Spectrum policy talks cut out potential users

By ADAM GIFFORD

The Ministry of Economic Development has issued a secret contract to an Australian consulting firm to develop policy on competition safeguards for radio spectrum allocation.

The ministry's website does not mention the contract, but the project brief is contained on the site of the firm, Market Dynamics.

The Canberra consultants were asked to assess the existing spectrum allocation framework and the secondary market for radio spectrum, including whether there was any evidence of spectrum hoarding.

Market Dynamics was to recommend whether additional competition safeguards were needed, including "use-it-or-lose-it" provisions.

Brian Miller, the ministry's radio spectrum planning manager, said the work was not put out to tender because "we didn't have to".

Sources say ministry policy means contracts must be put out to tender only if they are expected to be worth more than $50,000 - inviting suspicion that, in this case, the ministry was trying to get policy work done on the cheap.

The job was potentially quite large and is significant to the ministry's plans to shift more spectrum to a management-rights regime - essentially privatisation of frequencies.

It was the sort of work the ministry used to do itself, but a reorganisation instigated under new chief executive Geoff Dangerfield split the radio spectrum policy division into operational and policy arms and cut staff by more than half.

Market Dynamics was told to consult the ministry and existing right-holders.

Excluded from consultation were potential spectrum-users who could not afford to buy spectrum at auction, and Maori and others who might have made a case for access to open spectrum or "commons".

The ministry's pro-privatisation position is made clear in the brief's background notes, which said the aim of radio spectrum management "is to maximise the value of radio spectrum to society".

"To achieve this, it is necessary for spectrum to be held by those that value it most."

Although the Radiocommunications Act allows the Crown to retain management rights or sovereignty over spectrum and issue licences to use defined bands, the preference of the ministry is to auction management rights, which means it has little control over what happens to spectrum subsequently.

This was made clear in the way officials responded to questions about licensing during a recent seminar on a new spectrum-allocation plan.

They put their faith in "a properly functioning secondary market" to ensure spectrum continues to be applied to its highest value use after the initial auction, but the brief said there was a major outstanding question about whether such a market exists here.

As it is assumed that companies buy spectrum with the intention of using it eventually, the initial auction becomes extremely important.

"Companies might be able to use their resources more efficiently if they were able to decide to invest in spectrum closer to the time it is used," the brief said.

"Instead, they are effectively forced to acquire spectrum according to the Government's allocation programme."

There are also concerns about spectrum hoarding, although the ministry has previously concluded there is little evidence of this and it was best dealt with through competition mechanisms such as the Commerce Act.

If Market Dynamics was able to find evidence of hoarding, it was to consider the introduction of use-it-or-lose-it mechanisms.

The brief said: "A major difficulty that has been identified with use-or-lose is the difficulty of defining 'use' and the leeway that should be given before new services are developed - eg, 3G mobile spectrum is yet to be 'used' by any telecommunications company in New Zealand."

www.market-dynamics.com.au/current.htm

www.market-dynamics.com.au/Current/brief.pdf