Ihug goes to court this morning seeking an injunction against a radio spectrum auction that director Nick Wood says has been captured by ministry officials.
In the High Court in Wellington, the company is seeking an interim injunction and a judicial review of the government's decision not to impose a cap on the 2G mobile radio spectrum due to be auctioned next Monday.
Ownership of spectrum earmarked by the International Telecommunications Union for third generation (3G) services has been capped, meaning no bidder will be able to capture more than a quarter of it.
Although the 2G spectrum was long regarded as an afterthought in the auction - with the big prize being the band set aside by the ITU for sophisticated 3G services - that all changed recently. Following an ITU policy change in May, the 2G spectrum being auctioned will also be 3G-compatible.
"The situation now is that the front end of the auction is more valuable than the back end, because it's 3G usable, but you can use it today to build a network," says Wood. "So anybody smart would want to buy the stuff you can use right now, build a network today, then in three or four years' time when the network's ready, turn it into 3G."
Wood says both local industry submissions and the draft report of the Telecommunications Inquiry released last week support the 2G block being capped, but the government has declined to act.
"I think they've been poorly informed by the Ministry of Economic Development. Having seen the evidence being presented by the government side, to me it just smacks of misinformation or lack of detailed analysis - and a view at the ministry for some years, prior to this government, on the process, and it's been skewed in that direction.
"The government's decisions have been made on badly formulated ideas and information."
A relatively small roster of only 12 bidders - of whom only half that many may be serious buyers - has not eased Wood's concerns.
"I still don't think it's that relevant, because a lot of those bidders have got big dollars in their pockets, whether it's an incumbent or somebody now, wanting to make sure nobody else gets in the game.
"The reality is that we've got these resources that are worth something to country - and nobody needs more than a certain amount of them to run a business. If we're focused on using those resources in the most efficient way, then you need to make sure that you don't let people get more than they should."
"The way the auction is structured, the resources could easily be wasted and never put to the benefit of the country."
The chief reason given by the government for the decision not to limit purchases of 2G spectrum was that it would be too difficult for a new entrant to build a network in competition with the incumbents, Telecom and Vodafone, in the short term.
"With the inquiry's call for mandatory roaming and site sharing, that's a pile of rubbish," says Wood. "They knew this was all coming. In fact the government already knew that the 2G stuff they're auctioning was going to be 3G. They had advance warning that it was on the agenda for May's meeting of the ITU and they knew the status of the bands was likely to change, but the Ministry of Economic Development didn't take that into account when they advised the government."
Although Ihug has confirmed it wants to build a mobile network, Wood still won't discuss what, if any, partners it may have on board for such a project.
He admits that, like other bidders, Ihug has a vested interested in the structure of the auction, but says the company isn't seeking changes "for ourselves specifically. Even if we aren't successful there are other parties who would create competition and would allow for better resell options for other people. It would be a much more competitive environment with at least one more operator. Two more would make sure of it."
As well as Ihug, Telecom, Vodafone, Telstra Saturn, Independent Newspapers, Television New Zealand, several power companies and Airways Corporation have registered as bidders.