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Paul Brislen: Logic behind SkyCity deal works for telco networks

It's probably appropriate the Government charge those that are benefiting from gambling in order to support those who suffer from it. Photo / Doug Sherring
It's probably appropriate the Government charge those that are benefiting from gambling in order to support those who suffer from it. Photo / Doug Sherring

The Government's deal with SkyCity means we'll get a national convention centre without the public paying directly for it.

SkyCity likes the deal because it gets more pokie machines and automatic gaming tables, a change in the legislation and a 35-year licence to run its casino as well as roughly $40 million a year more in terms of revenue.

The Government likes it because we get a 3500-delegate national convention centre that it hopes will see an extra $90 million a year spent on tourism, 1000 jobs during the construction and 800 permanent jobs following the centre's opening in 2017.

Putting aside the social impact of increased gambling, the price is a cool $400 million, give or take a few dollars.

I haven't seen an economic benefit analysis, but the Government says there will be positive spin-offs above and beyond the figures quoted above.

Having a convention centre of this scale is something that will attract new business to New Zealand and that's a good thing.

I tend to agree. Traditionally, if we're going to award these multi-decade licences there are two ways to do it. Either we weigh up the benefits of awarding the licence alongside the pitfalls and see what comes out on top, or we have an open tender process and see who wants to throw lots of money at the issue.

The problem with the second approach is obvious. The bidders pay millions of dollars for a licence fee before the first sod is turned.

In some instances, that's justified. The social harm of the project might be so high that we need to build in a safety net before the licence is granted.

Gambling would be an obvious contender for this - the cost of gambling to our social services is well reported and not insubstantial, so it's probably appropriate the Government charge those that are benefiting from gambling in order to support those who suffer from it.

However, in this case the Government is looking to the bigger economic picture and has formed the view that the benefits of having a convention centre far outweigh the costs associated with increased gambling at SkyCity.

So why isn't the Government applying the same logic to the licensing of radio spectrum for mobile use?

Later this year, the Government will issue three licences that run for the next 18 years. Those licences will allow the operators to build 4th generation mobile phone networks.

The spectrum on offer (in the 700MHz range) is ideally suited to rural and remote areas that currently struggle to get any kind of service and which house our primary production powerhouse that forms the backbone of the economy.

The upside of giving broadband services to these customers is tremendous, not only on an economic basis but also in terms of social cohesion, education, health and numerous other benefits.

Rural folk need access to 21st century communications if they are to maintain and grow their communities.

The benefits of having mobile broadband are well defined and clearly spelled out, yet instead of approaching Telecom, Vodafone and 2Degrees to find out what their plans are and how they would use the spectrum, the Government is going to auction off the spectrum.

It hopes to gain a couple of hundred million dollars for this, which amounts to about $3 million per telco per year for the life of the licence.

That's chickenfeed to a government but money spent on a licence is money that is not available to spend on a network. Spending millions on a piece of paper will give government coffers a shot in the arm, but means the funding available for network deployment is reduced.

While this will obviously affect 2Degrees the most - it's still building out its 3G network, let alone looking to 4G - the same will be true of both Vodafone and Telecom.

TUANZ believes the Government would see a much greater return on its ownership of the radio spectrum if it used the same logic that sits behind the SkyCity deal. Enabling the licence bidder to build something that generates economic benefit for the country as a whole far outweighs a short-term cash injection to the Treasury coffers.

Give the three telcos the right to use the 700MHz spectrum for the next 18 years and let them get on with building networks and offering service.

The benefits to rural New Zealand alone would be worth it but we would get so much more than that. We'd get a truly competitive mobile market that will mean reduced prices for both business and consumer users and that will only add to the economic benefits we see.

If it's good enough for casino owners, surely it's good enough for the users of telecommunications?

Paul Brislen is chief executive of the Telecommunication Users Association of New Zealand

- NZ Herald

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