6.3 Duration of acquisition limits

87. As noted earlier, an acquisition limit by associated parties of 35 MHz¹ is proposed for pro-competition reasons (to allow the maximum number of interested parties to acquire spectrum at a reasonable price).
88. The issue arises however as to the duration of those limits (that is, the date at which such restrictions expire). This involves a trade-off between the following considerations:

• A lengthy duration delays the market consolidating spectrum even though consolidation may be desirable to take account of technology developments. This may be problematic given rapid technological development and the general uncertainty about technology trends (see earlier section on technology uncertainty). A lengthy duration also delays any desirable market consolidation to improve the commercial viability of services such as WiMAX (it is unlikely that the New Zealand market can support a large number of nation-wide providers over the longer term).  
• A short duration may allow early consolidation of spectrum to the detriment of vigorous competition (notwithstanding restrictions on business acquisitions which substantially lessen competition under Part 3 of the Commerce Act).
• A short duration may also encourage speculative buying at auction for trading purposes.
• Consideration of acquisition limits needs to be linked with ‘use or lose’ provisions, as it may be unreasonable to expect parties to forfeit spectrum without an ability to trade it to other parties who already have spectrum.   

89. For the avoidance of doubt, trading between parties within the acquisition time limit is generally permitted (subject to Ministry consent and conditions) provided all parties, including associated parties, remain within the relevant overall acquisition limit.
90. As provided in the Radiocommunications Act, the business acquisition provisions of the Commerce Act would apply to any spectrum purchases, and subsequent trading before or after the expiry of acquisition limits. These provisions are intended to prevent acquisitions which substantially lessen competition unless there are net benefits to the public from the acquisition.
91. On balance it is proposed to set an expiry date for the acquisition limit one year prior to the ‘use of lose’ date. This date is expected to be in December of the selected year.

Question 5: Duration of acquisition limits

Do you consider the expiry of acquisition limits 1 year before the (December) use or lose date to be satisfactory? Do you prefer a different acquisition limit date? Please explain reasons for your view? Do you have any other comments on the time for acquisition limits to expire?

¹Except that paired FDD lots have an acquisition limit of 40 MHz (including two 5 MHz guard-bands, giving useable spectrum of 30 MHz).