Conroy to set 4G spectrum reserve pricing

The Australian government has directed the Australian Communications and Media Authority (ACMA) to accept a reserve price for auctioning off spectrum in the 700MHz and 2.5GHz bands.

The government is hoping that the so-called digital dividend auction of spectrum for use in 4G long-term evolution (LTE) networks, to be held early next year, will bring in up to AU$4 billion in revenue at a time when the government is looking to get a razor-thin AU$1.1 billion budget surplus in 2012-13.

The auction was originally supposed to take place this month, but in June, Communications Minister Stephen Conroy delayed the auctions until April 2013 to give the potential bidders time to prepare.

Yesterday, Conroy issued a direction to the ACMA, stating that it must allow the minister to set the floor price for the spectrum, rather than the ACMA itself setting it.

The move suggests that the government is concerned that it won't meet the desired sale price for the spectrum when it goes to auction in 2013. While Telstra and Optus have indicated that they will participate in the auction, and both intend to pick up spectrum for their respective 4G networks that are currently operating in the 1800MHz spectrum band, the nation's third mobile network, Vodafone, has said that it may ultimately sit out of the spectrum auction.

Vodafone has struggled since 2010, shedding more than 1 million customers and making massive losses as the company overhauls its network infrastructure and customer service. New CEO Bill Morrow said in July that because Vodafone has 30MHz worth of 1800MHz spectrum that can be used for 4G services, the company may opt out of participating in the auction for the "waterfront" spectrum.

"We have to weigh that against the current spectrum position we have, which is actually quite rich," Morrow said at the time. "If you look at the depth of what we have at the 1800MHz level, we're in a far better position than any of the other two carriers, and there is plenty of spectrum to use for LTE."

Conroy's decision to intervene in the process is in line with comments made recently that in Australia, the communications minister has unfettered legal power in the telecommunications industry.

"We are in the fortunate position that the regulation of telecommunications powers in Australia is exclusively federal," he said at the time.

"That means I am in charge of spectrum auctions, and if I say to everyone in this room, 'if you want to bid in our spectrum auction, you'd better wear red underpants on your head', I've got some news for you. You'll be wearing them on your head."

The spectrum is being made available as a result of the switch from analog to digital TV, with all services to be made digital by the end of 2013. However, digital TV still occupies a portion of the 700MHz spectrum band, and before the telcos can begin operating LTE services in 700MHz, the TV services must be restacked within the spectrum band across the country.

In areas where analog television has been shut off already, the restack can occur sooner, and thus telecommunications providers can begin offering LTE services in that spectrum band in those areas earlier.

The ACMA said yesterday that it will still be ready for the April 2013 auction date, and said that it would publish a revised timetable for the auction process soon.