There's no rush over spectrum

Delays in auctioning the radio spectrum suitable for third-generation mobile technology might deliver a $50 million windfall to the government.

In The Independent, on March 1, it was reported that delays in auctioning the radio spectrum suitable for third generation mobile technology might deliver a $50 million windfall to the government.

According to Australian telecommunications analyst Paul Budde, the government stands to make at least twice what it would have if the auction had gone ahead last year, as originally planned, because the players are now considerably more aware of the strategic importance of the frequencies.

Likely bidders are Telecom, Vodafone, Clear and Telstra/Saturn. Frankly I think they have always been aware of the importance of said spectrum in providing a platform for third generation mobile - but that’s not my beef. What I’m wondering is why the acting Minister of Communications Trevor Mallard, quoted in Computerworld on March 6, felt compelled to dismiss reports that the value of the spectrum has risen and that the government will gain by this.

Shouldn’t he be trying to get the best price possible? As a taxpayer, my message to the government is go for it. If the value is rising, well and good. And don’t be bullied by cries that New Zealand will fall behind in the communications race if the spectrum is not made available straight away. At the CeBIT IT expo in Hannover, recently, most cellphone companies admitted that 3G services are still in their infancy.

What I don’t want is a repeat of what happened with the 26Ghz-28Ghz spectrum auction in 1997. The telecommunications industry was caught unawares when the then-government announced, seemingly out of the blue, that the spectrum would be auctioned. Telcos had not had time to prepare buying strategies and business plans or consider how they would source the technology to successfully use the spectrum to deliver services.

Later it was revealed by Computerworld that just one month before the auction Maurice Williamson, the IT minister whose decision it was to put the spectrum under the hammer, had visited Formus Communications, a Denver-based company specialising in LMDS (local multipoint distribution services) services and equipment. LMDS is delivered using radio spectrum in the 26Ghz-28Ghz range. Williamson denied that the visit prompted his decision to auction.

The following February, the auction went ahead, and Formus grabbed five of the six lots available for $NZ2.6 million or a measly $52,000 each. At the time it said it would deliver LMDS such as high-speed Internet access and networking. (LMDS is also suitable for digital television.) But the following August (1999) Formus abandoned its plans in New Zealand because it failed to obtain broadband spectrum in a government auction in Australia.

Obviously the Australian market was not the bargain-bin basement that Formus found New Zealand to be. However Formus has just made a tidy profit, Clear Communications, which held the other parcel of spectrum, has bought the five lots for a reported $16 million.

Clear is planning a $120 million roll out of a wireless voice, video and data service. Spokesman Ross Inglis says Clear has failed to deliver anything thus far as it has had to deal with its 100% acquisition by BT and there have been considerable developments in LMDS technology. So, he says, rather than complete the LMDS programme as originally envisaged, Clear has taken advantage of technology changes to reconfigure trials. So can we expect to see LMDS services before the end of the year? Too early to say says Inglis.

If the technology was so immature when Clear bought the spectrum perhaps it shouldn’t have been sold then? Perhaps the government should have held off until LMDS developed to the point where it offered a serious business/technology proposition and attracted more serious bidders.

I know that 3G technology is totally different to LMDS but hope that we don’t make the same mistake. Those who don’t know history are doomed it repeat.

Andrea Malcolm is Computerworld'’s chief reporter. Phone her on 09 302 8774.

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