ACMA to auction off 700MHz spectrum in April

The Australian government will level a AU$10,000 entry fee on any telcos wanting to take part in the 700MHz spectrum auction in April.

The Australian Communications and Media Authority (ACMA) has released its consultation paper on the draft allocation decisions for the 700MHz spectrum band auction, revealing the proposed entry fee, lot configuration, and auction methodology.

According to the Draft allocation instruments for 700MHz spectrum unsold lots auction: Consultation paper, published on Friday, the auction will have an entry fee of AU$10,000.

The proposed lot configuration is one lot of 2x 10MHz and one lot of 2x 5MHz, with the former to be auctioned off a few days before the latter.

Both will be nationwide lots, with the 2x 10MHz lot to be comprised of the frequency ranges 738-748MHz paired with 793-803MHz, while the 2x 5MHz will comprise the frequency ranges 733-738MHz paired with 788-793MHz.

The ACMA proposed that it uses what it called the "simple clock auction" (SCA) methodology for auctioning off the spectrum.

"Before each round, the auction manager names a price (the specified price) that the bidder must meet to be eligible to place a bid in the subsequent round. The bidder can accept the specified price (a continue bid) or place a lower bid (an exit bid). If a bid is lower than the specified price -- that is, if it is an exit bid -- then it is the bidder's final bid. Once a bidder has made an exit bid, the bidder cannot resume bidding on that lot in future rounds," the ACMA explained.

"The ACMA considers the sequential SCA would be the most suitable allocation methodology. The SCA format is relatively simple to understand, flexible, and has been adapted with reasonable effectiveness to a wide variety of situations.

"There are only two lots on offer, and they are related. Offering these two lots sequentially via an SCA, with the 2x 10MHz lot being sold first, reduces the exposure risk for bidders (where, for example, a bidder wants 2x 10MHz but not 2x 5MHz)."

Under the ACMA's indicative timeline, applications to take part in the auction will open on January 16 and close on February 13. The preference deadline is set for March 16, and the estimated auction commencement is on April 4.

The allocation determination -- wherein the ACMA will determine the type of auction, competition limits on how much spectrum a single telco is allowed to obtain, and methods of payment, among other things -- will be announced in late December.

While there was a limit imposed during the 2013 digital dividend preventing any companies from acquiring more than 2x 25MHz of spectrum in the 700MHz band, the ACMA has flagged that "the minister indicated he is reviewing the competition limits and may vary or revoke the limits direction in November".

"The Department of Communications and the Arts has advised the ACMA that the minister has asked the ACCC to provide him with advice on possible limits by 11 November 2016," the consultation paper said.

"If the minister decides to vary or revoke the existing limits direction, he will issue a new ministerial direction to the ACMA."

The government agency also said that it is looking at amending the spectrum tax determination.

"The ACMA intends to amend Part 7A of the Radiocommunications (Transmitter Licence Tax) Determination 2015 in December 2016 to incorporate base rates of tax for a PMTS Class B licence authorising the operation of a transmitter in the frequency range 788-803MHz," the ACMA said.

"The relevant annual licence tax rate is expected to be AU$0.07/MHz (paired)/pop with population based on the relevant hierarchical cell identification scheme (HCIS) 2 block applying population estimates from the 2011 Census."

The ACMA is seeking feedback on its proposed timeline, amendment to the tax determination, the draft marketing plan, and the draft allocation determination, with submissions due by November 17.

At the beginning of October, the Australian government announced that it would be auctioning off the 700MHz spectrum that went unsold during the 2013 digital dividend auction, following Vodafone Australia's proposal to buy the spectrum outright for either AU$571,814,450 upfront or in three instalments totalling AU$594.3 million.

The 700MHz spectrum, auctioned off by the ACMA in 2013, is used for additional 4G mobile broadband capacity, particularly over long distances.

The government said it had decided to auction off the remaining 700MHz spectrum after consulting on Vodafone's proposal and determining that there was strong market interest from other providers.

Vodafone, TPG, Optus, and Telstra have all expressed interest in bidding for the spectrum, with TPG CEO David Teoh saying it could allow another mobile entrant in Australia.

"We believe that wireless connectivity will play an increasing role in the future needs of Australian telecommunications consumers. We have recently invested in 1800MHz spectrum and would be keen to augment that purchase with 700MHz spectrum. The long-term benefits for our company of securing this spectrum would be significant," Teoh said at the time.

"We are particularly pleased that the ACCC will be looking at the competition limits that should apply in respect of this auction. Access to spectrum represents the ultimate barrier to entry in this market. Existing providers, particularly those with substantial existing spectrum holdings, including in the 700MHz band, might have an incentive to limit the ability of a fourth entrant to secure spectrum. We will be making submissions to the ACCC that they recommend allocation limits that will have the best outcomes for competition and consumers."

During the original 700MHz auction, Telstra bought 2x 20MHz of the 700MHz spectrum along with 2x 40MHz pairs of spectrum in the 2.5GHz band for a total of AU$1.3 billion, while Optus bought 2x 10MHz of 700MHz and 2x 20MHz in the 2.5GHz band for a total of AU$649 million.

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