4. The auction alternative

Issue 4.1

What would be the most appropriate design of auctioning cellular spectrum, following a rejection by incumbent rightholders of renewal price offers from the Government?

85. In broad terms Telecom’s preferred auction process is a multiple round internet based auction along the lines of the auction conducted for the 3G spectrum (and progressively developed over several subsequent auctions up to auction 6).
     

Issue 4.2

Do you have any comments on the use of an open, simultaneous multiple round auction design previously adopted by the Ministry for large commercial rights and licences (e.g. Auction 6 rules)?

86. That is Telecom’s preferred approach, as noted above.
     

Issue 4.3

Do you have any other comments on auction as an alternative to the renewal process?

87. We consider that adequate opportunity to resort to market process means that the market process should be made clear as soon as possible, by providing the proposed auction rules. If the auction rules are not stated in advance, we will not have sufficient information upon which to base a decision about whether to resort to an auction.
88. Further, we note that an auction is uncertain for both incumbents and the Crown, as demonstrated by the 2001 auction (relating to 890 – 900 MHz).
89. We also think that the proposed auction rules are relevant to our views on the price formula. It is difficult for us to assess the Ministry’s price-setting formula, and ultimately the Ministry’s offer, without knowing how any auction would be conducted.
    This is because the price-setting formula is intended to provide an estimate of the market value of the rights, which, if the offer is not accepted, would be determined by an auction. To be able to make an informed submission on the price-setting formula, and an informed decision about the offer, we believe we should have the following information about the auction
    1. What will be the size of the spectrum blocks to be auctioned?
    2. Will there be any limitation on Telecom, or others, participating in
       the auction?
    3. Will there be any limitations on the quantity of spectrum that can
       be bid for?
    4. When would the Ministry expect to hold the auction?