Telecom has won the second 700MHz spectrum auction with a bid of $83 million for a block of 2x5MHz spectrum.

I’m sure nobody at Telecom HQ is celebrating, however, because it’s paid around four times as much as it had for the 2x15MHz block it bought last year.

Paying $66m for 2x15MHz was a reasonable amount. It wasn’t cheap, but it certainly wasn’t up there with the kinds of stupidity we saw in the UK and Europe during the 3G spectrum craze of the early 2000s.

All three mobile operators were happy enough with the $22m they paid per block.  I can’t imagine how Simon Moutter and co are feeling right now, but probably they look a bit green. $22m was OK, but $83m? That’s another matter entirely.

Telecom didn’t even want to bid on the remaining block. They argued that the last 5MHz pair should be left on the table for another round of bidding in a few years’ time when 2Degrees could, presumably, afford to buy it.

That made a lot of sense. TUANZ argued against having an auction at all – each of the three network operators should have been given 2x15MHz so as to preserve the competitive market in the 700MHz space, but if we had to have one, any excess spectrum left over shouldn’t be flogged off just to raise cash. Sadly, that’s just what the government has done. Telecom was forced to take part even though it wasn’t keen because it couldn’t allow Vodafone to simply walk away with the extra spectrum. Vodafone, likewise, couldn’t let Telecom have it cheaply either, and unfortunately we’ve seen the telco equivalent of the Cold War end in a huge cost.

Worse, when you look at the overall spectrum holdings you’ll find that 2Degrees has just on 100MHz of spectrum, Telecom has double that and Vodafone has nearly 300MHz of spectrum available to it right across the managed spectrum range.

That imbalance means Vodafone and Telecom already have a huge advantage over 2Degrees when it comes to the total spectrum market and that’s going to be a problem if we want a truly competitive landscape.

Should we care that Telecom has paid a fortune for the spectrum? Surely that’s its problem and good on the government for getting the best dollar for the tax payer? Well yes and no. Telecom will have to find that money somewhere and I’m guessing it wasn’t down the back of a couch. It probably will have to come either from the existing capex budget, which means something else will go by the board, or it’ll be raised from the customers.

That much money would have paid for (by my calculation) an additional 160 cellsites around the country, which would have been very nice to see in rural New Zealand. Instead, Telecom will have a nice piece of paper that says yes, it can build a cellphone network in the 700MHz range.

The good news is this isn’t a done deal. The Commerce Commission still has to assess whether or not the extra spectrum breaches the Commerce Act in terms of market dominance. We’d argue that yes, it does and I’d go further and say that both the telcos and the customers would be better off if we set aside this auction and leave the last 5MHz pair on the shelf for the time being.

Guest post – UK broadband goes mobile

UK mobile broadband infrastructure

The UK was
among the first countries in Europe to receive a consumer level 3G network,
launched by the mobile wing of British Telecom in 2003. Up until that point we
had, like everywhere else, struggled along with a 2G service – fine for voice
and texts but internet access could be painful even compared to dial-up.

It wasn’t
until 3G went live that mobile broadband became a real possibility, and it’s
proven popular: the UK telecoms regular Ofcom
estimated in 2012
that 13% of adults in the UK had a mobile broadband connection.

Mobile broadband not-spots

Despite the
enthusiasm with which UK net surfers have taken to mobile internet access,
coverage and performance remains an issue. The UK is not a big country and
we’ve had 3G for ten years so it would be reasonable to expect almost complete
saturation of mobile network signal, but in fact many gaps remain.

In towns and
cities you can generally rely on access to 3G, but it’s still not uncommon to
find ‘not-spots’ where the signal falls back to 2G or drops out entirely. And
once you’re out into the countryside the coverage becomes very patchy.

The network
operators claim to offer in excess of 90% coverage. In 2011 the BBC conducted a crowd-sourced experiment to explore mobile signal
throughout the UK and discovered that when a data connection was available
users were only able to get 3G around 75% of the time. The resulting map
revealed a large number of not-spots throughout the country.

That was two
years ago of course, but our own testing confirms that mobile broadband still
has a long way to go. In May we conducted our annual mobile broadband Road Trip, travelling from London to
Edinburgh while recording the performance of all major network providers.

With speed
tests, downloads and uploads and media streaming we were able to see how mobile
broadband handled practical tasks in a real situation.

networks – notably Three, EE and T-Mobile – completed a large number of tests
and returned some excellent speed test results, some as high as 8Mb.

several networks failed to perform to a reasonable standard, with the weakest
managing to complete just 13% of the tasks. All the networks struggled with
streaming media, particularly video, none of them managing more than half of
the attempts.

This adds up
to a frustratingly inconsistent experience when using mobile internet on the
move. Provided the signal is available the connection can be incredibly fast,
particularly with the latest DC-HSDPA 3G networks providing 20Mb or more, but
all too often you’ll wander into an area with no connectivity and it will cease
to function.

The next generation

We are
hopeful this situation will improve, however, thanks to the recent introduction
of next-generation 4G mobile broadband.

The first 4G
network was launched by EE in October 2012 and is still fairly limited, but the
spectrum auction which doled out 4G frequency to the remaining providers came
with a requirement: they must commit to providing indoor coverage to 98% of the population

This should
mean that within the next couple of years we’ll see a significant improvement
in mobile broadband performance as the networks compete to offer the best
mobile internet. Not only will 4G bring much faster speeds but this caveat to
offer a minimum level of service will help reduce not-spots.

Britain’s Rural areas – currently poorly served by both fixed and mobile
broadband – may see the benefits too as mobile internet fills the gaps left by
our ageing telephone network.

Author Bio: Matt Powell is the editor for the UK broadband
comparison site
, where he blogs on the
latest broadband and mobile broadband topics.