1. Introduction

The Ministry of Economic Development (MED) has requested a short study that examines:

• the optimal quantity of 800MHz and 900MHz spectrum for operators in New Zealand over the period 2011–2031:
  • the optimal quantity of spectrum required by the current management right holders in the 800 MHz and 900 MHz bands
  • the optimal quantity of 800 or 900 MHz spectrum that a new entrant would require in the 800 MHz and 900 MHz bands to operate a nationwide cellular network.
• the amount of 800/900MHz spectrum substantially used by the current management right holders.

Our findings for the first part of the study are based on a bottom-up modelling exercise that determines the optimal amount of spectrum that could reasonably be forecast to be required by the relevant players over the period 2011–2031 (section 2). For the second part of the study we reviewed publicly available information and submissions to the spectrum renewal process to estimate how much spectrum operators are currently using in these bands (section 3). We also examined overseas data in order to draw on relevant experience for the New Zealand situation (section 4). The report concludes with a summary of our findings and recommendations (section 5).

In setting its policy on renewal of management rights for the 800 and 900 MHz bands, the MED has a number of policy objectives:

• optimise incentives to invest for both current holders and new entrants
• promote competition in telecommunications markets
• minimise risk of stranded investment by current holders
• minimise risk of supply discontinuity by current holders.

While we believe that our study supports the MED’s process in ensuring the above objectives are achieved, it should be noted that the scope of the study does not extend to any detailed welfare analysis. While a full welfare analysis would enable examination of the issue of maximising the value of spectrum to society as a whole it would need to take into account all spectrum allocation and not be limited to the 800 MHz or 900 MHZ bands. Such an undertaking may well be worth considering but could not have been achieved within the short time-frame of this desktop review.

Although this study was commissioned by the MED, the views expressed in this report are solely those of Network Strategies. Confidential data is denoted in the report by square brackets.