The allocation of early access rights in the 3.5 gigahertz band for 5G services will be cheaper for telcos than it would have been pre-Covid, but the government is willing to take the revenue hit if it means rolling out the service.
The government had planned to auction off spectrum for the early-access stage of 5G, but canned the idea when the Covid-19 pandemic hit, instead allocating blocks to Dense Air, Spark New Zealand and Two Degrees Mobile. Vodafone NZ had enough spectrum to press ahead with its own plans.
A second auction is still in the mix for long-term allocations.
Broadcasting, Communications and Digital Media Minister Kris Faafoi said the government won't hold out for as high a price as it might have before the pandemic.
"They will get it for cheaper but that's because we also know that the potential of the 5G technology they want to roll out can also have a big impact on the bounce back of the economy," Faafoi said at Parliament's economic development, science and innovation select committee.
The telcos "have also been affected by Covid and their bottom lines have also been affected by Covid," he said.
Dwindling appetite for capital investment
"I think it is fair to say the appetite for that investment has somewhat diminished because they don't have as much capital to invest in rolling out the type of infrastructure they need to for the early allocation of spectrum," Faafoi said.
However, "we want to keep that momentum going. We don't want to be left behind because our telcos can't afford it as much as they could pre-Covid," he said.
One of the key advantage of 5G mobile technology is that it offers increased speeds. However, the infrastructure needs to be in place to achieve that, he said.
Faafoi defended the decision to cancel the early-access auction and said it was made in consultation with the sector.
It was a "sage intervention as it allowed them to settle and find out where their new appetite for capital investment in the short-term allocation of 5G spectrum was at," he said.
The government has made the early allocation of the 5G spectrum a priority "and it should be done very soon."