The Government is to re-auction some under-used cellular phone spectrum rights held by the only significant players in New Zealand, Vodafone and Telecom.
Communications Minister David Cunliffe said the Government will re-auction the 7.5 MHz of spectrum in the 800 and 900 MHz bands in 2011 and 2012.
The spectrum held by the big players will not be offered for renewal to Telecom and Vodafone.
The New Zealand cellular market is a duopoly and the Government is keen to get a third or fourth player into the market to try and bring prices down. Cellphone calling is considered expensive by international standards.
The spectrum will be freed up to the open market and reallocated by way of an auction which will be open to all interested parties, including Telecom and Vodafone.
"This decision has been made after a case-by-case review of spectrum holdings in the 800 and 900 spectrum bands," Mr Cunliffe said.
Analysis showed Telecom and Vodafone were not fully or efficiently using their existing holdings, he said.
Mr Cunliffe said potential market entrants had shown significant interest in gaining access to the 800 and 900 MHz bands, as these bands were considered to be more economic for providing coverage to lower population density areas.
Reallocating some spectrum by auction would test market interest in these bands and improve the potential for new entrants.
Mr Cunliffe said it was possible Telecom and Vodafone would want to on-sell their cellular rights through secondary market transactions, so an incentive had been provided for existing holders to arrange an early secondary market transaction, rather than face a later auction.
The Government's approach was designed to encourage investment in cellular services.
"Freeing up 7.5 MHz in each band is the best way to improve this as it provides sufficient certainty for incumbents while also making the mobile market more attractive and accessible for new entrants."
- NZPA
