Environment Bay of Plenty

Bay of Plenty Councils response to the Discussion Paper (August 2007) “Radio Frequency Auction: 2.3GHz and 2.5GHz Bands.”

10 August 2007

Question 1: Considerations relating to lot design

For the national auction process, it is agreed that a 35MHz band is appropriate for allocation of management rights.

Expected technical developments and likely demand: Agreed this may be difficult to forecast and to hold the auction following the next meeting of the WRC (World Radio Conference) in November this year. While some uncertainty exists in the availability of Wimax equipt for the 2.5GHz band, there is less doubt on this matter for the 2.4GHz band. Alternative services to Wimax should be restricted to the 2.5GHz band if possible.

Size and location of the MSPs: The special interest for the region relates to the design of the managed spectrum park because this may be of more value in the delivery of services in regional and remote areas.

Agree to two MSPs in the 2.5GHz band with the smaller for non Wimax use, to ensure the 2.3GHz band and the 35GHz allocation in the 2.5GHz band is used primarily for Wimax, with overflow to the 2.5GHz band where necessary.

Acquisition Limits: Agreed to allow up to six national spectrum management rights awards, and agree that this might not attract six providers.

Technical Issues: TDD (Wimax) should be given priority in the 2.3GHz band, and FDD (IMT 2000) and CMAR replacement technologies, if only likely to be provided by Telecom, should be limited to the 2.5GHz band. Agree guard bands are best negotiated between license holders as the first option, with the MED acting as arbitrator where there is failure to agree.

Auction Type: We have less concern regarding the auction type chosen for the national spectrum auction, because the emphasis for the region is the allocation of MSP spectrum.

Question 2: Proposed Lot Design

Our primary interest is with the MSP allocation and that is the same through all options. We express no preference for options A-C with respect to the national auction options.

Question 3: Maori Interests

We believe there will be sufficient MSP capacity for specialist Maori language and culture services and do not support allocation of national spectrum for this purpose because it is unlikely a national spectrum allocation would be able to be used efficiently.

Question 4: Eligibility to Bid

Yes – so long as national spectrum allocation is limited to 35MHz which allows up to six different license holders, no restrictions should be placed on eligibility of parties able to bid at the auction.

Question 5: Duration of Acquisition Limits

We suggest a relatively short acquisition limit of 12 months is appropriate if, the use it or lose it terms are tightened – see response to the next section.

Question 6: Use or Lose Provisions

We prefer a short ‘use it or lose it’ date and even 2012 may be too long. We suggest a staged process as follows:

We prefer the Option B case where 30% coverage of 15 TLAs is required, and suggest that one contiguous group of 10 TLAs be covered in this way within 24 months, and then the remaining 5 TLAs be covered in the same way within 3 years.

We agree with the financial penalties for non use and option ‘b’ describing a ‘buy out’ option applies, with the consequences of failing to buy out being the loss of the national spectrum ( a staged transfer to MSP capacity would be permitted over a 1-2 year period).

Assessing the payment amount for option ‘b’ might be as follows:

On the basis of a 20 year license, payment of double the equivalent annual cost of the management rights for the period of the buyout sought. For example, if the management rights cost $100 (theoretically) and a one year buyout was sought, the financial consequences would by 2*100/20 = $10, ie 10% of the auction price for a 5% extension of the time limit for deployment.

Question 7: Settlement

Yes – this will deter speculation and the price paid will determine the market value.

Question 8: Managed Spectrum Parks: Proposed Allocation Procedures and Usage Rules

a. Agree – holders of management rights to national spectrum should not have access to MSP.

b. Agree – self management with intervention and dispute resolution for the MED only as a last resort.

c. Options 2 or three are favoured because they enforce planning, efficient spectrum use and tend to discourage speculative application. Option 2 is preferred because it may operate on a TLA basis where councils can offer infrastructure access, and because technical coordination would ensure efficient spectrum use. This is less complex to administer than option 3.

d. We are satisfied with option 2, subject to the opportunity for further consultation in 2008 as suggested, before final details are confirmed.

e. Low cost access to MSP use may encourage ‘gaming’, and options 2 and 3 assist in providing a cost penalty. We suggest that MED develop a tight ‘use it or lose it’ requirement for users of say, 12 months at most, with substantial penalty payments required if services are not delivered in this timeframe. Resale or transfer to any other party will not be permitted.

f. The cost recovery fees appear reasonable for the options. We agree with the development of a resource charge based on the average of fees paid for national spectrum, and divided by the reduced area (suggest multiples of TLAs), possibly with a premium for heavily populated areas. For example, if there are 1,000 TLAs and the average prices for national bandwidth is $1,000,000, then the average cost per TLA MSP might be nominally $1,000. A discount would be applied for remote and sparsely populated regions and a premium charged for high density (ie more profitable) TLAs.

Question 9: Transition Plan for the 2.5 GHz Band

No.