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By Professor Michael Porter
The federal government is seeking fees of $1.4 billion from Telstra and Vodafone for the renewal of 800 MHz spectrum licences that are expiring in 2013.
This spectrum band is extremely valuable. It is used to service growing demand for data-intensive services to iPads, mobile phones and other wireless services that are exploding in terms of data usage, as the market demonstrates the value placed on portability.
Realising this value, Broadband Minister Stephen Conroy wants to auction the spectrum to boost budget revenues. If the companies object to paying the fees, he has told them he will auction the licences, which could bring in new players.
But the real issue is that Conroy has chosen to spend $37 billion on the wrong broadband model. Many customers who are not that desperate for faster home broadband via the national broadband network are cranky as their 3G and ADSL data services become grindingly slow under the seasonal surge in demand in coastal and holiday areas. Dongles and 3G services are being renamed Doodles or BoonDongles, as people go to sleep awaiting downloads such as news, ebooks and sports information.
The beach-based demands via iPhones, iPads and other wireless services reveal the absurdity of a centralised roll-out of fibre as the broadband solution.
Both the suggested charges to Telstra and Vodafone, and the threatened auctions, confirm Conroy is aware that it is the structure (wireless versus fixed services) and location of demand that are the burning issues, not the need for an almost uniform forcefeed of fibre via the NBN.
The inadequate bandwidth and speed in coastal and rural communities suggests auction demand for the bandwidth should be substantiaL But uncertainty across the broadband market is stopping private investment and making a mockery of current priorities.
Communities wait for the bigspending NBN to roll by, rather than localise a solution in a tender to the NBN that will fit with a national market. And as revealed in The Australian Financial Review yesterday, the charges demanded by Conroy for spectrum are far in excess of those charged in much higher density markets, with the minor exception of Hong Kong, which is blessed with an extreme density of mobile customers.
Public consultation on the issuing of 15-year spectrum licences closes on January 16 and the timing is right to reconsider the regional tendering process. Apart from the dash-for-cash, given a projected $37 billion commonwealth deficit, there are problems with Conroy’s approach:
Why not call tenders for the broadband rights for the many distinct areas, each with varying current endowments of existing services? Why should each area not be the basis for a tender for local connections that can blend into a competitive national broadband framework rather than a monopolistic NBN? The minister is right to flag the option of competitive auctions but not in a selective milking of the 800 MHz band.
This article first appeared in the Australian Financial Review.