Will Libs use NBN policy launch to disrupt 4G auction?

Will Libs use NBN policy launch to disrupt 4G auction?

Summary: Could the timing of the Coalition’s policy launch turn April’s digital-dividend auction into a huge mess?


The telecommunications industry has long clamoured for something — anything — by way of real details that would justify the Coalition's promised changing-canoes-in-midstream NBN policy. But as rumours put an impending policy launch within the next few weeks, how will the Coalition's timetable affect the Labor government's 4G spectrum auction that's been a decade in the making?

(Image: David Braue/ZDNet)

That auction, due to start on April 16, will be a key benchmark for the Labor government — both to see how much revenue it will put into government coffers, and also to see whether the 700MHz band still has the exclusive strategic value it once held for carriers.

That value is still significant, but the spectrum has lost its exclusivity in recent years as carriers, fed up with delays — or perhaps in a signal that Labor has taken far too long in reassigning the analog-TV spectrum — have sought their own alternatives.

Telstra in particular seemed like a rebel when it began refarming its 1,800MHz spectrum to support 4G — until Optus and Vodafone began considering doing the same, and the Australian Communications and Media Authority (ACMA) recently proposed opening up even more 1,800MHz spectrum to support 4G services in regional areas. More recently, Telstra committed to pushing 4G into its 900MHz allocation as it winds back its commitment to 2G GSM mobile services.

None of this bodes well for the 700MHz auction, for which Labor is expecting a pretty penny. If mobile carriers call the government's bluff, however, what it hopes will be the clean snap of the auctioneer's gavel could actually play out more like Gallagher's Sledge-O-Matic — sloppy, gratuitous, destructive, and ultimately inconsequential (for everyone, that is, except for the poor sod that has to clean up after Gallagher's stage show).

Yet there is more at stake in this auction than simply deciding the best way forward for 4G: carriers, who are already on a knife's edge waiting for certainty from the upcoming election, will be keenly interested in balancing their investments in 4G against the financial demands of potential changes in their NBN-related commitments.

Carriers, who are already on a knife's edge waiting for certainty from the upcoming election, will be keenly interested in balancing their investments in 4G against the financial demands of potential changes in their NBN-related commitments.

Which brings us to the Coalition and its reported policy launch.

This policy, which is likely to both appease some critics and incense those looking for more real details about the NBN's future, will unquestionably be a source of fever-pitch speculation. Yet if it lands just days before the spectrum auction, not only will it distract from that very significant event — but it could fundamentally change the value proposition for Telstra, Optus, and Vodafone.

With 1,800MHz and 900MHz now well and truly on the table, a lack of clarity over the future of the NBN could well force those carriers to rein in their 4G commitments to focus on covering their exposure to that project.

Optus in particular will be watching the Coalition's policy with great angst: although the company has been all too happy to cash out of its HFC broadband services, the Coalition's stated interest in Optus and Telstra HFC networks could well muddy its forward planning — that is, if the policy suggests that a Coalition government would seek to revive some of Optus' network, and in so doing, saddle the company with the great expense of maintaining it into the future.

Telstra, of course, is even more exposed in this respect, since Turnbull's rhetoric to date has repeatedly raised the question of whether the company's HFC data services will in fact be retained under a revised NBN Co contract. This would force the company to revise its forward estimates in areas such as maintenance costs, as well as forcing it to account for lower subscriber-migration bonuses for the customers it would no longer be migrating off of its HFC.

Both companies would also have to consider the impact of a government-enforced opening of their HFC networks, which have long been closed to competition.

Whether or not this will affect how much they're willing to pay for 4G is not entirely clear. If the Coalition policy drops right before the auction, it could just make for a busy news time.

Perhaps the bigger problem could come if the Coalition policy drops after the auction. This would force the three mobile carriers to effectively take a punt on the consistency of the Coalition's statements against whatever policy details it presents. If they bid big at the auction, then find out a Coalition government will expose them to massive and previously-unexpected costs, it's certain that carriers will be less than happy.

There's no question Tony Abbott would revel in painting the failed auction as yet another example of Labor incompetence and its insistence on a reserve price as yet another example of a Labor tax — this time, on mobile innovation and private-sector enterprise.

To avoid this risk, they may go into the auction with a conservative posture that sees them not bid at all or simply bid for the minimum possible amount of spectrum, perhaps as a concerted bloc acting in protest to Labor's reserve-price policy.

