6. Responses to claims made by others

64. In this section we comment more directly on some of the claims made by Econet and TelstraClear in their submissions.

The Ministry’s work is not about short-term revenue raising

65. Econet suggests that the Ministry’s renewal process is focused on short-term revenue raising and criticises the Ministry for an implicit failure to serve the broader interests of New Zealand in the allocation of spectrum (see page 6 of its submission).
66. Econet also suggests that we want a high renewal price in order to raise their costs (page 4).
67. We entirely disagree with Econet on this point. Fiscal goals are not and have never been the overriding concern of the policy. Indeed, one of our chief concerns in this process thus far has been to ensure that fiscal goals that might push the Ministry in the direction of a high renewal price are not made the primary driver of the renewal decision.
68. The point of the renewal process is to ensure that the spectrum ends up in the hands of the firms that will make the most valuable use of it. This ensures the greatest possible value for spectrum for New Zealand as a whole.
69. A market price for spectrum supports this goal. It ensures that firms are required to back up statements that any particular piece of spectrum is valuable with actual payment, so it helps decide which firm is likely to value a piece of spectrum the most. This does not mean that revenue raising is a goal in itself.

Vodafone’s GSM spectrum ownership is not a "policy failure"

70. Econet frequently describes us in public and in private of being a “GSM monopolist” and blames the Ministry and the spectrum allocation policy for this supposed “policy failure”. It repeats the substance of these allegations on page 2 of its submission.
71. Vodafone or its predecessor acquired 2G spectrum in four stages:

• 2 x 7.5 MHz of 900 MHz spectrum in 1990 (from the Ministry)
• 2 x 7.5 MHz of 900 MHz spectrum in 1997 (from Telstra)
• 2 x 15 MHz of 1800 MHz spectrum in 2001 (from the Ministry)
• 2 x 6 MHz of 900 MHz spectrum in 2002 (from the Ministry)

72. The fact that we own 21 MHz of 900 MHz spectrum is a result of open market bidding, of secondary market trading, and of investment decisions by Vodafone and by others. It has nothing at all to do with regulation. Vodafone has bought spectrum and invested heavily in its network. Others have chosen not to do this. In our view, policy should encourage investors, not discourage them.
73. Econet objected to our purchase of 900 MHz spectrum in 2002 in front of the Commerce Commission. The Commission considered these issues and concluded that no substantial lessening in competition would result from our acquisition.

Our roaming and co-location pricing is reasonable

74. Econet states in its submission that our roaming and co-location are entirely unreasonable (page 4).
75. In fact our starting point for roaming pricing is [withheld under the Official Information Act 1982 ]. We do not understand why Econet thinks that our pricing was 86 cents a minute.
76. Our co-location pricing is entirely cost-based and founded on a transparent methodology developed by an independent property valuer. We follow the process for co-location processing outlined in the TCF co-location code, which is currently with the Commission for approval. Our pricing does not contain a “monopoly element”.

Vodafone should not be forbidden to bid at any auction

77. TelstraClear says that Vodafone and Telecom should only be allowed to bid at any auction for the renewing rights if they surrender all rights to renewal of their existing rights (para 14).
78. If the Ministry considers that we should not be allowed to renew our 900 MHz spectrum rights, this must be on the basis that Vodafone ownership of the renewing 900 MHz spectrum rights is incompatible in some way with the policy goals.
79. We can therefore see some logic in the argument that Vodafone should not be allowed to bid at any auction that is held if renewal is not offered.
80. However, this approach would risk generating a very low value for 900 MHz spectrum. This does not seem consistent with a policy of either ensuring a fair value for the Crown or of allocating the spectrum to the highest value user.
81. It may be that TelstraClear and Econet support this approach because it will mean that they can get access to 900 MHz spectrum very cheaply. This could then open the door to for resale of the spectrum rights to Vodafone, who values the 900 MHz to support its network build beyond the cities.
     

20 years is an appropriate renewal timeframe

82. TelstraClear says it needs a twenty year term to invest in a network and get a return (para 17). It thinks that Vodafone does not need a similar timeframe, instead suggesting eight years for us (para 18).
83. We do not support TelstraClear’s position. We also need time to build a network and generate a return. We are in the process of building New Zealand’s second nationwide broadband network. The same factors that motivate TelstraClear to ask for a twenty year term apply in our case.