Fuelling the telco 4G firestorm

Telstra and Optus’ push to gain early accesss to the 700Mhz spectrum before the scheduled release date of 2015 has received a boost of sorts but will the goverment play ball?

Telstra and Optus’ push to gain early access to the 700Mhz spectrum before the scheduled release date of 2015 has received a boost of sorts from the latest research by the global cellular industry organisation, the GSMA, and Boston Consulting Group. However, the government is unlikely to change the Gillard government's game plan any time soon.

Both telcos are looking to gain early access to the spectrum to beef up their 4G networks and the latest report from GSMA and The Boston Consulting Group says that early allocation the spectrum could deliver substantial socio-economic benefits.

According to the report, the digital dividend for the Asia-Pacific region could be worth almost US$1 trillion in additional GDP by 2020. Conversely, delayed allocation could result in significant losses in incremental GDP growth.

“A delay in the allocation of the 700 MHz band by one year, to 2015, could result in a loss in incremental GDP growth of US$40 billion in the first year, and an indirect loss of US$70 billion in the three subsequent years,”  the reports says.

“Countries that implement a different allocation will see a reduction in benefits of up to 30n the case of job creation. Furthermore, they will also affect their neighbours along the borders. Neighbouring countries could lose up to 3 per cent of digital dividend GDP, and up to 11 per cent of new business activities.

Of course Australia is already ahead of the pack in the Asia-Pacific region when it comes to the implementation of the "harmonised" APT 700MHz band plan. However, the telcos are more concerned about the fact that they can’t get their hands on the spectrum until 2015, two years after pay for the licences.

It’s unlikely that the government or the telcos disagree with the findings of the report and the overall economic benefit evaluations will become a more pertinent issue if the January 2015 deadline ends up facing unexpected hiccups.

For the time being the telcos are really interested in ensuring that they have access to every bit of available capacity in an increasingly competitive market.

The current deadlines are based on the fact that by December next year all analog services will be extinguished, thereby freeing up the 700 Mhz spectrum. With the process already under way there will be substantial pockets of spectrum available around the country by early next year.

It’s these pockets that the telcos are keen to exploit as quickly as possible to roll out their 4G offerings, especially in the regional and rural areas.

The auction process has been slightly delayed to provide television broadcasters the time they need to make the switch to digital and it also provides the telcos with greater certainty with regards to what on offer at the auction.  

And the government has made it clear that access to the spectrum will only be given once the switch-off and the restacking process, including the revision of channel plans and the implementation of channel changes, is complete.

This process not only prevents the potential for interference between mobile calls and digital TV reception, but essentially allows the allocation of spectrum in a way that maximises the sale price. It also means that the government is unlikely to start auctioning out the spectrum in a piece-meal manner.

For all the benefits that the Digital Dividend auction will bring, further highlighted in the GSMA report, maximising the dollar value of the spectrum licenses is the primary objective of the government. We are talking about close to $4 billion dollars here and the government is unlikely to jeopardise that kind of payday in a hurry.

Interestingly, while Optus and Telstra have both demanded early access to the spectrum, Vodafone said it was “comfortable” with how the government was managing the spectrum sale process.

Another indication that Australia’s third largest mobile operator is squarely focused on getting the most out of the 3G space and will take a softly, softly approach to 4G.

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