Why we can’t let two players dominate the 700MHz spectrum auction

Thank you for the opportunity to submit on the rules regarding the upcoming 700MHz spectrum auction.

TUANZ (the Telecommunications Users Association of New Zealand) is a strong advocate for increased competition, and as such has lobbied hard to improve the conditions for new entrants into the market, so as to increase customer choice.

The mobile market has, as you know, recently moved from a two-player duopoly to a truly competitive environment for the first time and TUANZ is determined to encourage the growth of competition in the years ahead.

The 700MHz auction gives us an opportunity to ensure that competition is continued in the newly emerging world of 4G or LTE networks.
Rather than restating our pro-competition position again, TUANZ would like to see the following issues addressed through the auction process.

1: Fair distribution of spectrum
TUANZ is concerned that any move to allow two players to buy up to 2x20MHz of spectrum will result in a duopoly in terms of 700MHz spectrum. Given that we’ve only just begun to see competition in the mobile space, this would be a catastrophe and TUANZ encourages MBIE to make sure that doesn’t happen. Allowing a maximum of three lots of 2x15MHz each would ensure that an even and fair apportionment takes place.

2: Price
The recent debacle of the Australian spectrum auction shows that too high a reserve price can mean limited competition for spectrum. TUANZ hopes New Zealand can learn from this example and set the reserve price at a level that encourages all three network operators to bid on spectrum.TUANZ suggests looking at recent European pricing as a guideline for reserve pricing.

Notwithstanding Treasury’s keenness to maximise its return through this auction, TUANZ would like to remind all participants that the real benefit of 700MHz spectrum comes through the deployment of networks, not through an initial cash grab. To that end, TUANZ would like to see the reserve price set at a low level so as to give the telcos the funding to deploy networks as quickly as possible.

3: Payment terms
TUANZ suggests two courses of action with regard to the payment terms for any winners. First, payments are suspended until network deployment takes place. Currently there are no devices that will use 700MHz and it will be at least a year post-auction before the telcos are in a position to offer service using 700MHz. It would seem prudent to base payments around this schedule. That supposes there is also a “use it or lose it” clause – something that TUANZ would support.

Second, payments should be spread over the life of the asset – that is, apportioned payments each year for the 18 years of the management rights period. This will help all three mobile network operators to free up cash to spend on the network deployment.

This is in line with the Minister’s comments regarding the true economic value of the spectrum being tied to its use, not to its sale.
TUANZ’s overriding concern in this process is for competition. We have seen what having a third entrant in the market can do in terms of products, service and pricing and we would not like to see the New Zealand market drop back to a two-player duopoly.

(This is TUANZ’s submission on the spectrum auction sale process)

3 replies
  1. Paul Brislen
    Paul Brislen says:

    Building penetration on 700 is much better than 1800, I’m told, so yes, I’d expect to see some urban deployment as well.

    But given the 4G capability that Huawei is talking about, I suspect the future will included blended devices that allow the user to aggregate spectrum up and down the range… not sure what the handset will look like with all those antenna inside but I’d expect to see phones capable of dealing with any/all spectrum at the same time. Think of the throughput!

  2. Paul W
    Paul W says:

    I think like the 3G 850 and 900 meg bands being deployed in the metro areas I think we’ll see 700 LTE deployed there as well. It will give better building penetration than 1800 meg band..

  3. Alan
    Alan says:

    All mobile operators here in NZ have existing spectrum to rollout LTE in the 1800MHZ band. As all mobile operators in Australia also use 1800MHZ spectrum this will solve the problem of data roaming.
    The lower the frequency bands the less cellsites used to cover a certain geographical area. So therefore would 700MHZ spectrum be used for rural areas only or as a second frequency for LTE Advanced once operators decide to rollout this upgraded technology.


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