Telcos revolt over mobile spectrum price

Telcos revolt over mobile spectrum price

AUSTRALIA'S biggest telecom carriers have threatened to boycott the government's spectrum auction, claiming the reserve price for the spectrum that underpins mobile networks is too expensive.

Late on Friday, Communications Minister Stephen Conroy set out the reserve price for the auction, which is expected to raise billions of dollars for Canberra.

But this drew immediate criticism from the nation's mobile carriers.

They claim the price set by the government will increase costs for consumers and is more than double what foreign governments have charged for comparable spectrum. The price is $1.36 a megahertz per head of population and the minimum purchase is 5MHz.

It will cost about $1.5 billion for a company to buy enough spectrum to cover 22.6 million people.

The minister has also increased the size of parcels bidders can buy to 25MHz instead of 20MHz.


Telcos will need to buy two lots of 25MHz to cover the entire population of Australia.

The government will hold an auction by April next year.

Telcos need more spectrum to carry data on their mobile networks and are struggling under increasing demand from consumers. The frequency up for auction - 700MHz - is occupied by analog television signals. It is valuable because it is efficient and works well over long distances. Optus is trialling 4G services at this frequency.

''This spectrum is seen as the 'waterfront property' of spectrum and the government has made a significant investment to free it up. It is important that we get a reasonable return on this valuable public asset,'' Senator Conroy said.

''In setting the reserve price, the government has taken into consideration expert advice and consulted with relevant agencies, including the Australian Communications and Media Authority.''

Money from the auction will be counted in this financial year. The decision comes as the government scrambles to meet its pledge to deliver a $1.1 billion budget surplus in 2012-13, with a slowing economy and falling commodity prices eating into tax revenue.

Optus, the second-largest mobile carrier in the country, said the new reserve price set by the government was too expensive and out of line with international standards.

David Epstein, vice-president of corporate and regulatory affairs, said: ''Optus is studying the detail of the government's announcement, but as announced it appears unworkable and out of line with international outcomes.

''It is likely to have the effect of restricting investment significantly, raising prices as costs are passed through to consumers and reducing consumer choice.''

Karina Keisler, a spokeswoman for Vodafone, said it would not participate in the next round of spectrum auction at the present reserve price.

A Telstra spokesman said it had seen the announcement, but declined to comment.

''We will consider it in detail as part of our auction strategy. Given this is an auction process, we have no further comment.''

The price set by the government is slightly higher than the $1.23 a megahertz that telcos are being charged to renew existing spectrum licences.

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