Government plans to auction the remaining 4G spectrum are the worst outcome on offer from a competition point of view, says TUANZ (Telecommunications Users Association of New Zealand) chief executive Paul Brislen.
Telecom and Vodafone each successfully bid for 2x15MHz (three lots), while 2degrees successfully bid for 2x10MHz (two lots) during the first round of the auction last month. This left 2x5MHz of spectrum unsold.
Brislen says that, instead of waiting till later to sell the spectrum, the Government has decided to allow Telecom and Vodafone to cage fight until one is left standing.
"It will be a fight because neither company can afford to allow the other to have that advantage in the market," he says. "Currently, both have paid $66 million for their chunks [of spectrum]. Whoever wins this fight will have to pay considerably more per megahertz for their next block. That's just stupid. It's money that is better spent on the network itself, not on a piece of paper."
He says Telecom had stated it would rather not fight over the remaining spectrum and supported putting it on the shelf. "Vodafone, however, was happy to remain in the competition, and since Vodafone has said it will bid, Telecom has kept its options open, saying it will bid as well if forced to."
He says having three network operators has meant a healthy tension between parties. "With one player, you get ripped off; with two you get a cosy duopoly; but with three you have a natural balance, which means the telcos can never sit back and relax but must always fight for market share.
"So why has the Government decided to give all that away in favour of raising a few million dollars more for the consolidated fund?"
Brislen maintains that it will now be very difficult for 2degrees to challenge the big two in the 4G world. "It was always going to be difficult because 2degrees was late to the 4G party, has a smaller marketing budget, and still needs to build out its network coverage. Now, it has to win market share with a lesser allotment of spectrum as well."
Communications and Information Technology Minister Amy Adams says Telecom and Vodafone have both applied to the Commerce Commission for clearance to purchase 2x20 MHz. Radio spectrum management rights are deemed to be business assets and are therefore subject to the competition provisions of the Commerce Act 1986.
Bids for the final lot will be conditional on a bidder's clearance application being granted. Final settlement of the auction will not occur until the Commission's process is complete.
Supplementary allocation rounds to auction the final spectrum block will begin on November 26.
She says in a press release that all registered bidders (2degrees, Telecom, and Vodafone) are eligible to participate. Bidding will begin at the reserve price of $22 million (plus GST), and the price will increase in each round until only one bidder remains.
Under the auction terms, bidders who acquire three lots of radio spectrum must build at least five new cell sites each year, for five years.
However, for any bidders who win four lots, the requirement increases to 10 new cell sites each year for five years.