The ACMA's year of spectrum

As most people go about their daily lives talking on their mobile phones and downloading the latest apps, they will be blissfully unaware that telcos are preparing to fork out billions of dollars for spectrum just to keep up everyone connected and downloading at faster speeds.

The analog signals that are used to bring us our TV are slowly being switched off around the country as Australia makes the move to digital TV. The spectrum now available for brand new technologies is the "waterfront" spectrum for mobile broadband and new networks such as long-term evolution (LTE), according to Jane Cole, the Australian Communications and Media Authority's (ACMA's) manager of major spectrum allocations. For the ACMA, charged with auctioning off this spectrum in December to the highest bidders, this year will be a big year.

"For us, this is the year of delivery," Cole said. "It's really an exciting point in time for Australia, and certainly for the communications industry. We're auctioning off what is the waterfront property of the spectrum world, and the auction is going to offer really significant benefits for consumers, the communications industry and the economy."

The ACMA will use a "Combinatorial Clock Auction" format for the sale of 90MHz of spectrum in the 700MHz band and 140MHz in the 2.5GHz spectrum band divided into blocks. The authority is hosting a number of workshops starting tomorrow to explain to potential buyers how the combinatorial clock format will work on the day, and prepare them for the Power Auctions software that will run the show.

"We are actually as early as tomorrow starting to expose the stakeholders to the auction software and system. We will also be showing them how those rules are implemented from a practical visual point of view," she said. "For a lot of people, this will be new, and we really want to build up their knowledge from the ground up."

There will also be mock auctions held later in the year to get everyone prepared.

"It's purely a mock auction. We use mock data, and we create a scenario that enables people to interact with the system."

The idea, she said, is to ensure that there would be "no surprises" on the day of the auction.

Cole said that the spectrum will be divided up into "lots" based on locations in Australia, as well as the frequency of the spectrum, but the ACMA is still developing how this division will be determined, based on feedback from the industry.

"If you're selling something to people, you want to sell them something that they want to buy. For us, finding out what prospective bidders want in terms of lot configuration was a really key step for us."

This will allow telcos eyeing the spectrum in different bands for mobile networks to "package up" spectrum, meaning that telcos can buy bits they need, or can aim for a national package of spectrum.

A reserve price for the spectrum will be set towards the end of the year. This price will be used as the starting bid for the spectrum in the first round of the auction, and, if there is more demand at that price than is available to buy, then the system goes to the next round, and the price of that spectrum lot goes up. The initial price will be based on a number of factors, according to ACMA principal economist Rebecca Burdon.

"We will definitely have regard to the international auction results," she said. "We will also be having regard to which parties might emerge as bidders for the spectrum. We'll be thinking carefully and doing modelling about the expected value of obtaining lots in this auction to the potential bidders.

"We'll also be looking carefully at demand projections," she said, adding that other external factors, such as the global financial situation, will also impact the proposed reserve.

Even if the global market takes another downturn, Burdon said it is unlikely that there would be any spectrum left unsold, but would not rule out delaying the auction.

"We're working very much to deliver the auction by the end of 2012. There are very good reasons for meeting that timetable."

Cole said that selling the spectrum is all about getting the most out of it for the public.

"We've got this large parcel of extremely valuable useful spectrum, and we would not want it to be lying there unused. If it is lying there unused, it means that consumers are not receiving the benefit that different companies can provide them with using that spectrum."