THE biggest telcos have threatened to boycott the government's upcoming spectrum auction, claiming the reserve price that underpins mobile networks is too expensive.
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."