Friday, 10 December 2021 12:19

Outcome of 850/900MHz band spectrum auction Featured

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Two companies, Optus and Telstra, have won spectrum in the Australian Communications and Media Authority’s (ACMA) latest spectrum auction.

All 16 lots available were allocated. The allocation realised a total revenue of $2,091,618,000, equivalent to almost $1.21/MHz/pop.

Optus won eight lots of spectrum at auction for $1,119,183,000, and acquired a total of 12 lots of spectrum for $1,475,958,000. Two set-aside lots were allocated to Optus for a pre‑determined price, and two lots of 1 MHz were automatically allocated also to Optus as the winner of the 900 MHz lower products.

Telstra won four lots of spectrum for $615,660,000.

TPG Telecom did not participate in the auction.

ACMA acting chair Creina Chapman said the spectrum has been designed to support the deployment of 4G and 5G networks across Australia.

“This spectrum will support the deployment of more wireless broadband services, facilitating higher speeds and more reliable networks for consumers,” Chapman said.

“The successful allocation of 850/900 MHz band spectrum is another important step forward for Australia’s transition to 5G, and the deployment of new technologies.”

Licences won at auction will come into force on 1 July 2024, for a 20-year term ending in 2044. Winning bidders may have the opportunity to obtain early access to the spectrum under special circumstances before licences commence, the ACMA advised.

The full results have been published on the ACMA website here.

Minister for Communications Urban Infrastructure Cities and the Arts Paul Fletcher welcomed the conclusion of the auction.

This auction follows the completion of the high band 5G auction in April 2021, making 2021 the ‘Year of 5G’.

“In 2021, the Morrison Government has delivered two major spectrum auctions to facilitate the growth of 5G, and have set the groundwork for the pace of 5G network rollouts to increase in the year ahead.

“The Government recognises the opportunities the 5G rollout presents for economic growth and innovation, including in Australia’s regional communities. The outcome of this auction is an important milestone in making sure the benefits of 5G will be shared by all Australians.

"As a result of the Morrison Government’s work to reform and modernise the Radiocommunications Act 1992, the spectrum licences are 20 year licences, instead of 15 years. Reforms to the Act were passed by the Parliament late last year and commenced in June 2021, meaning this auction was the first to be able to offer bidders the certainty arising from longer licence tenure," Fletcher concluded.

Telstra chief financial officer and group executive strategy & finance Vicki Brady said securing this spectrum was strategically important for Telstra and its commitment to providing its customers the best mobile network across the country.

“With the 2x10MHz of 850MHz spectrum we’ve secured in this auction, added to our existing spectrum holdings, we now hold 2x40MHz of low-band spectrum in the major cities and 2x45MHz in regional and remote areas. This is more than any other carrier, which is important given our larger customer base, and will help us continue to provide the best mobile coverage and service,” said Brady.

“Mobile and wireless broadband are key components of a successful digital economy, and this low band spectrum will help us support Australia’s digital economy ambitions which is critical to our nation’s pandemic recovery. The spectrum is essential for carrying mobile data, particularly 5G, over the vast distances needed across regional and remote areas and also enables us to provide better coverage indoors and other difficult to reach places in metro locations.

“This outcome helps to ensure we continue to meet the growing demand of our customers across the country, and especially in regional areas. Our current 850MHz spectrum licence has played an important role in our 5G rollout which now extends to more than 4,000 sites across the country, reaching 75% of the population. This new spectrum will help us meet the commitment in our T25 strategy to provide 5G coverage to 95% of the population by 2025.

“Over the seven years to end FY22, we will have invested $11 billion in our mobile network nationally with $4 billion of this invested in our regional mobile network. Because of this our mobile network now covers one million square kilometres more than any other telco – that’s the size of New South Wales and Victoria combined.”

Brady said Telstra would keep investing to ensure it maintained its leading mobile coverage and helped regional and remote communities fully participate in the digital economy.

“This is especially important as our nation rapidly digitises, as migration to regional areas continues at pace, and as billions of devices, like water sensors, home and business security cameras, and smart meters are generating data like never before.

