A. The impacts of reduced bandwidth on CDMA (which has flow on effects on Telecom and its customers).

• Telecom needs to be able to renew the full 2x20MHz of 850MHz spectrum that it
  currently holds.
• Any reduction in that bandwidth would limit our ability to offer our customers high speed value added services and therefore put us at a disadvantage relative to our competitors.
• If Telecom were to be allowed only 2x10MHz of 850MHz spectrum we would be
  unable to deploy Rev C and/or UMTS 850.
• If we were allowed only 2x15MHz of 850MHz spectrum we may not be able to take full advantage of Rev C and will incur additional costs.
• Either of the two scenarios above would have a significant impact on the competitiveness of our CDMA network and its future evolution. That will inevitably impact on our customers. We may be unable to offer advanced services and may incur additional costs, some of which will have to be passed on to customers.
• Ultimately, there is the risk that reducing the amount of 850MHz spectrum
  Telecom holds will reduce the range of technology options available in the New
  Zealand market and competition in that market. This in turn will limit consumer
  choice and access to competitive pricing.
• It is has been argued that overseas CDMA operators have smaller holdings of 850MHz spectrum, and therefore there is no reason for Telecom to need the full 20MHz it currently holds. However this argument fails to recognise that overseas CDMA operators have holdings in other spectrum bands that act as companion bands.

Spectrum holdings of US & European operators

Major US CDMA operators hold:

• 2x10MHz of spectrum in the 850 MHz band
• 2x15 (or 2x20MHz) of spectrum in the 1900 MHz band.
• The devices in the market are dual band ie. they cover both bands.
• Effectively a CDMA operator in the US has access to 2x25MHz of bandwidth.

Major European GSM/UMTS operators hold:

• 2x10MHz of spectrum in the 900MHz band
• 2x25 MHz of spectrum in the 1800MHz band
• 2x15 MHz of spectrum in the 2.1GHz band.
• Initial UMTS devices in the 2.1GHz band also have multi band GSM capability in the
  900/1800 MHz band.
• Effectively a GSM/UMTS operator in Europe has access to 2x35MHz and 2x15MHz of bandwidth respectively.

2.5GHz band:

• Europe has not yet allocated the 2.5GHz band to mobile.
• Indications are that this band will be divided into spectrum sizes that can support the 20MHz carrier bandwidth required by UMTS LTE. European operators will therefore have additional spectrum available for UMTS LTE.
• In NZ this band is used by TV OB links and is not available to mobile.

Spectrum holdings of US & European operators: The relevance to New Zealand holdings

• Telecom does not have access to the 1900 MHz band.
• By contrast, GSM operators in New Zealand have companion bands (900MHz, 1800MHz and 2.1GHz) which they can use to offer higher bandwidth services. These companion bands also allow alternative means for managing any bandwidth/capacity constraints that may occur should their 900MHz holdings be reduced.
• Telecom has access to 20MHz of bandwidth (all of which is in the 850MHz band), while a US CDMA operator has access to 25MHz of bandwidth (some at 850MHz and some at 1900MHz).
• However, even if 1900MHz spectrum were available, mobile TX in CDMA 1900MHz conflicts with base TX in GSM and so are not compatible in same market. (See Appendix A). Therefore the evolution path for Telecom’s CDMA network is only possible in the 850 MHz band.
• There are no markets that deploy both CDMA 850MHz with CDMA 2GHz as a companion band, so this option is not available to Telecom.
• There are some markets in which UMTS is deployed at 850MHz (eg Australia). However, that is a small market. That lack of scale leads to associated difficulties in obtaining affordable equipment and handsets.
• It is possible that during the relevant period (2011 to 2031), multiband CDMA handsets for 1800MHz and 2.1GHz or software defined radios (SDR) will become available. However, it is almost certain the availability of these products will not occur before Telecom will need to move to Rev B or C in order to offer customers advanced services.