Executive summary (ARCHIVED)

• Spectrum allocation framework
• Definition of rights
• Spectrum acquisition caps
• Secondary market for spectrum in New Zealand
• The need and efficacy of competition safeguards

Spectrum allocation framework

1. The MED has implemented a Spectrum Allocation Framework at the forefront of regulatory structures prevalent in international economies. This commendable work has resulted in a structure with the following positive features:

• Light-handed;
• Market based;
• Technology Neutral (in relation to the Management Rights Regime);
• Flexible; and
• Low complexity.

2. Our review of this framework does not indicate any need for substantial legislative change, although we make many recommendations that may improve the features associated with market function.
3. This report sets out further steps the MED may make for further improve the framework by dealing with the following issues:

• Regulatory risk caused by lack of publicised, open, transparent and consistent processes; and
• A large amount of spectrum that could be held under the most efficient regime - the Management Right, but currently is not, including spectrum held by Government Departments such as Defence, and spectrum administered by the MED.

Definition of rights

4. The MED should continue to move spectrum rights towards more simplified objects, and recognise that these are usage rights much more than management rights and MED should recognise that the goal of spectrum management is to protect receivers from harmful interference, rather than to create rights to transmit.
5. The Government should take action to remove or reduce inefficiencies caused by tenure issues in the current Rights regime.
    

Spectrum acquisition caps

6. We do not support the use of Spectrum Allocation Caps except where there are specific competition or public policy goals that are able to be promoted by such instruments.
7. Spectrum caps should not be used to engineer market outcomes for new players.
8. Prima facie, the only circumstance where we see a need for bidding caps is to restrain incumbents from acquisitions that could damage competition or industry development in the medium to long term.
9. Bidding caps are, however, an important compliment to the enforcement of provisions under the Commerce Act, and the application of these caps should be undertaken only following a formalised, open and transparent process.
10. In each allocation the MED should undertake a comprehensive analysis before the introduction of any spectrum cap or exclusion, including its effect on market design and auction bidding strategies. This paper sets out the elements of such a draft analysis.
     

Secondary market for spectrum in New Zealand

11. There does not appear exist in New Zealand a properly functioning secondary market capable of correcting inefficiencies in the initial allocation of spectrum and as such initial allocation should not rely on this discipline.
12. Matters such as volume of tradeable objects, tenure, definition of rights and incumbent reluctance limit the development of such a market
13. We see a case for a formalised market exchange that would substitute for the existing primary and secondary markets.
     

The need and efficacy of competition safeguards

14. Competition Safeguards in addition to the enforcement of the Commerce Act are warranted in some circumstances and should be used where there is a demonstrated need or public policy benefit.
15. Categories of potential need or benefits to be determined in any government intervention point should be limited and well publicised to include the need to deter non-competitive growth in market power, the benefit (if any) of facilitating improvements in the dynamic efficiency of current and potential markets and the potential for social benefits.
16. Specifically in relation to competition safeguards government intervention should be restricted to the following elements:

• Prevention of anti-competitive conduct;
• Prevention of non-competitive increases in market power; and
• The facilitation of new competitive entry.

17. For each allocation, renewal or grant the MED should undertake a comprehensive, open and transparent analysis of the need and efficacy of competition safeguards. This paper sets out the elements of such a draft analysis.
18. UILI provisions are generally ineffective and inefficient and should be avoided in all but social subsidy scenarios.