David Cunliffe Announces Extension on the 3G Spectrum Cap - 27 January 2004

Media Statement from Hon David Cunliffe, Associate Minister of Communications

27 January 2004

The Associate Minister of Communications Hon David Cunliffe announced today the government's decision to continue the 15MHz spectrum cap that applies to 3G radio spectrum for a further period until May 2007 in order to facilitate competition in the future market for third generation (3G) mobile telephony services.

This decision follows a review of the need to maintain the 3G spectrum cap in respect of the 3G spectrum management rights that a number of telecommunications services providers hold. The cap of 15MHz was initially set for a period of three years. The Crown reserved the right to extend the caps for a further period should that prove to be necessary to continue to facilitate workable or effective competition as a condition of selling the management rights.

In making the decision the government took into account the special features of the 3G services market (including the limited amount of spectrum available for use in 3G cellular services), the price performance of cellular services compared to other OECD countries, the slower than anticipated development of the 3G market, and the views of existing 3G spectrum rights holders.

Given the potential importance of 3G technologies for the economic development of New Zealand, the government wants to ensure that conditions that promote competitive entry into this market are maintained.

"Prior to establishment of the market it is in the interests of consumers to ensure that potential future entrants will have access to appropriate spectrum," said Mr Cunliffe.

"Given slower than anticipated development of this market and continued uncertainty regarding the application of the Commerce Act to 3G spectrum acquisitions, the existing cap on 3G spectrum should be extended for a further period to facilitate workable and effective competition. Without the cap there is a significant risk that one or two major players may purchase enough spectrum to prevent other potential entrants from being able to enter the market."

Although the government has extended the cap on 3G spectrum, it has recognised that this may place some constraints on commercial partnership models that spectrum holders could otherwise consider, and that in some limited circumstances the long-term interests of consumers of 3G mobile telephony services might better be achieved by allowing a degree of commercial partnership such as the joint servicing of low-density areas.

"In the event that such a proposal is of interest to two or more parties and complies with Commerce Act requirements, the Crown will consider a case for modifying the 3G cap for those particular circumstances, subject to appropriate safeguards," said Mr Cunliffe.

The government will conduct a further review prior to May 2007 to assess whether the market for 3G services has by then developed sufficiently to enable reliance on the Commerce Act.