This would force Stephen Conroy's hand, sending it towards an election with a sizeable budget shortfall, a lack of clarity around 4G's future, a decade-long analog switch-off with no clear financial benefit, and a mobile industry that has already figured out how to play the 4G spectrum game on its terms rather than Conroy's. I've previously suggested that this could, theoretically, support a case for the government to assign unsold 700MHz spectrum to NBN Co for onsale to VMNOs on a wholesale basis.

There's no question Tony Abbott would revel in painting the failed auction as yet another example of Labor incompetence and its insistence on a reserve price as yet another example of a Labor tax — this time, on mobile innovation and private-sector enterprise. He'd use the result to go after Labor with a ferocity that would make Gallagher look like Con the Fruiterer.

Whether the Coalition would engineer such a situation by delaying the launch of its policy is also not clear: if it does take government, it would then inherit an entirely new mess to clean up — and would have to do so quickly, with just months until the final analog signals go dark and the digital-dividend spectrum begins to lay fallow. That might be one more headache that even Turnbull doesn't need.

Given that the Coalition's digital-dividend policy has been broadly aligned with that of the government, it's doubtful that the party would intentionally try to engineer disruption in that process. But if the party's new broadband policy threatens too significant a change to the status quo, it could create yet another hot-button issue as we charge towards September 14.

What do you think? Will the Coalition play its policy launch to disrupt the 700MHz auction and drop a hot potato into Conroy's lap? Should it launch its policy before or after the auction? Or will the timing not make a whit of difference either way?

Topics: Telcos, Government, Government AU, Telstra, NBN


Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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  • Leopards don't change their spots

    Considering their destructive to the nations future antics to this time, their insistance on including the private sector in the NBN with their higher funding costs and dividend requirements and ROI, along with the suspect copper and inappropriate HFC, I would suggest they would do anything to destroy Labor and bugger the country, as long as Rupert and his media are happy.
    Any mess they will blame Labor and not bother to sort it out
    Abel Adamski
  • Whilst we're still allowed to speak freely

    No journalist could consider Conroy’s period as minister without focusing on his commitment to high-quality broadband. He outlined his plans on the ABC’s Inside Business on February 10, 2008.

    “What we have said is that we won’t contribute more than $4.7 billion, whether it’s a fibre-to-the-node or fibre-to-the-home proposal,” he told Alan Kohler. “So fibre to the home has some wonderful potential but it is more costly and people have got to build the business case; they can’t expect the government’s going to give more than $4.7bn.”

    No doubt many took Conroy at his word, especially some of the more, shall we say, regulated media. Yet we now know he went for a National Broadband Network based on a fibre-to-the-home model and rendering that $4.7bn pledge redundant.

    On Lateline on September 29, 2010, Conroy said: “The government will only need to put in $27bn at most.” Fair enough; time for the media to adjust numbers - by 600 per cent.

    By the way, on Lateline on August 8 last year there was an update. “The capital cost of the NBN is $37.4bn,” said the Communications Minister.


    At least he said "capital cost" for his $37b, these days quoted as cost (when actually $60+b).
    Richard Flude
    • Re: Whilst we're still allowed to speak freely

      1. NBNCo is using borrowed funds which will be repaid with interest. If I loan you $20 I am not contributing.
      2. The original plan was to cost $35b when you include the payments to Telstra to continue to maintain their copper network
      3. The FTTN (current) plan costs $40b
      4. The "build" costs do not include "maintenance" and "running" costs. Running costs for all those roadside cabinets would be astronomical. When you allow for that, FTTN and FTTP are almost the same price, so why not go for the larger one up front. MUCH cheaper and less wasteful than upgrading later!

      BTW is the UK now a country where you're not allowed to speak freely? Their media reforms are much more stringent than those planned here!
      Peter Hatley
  • And...

    Conroy was wrong, they couldn't do it for what they first thought and had to re-jig.

    Wow what a revelation.

    Just like the Coalition have had to re-jig their alternative and positions, when they were found wanting.

    It's know as progression.

    But of course ultra-conservatives who like things nice and safe and to keep the status quo, wouldn't understand such obvious logic.

    BTW - still awaiting that page number - were you lying about that Richard...? I wonder what else you are lying about...?