Carriers slam spectrum pricing
The Communications Minister, Stephen Conroy, has set out the government's reserve price for the auction, which is expected to raise billions of dollars for Canberra. But it drew immediate criticism from the nation's mobile carriers.
They claim it will increase costs for consumers and is more than double what foreign governments have charged for comparable spectrum.
It will cost about $1.5 billion for a company to buy enough spectrum to cover 22.6 million people.
The minister has also increased the size of parcels so bidders can now buy parcels of up to 25 megahertz instead of 20 megahertz. Telcos will need to buy two lots of 25 megahertz to cover the entire population of Australia.
The government will hold an auction by April.
Telcos need more spectrum to carry data on their mobile networks and are struggling under increasing demand from consumers.
The frequency up for auction - 700 megahertz - is currently occupied by analog television signals.
It is considered valuable because it is efficient and works well over long distances.
Optus is trialling 4G services at this frequency.
"This spectrum is seen as the 'waterfront property' of spectrum and the government has made a significant investment to free it up," Senator Conroy said. "It is important that we get a reasonable return on this valuable public asset.
"In setting the reserve price, the government has taken into consideration expert advice and consulted with relevant agencies, including the Australian Communications and Media Authority."
Money from the auction will be counted in the current financial year, as the government scrambles to meet its pledge to deliver a $1.1 billion budget surplus in 2012-13, with a slowing economy and falling commodity prices eating into tax revenues.
Optus, the second largest mobile carrier, said the new reserve price was too expensive and out of line with international standards.
Optus's vice president of corporate and regulatory affairs, David Epstein, said: "Optus is studying the detail of the government's announcement but as announced, it appears unworkable and out of line with international outcomes.
"It is likely to have the effect of restricting investment significantly, raising prices as costs are passed through to consumers and reducing consumer choice."
A spokeswoman for Vodafone, Karina Keisler, said it would not participate in the next round of spectrum auction at the current reserve price.
A Telstra spokesman said: "We will consider it in detail as part of our auction strategy."
Frequently Asked Questions about this Article…
The Communications Minister has set a reserve price intended to raise billions from the 700 MHz spectrum auction. Major carriers say the reserve price is too expensive—reportedly more than double comparable prices charged overseas—and claim it will restrict investment, raise costs for consumers and could prompt some telcos to skip the auction.
Telcos warn a high reserve price will increase their costs, which they are likely to pass through to customers as higher mobile prices. They also say the price could deter investment in network upgrades and reduce competition and consumer choice if some carriers choose not to bid.
Optus has said the announced approach appears unworkable and out of line with international outcomes and is studying the detail. Vodafone has stated it would not participate in the next auction at the current reserve price. Telstra said it will consider the announcement in detail as part of its auction strategy.
The minister increased auction parcel sizes to 25 megahertz (previously 20MHz). Bidders would need two lots of 25MHz to cover the entire population. The article estimates it would cost about $1.5 billion for a company to buy enough spectrum to cover roughly 22.6 million people.
The 700 MHz band is currently used by analog TV and is valued because it’s efficient and performs well over long distances. That makes it ideal for wide-area mobile coverage; Optus is already trialling 4G services at this frequency.
The government plans to hold the auction by April. Revenue from the auction will be counted in the current financial year as the government seeks to help meet a pledged $1.1 billion budget surplus for 2012–13.
Communications Minister Stephen Conroy said the government has made a significant investment to free up the 700 MHz band and wants a reasonable return on the public asset. He said the reserve price was set after expert advice and consultation with relevant agencies, including the Australian Communications and Media Authority (ACMA).
Investors should watch carrier participation and public comments from Optus, Vodafone and Telstra—non‑participation or a high-cost auction could affect carriers’ capital spending plans, margins and competitive dynamics. Also monitor official auction details (parcel sizes, timing) and any government responses to carrier criticism.
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