“All of these factors have increased demand on our network in regional Australia nearly threefold in the past three years. We will continue investing and this includes boosting regional connectivity with at least another 100,000 square kilometres of new mobile coverage as part of T25,” concluded Brady.

Optus was awarded 2 x 25 MHz of 900 MHz spectrum nation-wide for a total of $1.476 billion. Optus CEO Kelly Bayer Rosmarin said, “The auction result is a fantastic outcome for Australian consumers and businesses. Optus is building the network of the future for our customers and 900 MHz spectrum is its foundational layer.

"With this additional spectrum, and our existing mid and high band spectrum, we can continue to deliver great coverage and bring the benefits of our technology leadership to more Australians.

“We applaud the Government for prioritising competition and consumer interests in ensuring a competitive auction process that has also delivered more equitable holdings of this critical low band spectrum,” Bayer Rosmarin concluded.

Optus vice president networks Lambo Kanagaratnam said, “We are steadily advancing the rollout of Australia’s fastest 5G, and combining it with value and innovation, like our suite of Living Networks features.

"This spectrum means we can offer a significant uplift of 5G coverage nation-wide, to even more Australians.

“Optus aims to power optimism with options, and options have just become a whole lot better for Australians,” Kanagaratnam said.

Optus says that economic modelling by PwC shows that competitive national deployment of 5G could boost the national economy, with cumulative benefits over the decade of $130 billion – equal to 1.2% of GDP – and the creation of 205,000 net new jobs.

The same modelling shows that the benefits of 5G deployment in regional Australia over the decade would be $38 billion – equal to 1.4% of GDP – with 45,000 net new jobs created, Optus concluded.

TPG Telecom did not participate in the auction. TPG Telecom CEO Iñaki Berroeta said, "Our recent merger brought together the spectrum held by the former VHA and TPG entities. As a result, TPG Telecom has strong low-band spectrum holdings that are already deployed in our 4G and 5G networks.

"Given our existing low-band spectrum, TPG Telecom determined it was not in the best interests of our customers or shareholders to acquire more low-band spectrum at this auction.

"We will continue investing heavily to roll out our 5G network across Australia’s largest cities. Our build program has been accelerating, with more than 150 sites delivered last month alone.

"We are already maximising the potential of our infrastructure, as demonstrated by the recent tripling of our 5G coverage. Our 5G standalone network now covers more than 85 per cent of the population in ten of Australia’s biggest cities and centres, and we look forward to bringing 5G to more customers in coming months and years, Berroeta concluded

Low band spectrum, such as the 850/900 MHz band, has particular characteristics that allow it to transmit efficiently over long distances and through objects such as trees and buildings. It is therefore a highly valued component of mobile networks, particularly in regional Australia, the Ministers office says.

Much of this spectrum has been in use for cellular mobile from the outset of 1G in the 1980s (850MHz) and 2G (900MHz) in the early 1990's. It is beneficial, and sometimes co-incidental, for spectrum licences to be aligned to technology lifecycles, allowing business cases to be extended well into the future. Extending the spectrum leases to 20 years provides certainty for operators as they look to make those long term investments in 5G technologies.

Both operators should be relatively happy with the price of $1.21/MHz/pop. I recall that the same 850MHz spectrum was renewed last time at a slightly higher price of $1.23/MHz/pop. Taking into account inflation over the 15 year period the outcome is a significant discount on the previous price.

The economic issue for mobile telcos is that to keep ahead of demand they have purchased and deployed significantly more spectrum over time. The renewal or repurchase of these growing spectrum holdings along with growing number of cell sites, due to the higher bands, must be driving up both capital and expense budgets for the carriers. It is no wonder the carriers are looking to increase ARPU with increased prices and to grow in other areas such as IoT.

For Government, spectrum is a national asset and getting a good return on that asset can be viewed in two ways:

  • The direct payment in terms spectrum licences which the carriers need to pay in order to stay in business.
  • The economic multiplier benefit can result in substantial economic grow.

However economic growth can be stymied if the spectrum burden on the carriers drives price to levels where utilisation declines and availability of capital is reduced to deploy the technology extensively. A balanced approach is needed to ensure that spectrum is allocated at affordable levels so that economic growth is maximised.

This first appeared in the subscription newsletter CommsWire on 8 December 2021.


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