Govt sets 700 MHz spectrum reserve price

Communications Minister Stephen Conroy has directed the communications regulator to set a reserve price of $1.36 per megahertz per population for lots of 700 MHz spectrum to be auctioned next year.

Directions were issued from the Minister to the Australian Communications and Media Authority late Friday to set the reserve price for spectrum lots in the 700 MHz and 2.5 GHz bands.

Though Conroy put a price on the so-called "waterfront" 700 MHz spectrum, he left it to the ACMA to do the same for 2.5 GHz.

Conroy said the $1.36 per MHz per population reserve for 700 MHz would "ensure the best outcome and a fair price for the industry, consumers and the Commonwealth."

"This spectrum is seen as the 'waterfront property' of spectrum and the Government has made a significant investment to free it up," he said.

"It is important that we get a reasonable return on this valuable public asset."

An ACMA spokesman concurred: "In setting the reserve price, the Minister has been mindful that the relevant spectrum is highly valuable and that it is important for the evolution of mobile networks in Australia."

The reserve price was in the mid-range of a speculative $1.25 to $1.59 per MHz per population field that Technology Spectator reported as possible last month.

A separate report by CommsDay saw CBA analysts put forward a "bear case forecast" of $1.25, and a Deutsche Bank analyst come in "at around $1.20 per MHz per population.

"I think that Conroy is opportunistic as mobile broadband is booming and the operators do need that spectrum," telecommunications analyst Paul Budde said.

"At the same time, he needs to assist with the Government budget, so that together is leading to this higher price."

Optus vice president of corporate and regulatory affairs, David Epstein, was scathing of the price point.

"Optus is studying the detail of the Government's announcement, but as announced it appears unworkable and out of line with international outcomes," he said.

"The reserve price announced is effectively double the basket of outcomes achieved in comparable advanced economies over the past two to three years.

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

The ACMA said in a statement that it "intends to announce the reserve price for lots in each of the bands, as well as the lot ratings and the dollar value of each eligibility point, in January 2013."

The auction is to start "no later than 30 April 2013".

Also included in Conroy's latest directive is an "increase [to] competition limits from 2x20 MHz to 2x25 MHz for spectrum in the 700 MHz band".

The increase in competition limits — which were originally set in a separate direction in February this year — was intended to "provide a competitive bidding environment for the 700 MHz spectrum in a wider range of bidding scenarios," he said.

The ACMA noted that while the limits were imposed to prevent the spectrum on offer from being "monopolised... the quantum of the competition limits has been amended to enable greater flexibility in terms of different market scenarios, without precluding a new entrant."

"The amended limits will continue to ensure an appropriate balance is maintained between competition in the downstream markets and economic efficiency," the ACMA stated.

Competition limits for 2.5 GHz lots remain unchanged "at 2x40 MHz paired", according to the ACMA.

Comment was being sought from industry analysts at the time of publication.