Review of 3G Spectrum Cap – Cabinet Decisions

On 19 May 2010, Cabinet considered a paper on the ongoing need for caps on spectrum in the 2 GHz band used for 3G cellular services. It decided that the current caps on paired FDD spectrum in the 2 GHz band should be extended to 30 August 2013 in order to continue to facilitate workable and effective competition in the market for 3G cellular services.

This decision follows a review of the need to maintain the cap in respect of the 3G spectrum management rights that a number of telecommunications service providers hold. As a condition of selling the management rights, the Crown reserved the right to extend the cap for a further period should that prove necessary to continue to facilitate workable or effective competition. The cap was extended in 2004 and again in 2007.

In making its decision, the Government recognised the recent developments in the market, including the availability of other spectrum bands for deployment of 3G technology, and the entry of 2degrees. However, it acknowledged that there remains a residual risk that an incumbent might purchase a large block of 2 GHz spectrum to prevent others gaining access to spectrum.

In order to allow limited rationalisation of spectrum to create opportunity for gains to consumers, the Government is offering right holders a revised Management Rights Deed which will relax the caps from 15 MHz to 25 MHz. It will also remove the cap on unpaired TDD spectrum in which technology has not been deployed.

Individual right holders have been notified of the extension to the cap and the offer of a revised deed.

The Government will also consider proposals from two or more parties to allow a relaxation beyond 25 MHz in certain circumstances where the Government is satisfied the proposal will promote competition in the market.