Will we see the return of the cosy duopoly?

The government is gearing up to sell management rights to the 700MHz spectrum in the next few months and hopefully we’ll see LTE mobile service deployed throughout the country in the not too distant future.

The auction itself is key to the future of the mobile telco sector in New Zealand and there are a couple of worrying signs in the information that’s been released so far.

All together we’re looking at 45MHz in total. We have three mobile operators so that would be three lots of 15MHz each. Nice and simple, it means we have equal opportunity for mobile network deployments and each network operator will be able to offer the same level of throughput as the other operators.

However, that doesn’t take into account the technology itself. LTE is clever stuff and will allow network operators to combine together spectrum from a variety of different bands to create a massive network with potential for hundreds of megabits per second.

If that’s to happen, we need to address ownership of all available spectrum, not just the 700MHz spectrum in isolation.

What really worries me, however, is the note in the press release that says the 700MHz spectrum will indeed be sold off in 5MHz blocks with no operator able to buy more than 15MHz. Unless there’s a lack of interest, in which case the Ministry may increase that limit to 20MHz.

Two operators with 20MHz and a third with nothing or at best 5MHz would destroy our newly emerging mobile network competitive market.

For too long we struggled with a cosy duopoly in our mobile market. Two players does not make for a dynamic market – it makes for a carefully managed, steady-as-she-goes, don’t rock the boat approach to pricing and services. It’s natural, it’s what happens in every industry and it’s entirely hopeless.

Today we have three network operators with two and a half networks. If we want to ensure a three player market in 4G (something the Aussies have already got wrong) then we have to ensure the auction is conducted in such a way as to make that a priority.

I know Treasury thinks it can make a windfall from the auction. I know the government will, in these difficult economic times, be eager for a boost to the coffers from those greedy telcos. But the true economic impact comes later, once the networks are deployed. It’s only then, when we have competition and capability, that we see the benefits such deployment can bring. The government itself acknowledges that – now it must manage the bean counters to make sure they don’t get too carried away with dollar signs in their eyes.

I’d go so far as to simply offer up the spectrum at no cost. Think what 2Degrees could do with its network deployment if it didn’t have to invest $100m or more in spectrum. That’s serious money for a network rollout that will bring competition to the masses.

Think I’m a Communist? We have precedent. We’re talking here about a 20 year monopoly on these spectrum lots, given away in the belief that the economic gain will be tremendous. If that sounds familiar then it should – that’s the argument the government uses to sell its Sky City convention centre deal. Why not use the same logic here?

1 reply
  1. Reg Hammond
    Reg Hammond says:

    Auctioning the 700 MHz spectrum to the highest bidders perpetuates the practice of artificial scarcity – buying spectrum so others can’t use it. There are a number of ways that situation can be fixed.

    Acquisition caps to ensure at least three participants plus a low reserve price thereby letting the third participant have a relatively lower price.

    Requiring successful bidders who already own extensive amounts of underused spectrum to relinquish some (below 1 ghz) of that underused spectrum.

    other implementation requirements such as co-location rules to reduce costs and environmental concerns.

    MBIE is considering such requirements in relationship to the 700 MHz spectrum auction – submissions are due by mid June – those with concerns please submit.



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