Conroy has told ACMA (the Australian Communications and Media Authority) that he will personally determine the reserve price in the upcoming auction of the “Digital Dividend” radio spectrum space freed up by the end of analogue TV broadcasting.
Until now it was assumed ACMA would set the reserve price, as it has for previous auctions. But Conroy has decided to take charge, presumably because some carriers – most notably Vodafone – have indicated some reluctance to take part in the auction. The government hopes to make up to $4 billion from the sale.
Carriers need the extra spectrum for 4G, LTE and further rollouts. The spectrum to be auctioned is called the 700 MHz band, but is actually for 126 MHz of spectrum in the frequency range 694–820 MHz. The details were announced by Conroy in June 2010, but the date of the auction was not announced until June this year, when Conroy said it would be in April 2013.
Senator Conroy is under pressure from the government to maximise the return from the auction to help the federal budget return to surplus. The fact that Conroy has taken control of setting the reserve price can only mean that he is concerned that leaving it to ACMA will not give the government as high a return. In other words, he is likely to set a higher reserve price than the independent arbitrator, for purely political reasons.
That is more likely to help Telstra, which has lots of money, than its competitors, which don't. Telstra and Optus are keen for more spectrum, but Vodafone CEO Bill Morrow said back in July that it might not take part in the auction, and rely on its existing spectrum allocation for future growth. That is unlikely to concern the government. Vodafone is losing customers, is short of cash, and is seeking an outside investor.
Vodafone’s possible non-involvement would have reduced competition, and therefore the price of the winning bids. By intervening Conroy can make Telstra, Optus and any other interested parties pay as much as thinks the market will bear. Best not to leave the decision to bureaucrats …
Conroy warned in his notorious “red underpants” comments in New York in early October that he can do what we wants when it comes to telecommunications policy in Australia. He is now demonstrating that power. “If I say to you, everyone in this room, if you want to bid in our spectrum auction you’d better wear red underpants on your head, I’ve got some news for you. You’ll be wearing them on your head.” They will do as he says, in other words.
“I have unfettered legal power. There’s a seriously important difference between the Australian model and overseas. Not many regulators have quite that much power.” No they don’t.
The ACMA is still responsible for mechanics of running the auction, and publishes timetables and other relevant information on its website. It publishes a monthly “Spectrum Auction e-Bulletin" to keep interested parties informed. No news yet on the rule changes.