4. The focus should be on how to maximise the value of this spectrum to New Zealand

35. Given all the uncertainties about future spectrum demand, the best approach is to try to ensure that the system allocates spectrum to the highest value user over time. The renewal process takes precisely this approach. The key question the Ministry assesses is whether renewal would maximise the value of the spectrum to New Zealand as a whole.
36. Maximising the value of this spectrum is most likely to be the result of allocating it to the firm that will use it for the highest value services. This firm is likely to be the one that is willing to pay the most for the spectrum. The payment requirement is a sensible way to test the competing assertions of those who say they are also keen on the spectrum and would put it to more valuable use.
37. In this section we explain why we think Vodafone is likely to be the highest value user of its current 900 MHz spectrum rights in the future.

Vodafone is likely to be the highest value user of this spectrum

38. We have a history of substantial investment in telecommunications infrastructure in New Zealand. We have invested almost $2.5 billion in our network since buying BellSouth’s network in 1998, including the $750 million purchase price of the business.
39. We are using all of our 900 MHz spectrum now. The late availability of 1800 MHz spectrum has meant that our network uses 900 MHz spectrum more heavily than might otherwise have been the case.
40. Vodafone is committed to competing with Telecom using its own infrastructure. As we have said many times, we are aiming to become the number one telecommunications firm in New Zealand. To do this we are expanding our products and services to include broadband and local access, and we are continuing to cut retail mobile prices in order to encourage fixed to mobile substitution.
41. As part of this plan, we are building a national 3G broadband network. Vodafone has outlined its network roll out and investment plan to the Ministry and is already delivering against it.

• We launched an HSDPA broadband network with 42% population coverage in October 2006.
• We plan to invest [Withheld under the Official Information Act 1982] over the next four years to develop this network.

42. [Withheld under the Official Information Act 1982].

43. [Withheld under the Official Information Act 1982].

44. This network will provide a nationwide alternate network to Telecom’s infrastructure for the first time. This enables Vodafone to compete with Telecom using its own infrastructure across the whole telecommunications market. As far as we know, no other player has indicated plans to roll out an alternate nationwide network or anything remotely resembling one.
45. Access to 900 MHz spectrum is crucial to our plans. We need 900 MHz to economically build HSDPA outside the cities. Without it, we will not be able to roll our network out as far, or it will be delayed, or it will come at a higher cost.