5G deal: Māori will be able to onsell spectrum

Communications Minister Kris Faafoi: sees 50MHz temporary allocation to iwi as a "stepping stone" to a more enduring solution to a Treaty claim over spectrum. Photo / File

COMMENT

The Māori Spectrum Working Group may soon have Spark, Vodafone and 2degrees beating down its door.

Communications Minister Kris Faafoi this morning confirmed this morning that 210MHz of 5G-friendly 3.5GHz spectrum would be auctioned in March next year.

The spectrum will be issued on a temporary basis, running from mid-2020 through to October 2022 to give the Government breathing space as it grapples for a long-term solution to longstanding Treaty claims on spectrum. More spectrum is also expected to be made available in 2022.

That much was expected. MBIE had earlier flagged that the stop-gap measure was likely.

However, Faafoi also revealed that 50MHz of the 210MHz temporary allocation would be set aside for Maori in what he called a "stepping stone" to a permanent deal.

For context, Vodafone has launched 5G at 100 cell sites across Auckland, Wellington, Christchurch and Queenstown with a 53MHz chunk of 3.5GHz spectrum, and the telco has previously said it has ambitions to own 100MHz post-auction.

Faafoi said the 50MHz set aside for iwi would come with "a support programme to build Māori capability in spectrum-related industries will be developed to maximise the benefits of this opportunity."

However, a spokesman for his office also confirmed that iwi could on-sell or lease some or all of 50MHz to Spark, Vodafone or 2degrees.

"Māori are free to make whatever commercial arrangements they wish to make with their share of spectrum," he said.

That sets things up for a possible two-step process.

Spark, Vodafone, 2degrees (and potentially others) will bid for the 160MHz put on the table at the regular auction, then there could potentially be a feeding frenzy as they get their chequebooks out for some of the 50MHz allocated to iwi.

Bids will be capped

Faafoi also said today that there would be a cap on how much spectrum each company could bid for.

The minister said the size of the cap was still being decided. However, the decision to impose a cap is a crucial marker. It shows Faafoi has decided to come down on the side of competition and spreading spectrum between Vodafone, Spark and the smaller 2degrees rather than the alternative - going all out to stuff government coffers as with the 4G auction in 2014 when the reserve was smashed in the final round of bidding and the Crown realised $259m as Spark spent a total $149m, Vodafone $66m and 2degrees $44m.

Although the bidding cap hasn't been revealed, one person close to the process tells the Herald that an MBIE pre-qualification process points to Spark, Vodafone, 2degrees and Dense Air (more on which below) getting the green light to bid on up to 40MHz each.

Larger chunks of spectrum are expected to be offered at a later date.

Another key element is that spectrum auction owners will have to hand back the spectrum they currently own before the auction.

"That's a big tick. The Government has been listening," said 2degrees spokesman Mat Bolland.

Been here before

There is a precedent for Māori onselling spectrum - and most pundits thought it worked out well for consumers.

At the 3G auction in 2001, the Labour government of the day allocated a chunk of spectrum at a low price to Te Huarahi Tika Trust - a pan-iwi group set up to advance Māori interests in 3G spectrum. The trust parlayed its spectrum into a stake in the company now known as 2degrees.

The cheap iwi spectrum played a key role enabling 2degrees to launch, boosting competition. Customers were happy and Te Huarahi Tika Trust was happy. The only wrinkle was that a US-based company took control of 2degrees, meaning ownership of the once so sought-after airwaves now lies with Seattle-based Trilogy International Partners, listed in Toronto (though the trust can point to the fact it still has a small stake in Trilogy).

Te Huarahi Tika Trust is also part of the Māori Spectrum Working Group established by Faafoi in May as he announced his intention to find an "enduring solution" to the long-standing iwi claim on radio spectrum - WAI 2224, lodged by Graeme Everton, which builds on WAI 776 filed by his late mother Rangiaho Everton two decades ago.

For the 4G auction earlier this decade, the then National government (governing in a coalition that included the Māori Party, kicked the WAI 2224 issue for touch by setting up a Māori "ICT development fund" in lieu of 4G spectrum.

Now, Faafoi says he wants to work with the Māori Spectrum Working Group, which also includes Everton, for an "enduring iwi framework".

For now, only two players

The major telcos earlier welcomed the plan for temporary spectrum allocations.

Today, there are only two players with a substantial chunk of spectrum that can be used for 5G: Vodafone, plus the UK company Dense Air.

Last November, Dense Air paid $25.7m to acquire a 70MHz chunk of 2.5GHz spectrum from Craig Wireless and rich lister Malcolm Dick's Blue Reach Wireless. Spark subsequently leased some of that spectrum to enable its 5G fixed wireless trial in Alexandra, and its 5G fixed wireless commercial launch in a series of small South Island towns last month.

Tight timeframe

This morning, Vodafone's Rich Llewellyn said, "We welcome the inclusive approach adopted by the Government in recognising the need to build Māori capability in spectrum-related industries."

But he added, "We note the timeframes proposed appear to be tight, as an auction in March will come around incredibly fast. It is important there is enough time for proper consideration of the long-term impacts of what is an valuable asset to New Zealand, as mobile connectivity becomes ever more important to Kiwis."

Would Vodafone do a deal with iwi?

"We are ready and willing to collaborate with other parties including iwi to ensure the best outcome for all New Zealanders when it comes to mobile connectivity," Llewellyn said.

A taster

2degrees' Bolland, said, "This allocation will be a bit of a taster - access to a limited amount of spectrum from mid-2020 will give the industry the opportunity to introduce early services and test a range of applications so we can work out what 5G will really mean for New Zealanders, while we wait for more spectrum to become available in 2022."

The telco's new CEO, Mark Aue, earlier told the Herald that he sees no business case for 5G at present. 2degrees has yet to set a timeline for its upgrade.

Bolland added, "The Government has been under immense pressure to make some 5G spectrum available early, while also balancing the amount of spectrum operators hold so they don't gain an unfair advantage. Requiring successful bidders to hand back existing holdings in the band is a good move in terms of protecting competition."

True mass market

A spokeswoman for Spark said, "This is a positive development and we intend to participate in the auction.

"Access to sufficient spectrum in the 3.5 GHz band will enable Spark to bring true mass-market 5G services to more New Zealanders as soon as possible."

Spark is aiming to launch its first 5G mobile service in July next year, working with the recently drafted-in Nokia Networks and Samsung as Huawei remains sidelined by the GCSB.