More analysts weigh in on 4G claim
A claim the Government could seek $500 million from mobile phone companies for 15-year rights to the "digital dividend" radio spectrum that will be freed up by the closure of analogue television has been backed up by data collected by experts in Britain.
Other analysts suggested New Zealand had been a soft touch for telcos in the past.
London-based Dotecon, which monitors spectrum sales, said the going rate for the digital dividend in Europe and the United States was $0.70 to $1.30 per megahertz (MHz) per capita, which would suggest a top price of $520m and a midpoint valuation of $400m.
Last week Australian analyst Chris Coughlan argued that the Government could reasonably expect between $500m and $1 billion for 15-year rights to the 90MHz of 700MHz-band spectrum, which will be used to launch 4G mobile networks after the closure of analogue television next year.
That is far more than a $200m price tag suggested by Vodafone. Coughlan's estimate was based on the prices telcos had paid and were expected to pay for digital dividend spectrum in other countries, including Australia, and its value to carriers here.
Another Australian analyst, Paul Budde, said New Zealand had sold off spectrum to telcos too cheaply with too few conditions in the past.
A third analyst, who requested anonymity, said arguments sometimes put forward by mobile carriers that they might be slower to build 4G networks or would charge higher prices for services if they were forced to pay more than they wanted for radio spectrum were "not strong".
Communications Minister Amy Adams said previous auctions had obtained the "market price" for spectrum, but Budde was right that up until the early 2000s spectrum had been sold with minimal conditions on its use. That had since changed, she said.
"Spectrum prices worldwide have been highly variable and results in individual countries have depended on both the size of the perceived commercial opportunity and the global economic conditions at the time."
Vodafone, Telecom and 2degrees have paid $150m during the past few years to renew other sub-1GHz spectrum used to support their existing cellular services for another 20 years.
Pressure on the Government to achieve a better deal for the digital dividend comes at a sensitive time. Adams said she would take a paper to the Cabinet setting out how the spectrum might be allocated within the next few months.
A "straw man" proposal by the Economic Development Ministry last year would likely see all the spectrum acquired by Telecom, Vodafone and 2degrees, though the Government is expected to make some concessions to Maori interests after a Treaty claim.
Sources speculated it was possible the Government might issue shorter licences, perhaps lasting no more than eight to 12 years, both as a sop to competition and to leave the door open to carriers later choosing to switch to a single, shared mobile network.
Budde said he was in favour of charging a lower price for radio spectrum and imposing obligations on buyers to better serve rural communities, perhaps by creating the telecommunications' equivalent of an "open commons".
Telecommunications Users Association chief executive Paul Brislen said he would be happy to see the digital dividend spectrum sold at a discount if that ensured the rollout of 4G in rural areas was on a par with that in cities and towns. However, an industry source queried whether attaching conditions to the spectrum sale would be the most efficient way of supporting such a policy.
Adams said the Government had already secured greatly improved rural cellphone coverage through its $300m Rural Broadband Initiative. "We are still considering whether there is a case for further enhancements of that initiative," she said.
The anonymous analyst cautioned that demand from telcos for 700MHz spectrum should not be overestimated. While 4G could support faster smartphone plans with bigger data caps, it was not clear how the carriers would profit. They were still investing in 3G.
- © Fairfax NZ News
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