4. Proposed lot design

66. Taking the considerations in the previous section into account the Ministry proposes three possible options for the lot design. (View an expanded landscape version.)

67. All options offer similar configurations for managed parks, namely

• 25 MHz in the 2.3 GHz band:
• 35 MHz and either 20 MHz or 15 MHz in the 2.5 GHz band.

68. This allows for:

• Local WiMAX or other broadband services (in the 35 MHz block)
• FDD services (e.g. for CMAR)
• Overall, across both bands, this should allow for three or four local or regional service providers to co-locate at the local/regional level. 

69. The key difference between the possible options lies in how the nationwide management rights are specified. The main features are noted below:

Options for lot design

View full size version of above band plan.

Option b

• Specifies nationwide lots of 35 MHz.
• An acquisition limit of one 35 MHz lot would apply, effectively constraining use to TDD type services as there would be inadequate separation available between the two directions of transmission in a single lot.
• Bidders would be required to manage interference issue within the lots they acquire. They could do this by providing for guardbands within the lots they acquire and/or by agreement with neighbouring rights holders. 
• A sub-option here would be to specify conditions applying to spectrum licences created in relation to the management rights. These might specify, for example, that transmissions under licences within the 2.5 GHz band adjacent to management right boundaries require the express written agreement of the neighbouring rightholder.
• This option provides little opportunity for the market to deploy FDD services, at least until the acquisition limit is removed, and even then may require subdivision of the auctioned managements rights if a 120 MHz frequency separation is required.
• An outcry auction or an SAA auction could be used with this option. An outcry would be quicker, but may give widely different prices between the first and last lot sold.

Option a

•  Specifies nationwide lots of 5 MHz.

• No formal separation for FDD use is specified, although the MSP provides a logical separation of 85 MHz, and a separation of 120 MHz as provided for in ITU-R Recommendation M.1036 can be achieved by bidders exercising lot preferences.

• An acquisition limit of 35 MHz would apply for TDD operation and a limit of 40 MHz would apply for FDD¹. This is because FDD operation may require a 5 MHz guardband on both (paired) lots. The useable spectrum for each application is 30 MHz.

• Bidders would be required to bid on only contiguous lots (or two separate sets of lots if intending FDD use) to ensure a prompt auction process and minimise opportunities to game the overall process.

• Alternatively, bidders could be permitted to mix and match lots as they wished. This would allow the market to determine the extent to which, and where in the bands, TDD or FDD applications are preferred, but could extend the auction process significantly.

• As with option A, bidders would be required to manage interference issue within the lots they acquire. They could do this by providing for guardbands within the lots they acquire and/or by agreement with neighbouring rights holders. 

• A sub-option here would be to specify conditions applying to spectrum licences created in relation to the management rights. These might specify, for example, that transmissions under licences within the 2.5 GHz band adjacent to management right boundaries require the express written agreement of the neighbouring rightholder.

• Note that an SAA auction would be required for this option to provide bidders with the flexibility to choose an optimum combination of lots. Potentially this complicates and extends the auction considerably and rules would need to be developed (e.g. limiting the number of withdrawals) to shorten the process.

Option c (i)

• Specifies three sets of 35 MHz lots (suitable for TDD WiMAX applications) and two pairings of 15 MHz and one of 20 MHz suitable for FDD uses.
• A separation of 120 MHz has been provided for FDD operation. This meets the requirements of ITU-R recommendation M.1036.
• Guardbands of 5 MHz would be specified on the upper bound of each management right, with the exception of the paired 15 MHz lots in the 2.5 GHz band.
• As for Option A and B, an acquisition limit of 35 MHz would apply for TDD operation, with a limit of 40 MHz on FDD operation.
• This is a simpler auction, but involves the Ministry in determining relative interest in TDD and FDD applications at the outset.
• Option C would allow for an outcry auction or an SAA auction, though would probably best be accommodated by way of an SAA auction.

Option c (ii)

• This option is identical to Option C(i), except that there would be no pre-set pairing of the 15 MHz and 20 MHz lots in the 2.5 GHz band. That is, bidders would be able to bid for any combination of lots up to 35 MHz (or 40 MHz in the event of bidding for two lots of 20 MHz) depending on their preferences for a contiguous 35 MHz for WiMAX or pairs (15MHz x 2 or 20MHz x 2) for IMT or other FDD purposes. If warranted, bidders could purchase one half of a ‘FDD’ lot and deploy TDD services.
• The advantage of this option is that it allows the market to determine the most highly values uses of the band (while being less complicated than Option B). However, there would be additional complexity in the auction process (compared to Option C(i)) with the risk of a more drawn-out process.

70. The Ministry also welcomes alternative proposals for lot design. It notes that it may change any aspect of the options, or develop an alternative lot design, in light of this consultation process² .

Question 2: Proposed lot design

Do you prefer Option A, B or C for the lot design? Please explain why. If you prefer Option C is your preference for C(i) or C(ii)? Why? If there is an alternative option you prefer please specify it and explain why it would be preferable.

¹This is a small expansion (for paired lots for FDD uses) on the acquisition limit set by Cabinet (although useable spectrum, excluding guard-bands, remains within the 30 MHz limit).

²The Ministry does not propose to undertake a further round of consultations on any alternatives suggested in this consultation process in the light of the timing of the auction.