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700 MHz auction overview

Initial decisions on new uses for the 700 MHz band

In 2009, Radio Spectrum Management (RSM) and the Ministry for Culture and Heritage ran a public consultation process called Digital Futures. The major outcome of this was a decision that the 700 MHz band would be reallocated, as it was well-suited for fourth generation long term evolution (4G-LTE) cellular services.

 

Consultation on the allocation process

In 2011, RSM ran a further public consultation focussed on the best way to allocate the 700 MHz band, including band planning and any public policy set-asides.

 

Auction structure

In 2013, another consultation was held to gain input into the detailed development of the auction structure.


At the same time, RSM released a technical report, into coexistence between 4G-LTE in the 700 MHz band and existing fixed links in the KK band above 806 MHz.


It was decided that the 700 MHz band would be structured according to the Asia-Pacific Telecommunity (APT) band plan with nine lots of 2x5 MHz available, and allocated by auction. The auction was structured as a simplified combinatorial clock auction with three phases, outlined below. This was a new auction design for New Zealand, but similar formats had been used in other countries.
 

Phase 1 (Clock Allocation Phase): Bids are invited at the reserve price of $22 million (+GST). Bidding continues until demand is equal to or less than supply. An acquisition limit (“spectrum cap”) of three lots applies to each bidder.
 

Phase 2 (Supplementary Allocation Phase): If there are unsold lots after Phase 1, the Crown has the discretion to raise the acquisition limit to four lots and offer the unsold lot(s) again, starting at $22 million (+GST). Bidding continues until demand equals supply. Any acquisition above three lots is subject to clearance by the Commerce Commission, if a bidder chooses to apply for such clearance.
 

Phase 3 (Combinatorial Assignment Phase): Bids in the previous phases are for generic lots, i.e. not specific frequencies. In Phase 3, bidders can bid to obtain their preferred placement (frequencies) in the band. The outcome is decided by the compatible combination of bids that achieves the highest revenue to the Crown. Only contiguous options will be available (i.e. all the lots a bidder has won in phases 1 and 2 must be next to each other), and the Crown has the right to not offer some placement combinations. The Crown decided not to offer all placement options.


Implementation requirements were applied to the acquisition of each lot to ensure that the spectrum was put to use in a timely manner for the benefit of consumers.


A payment plan was developed to allow successful bidders to pay over five years. While this is common internationally, it was the first time such a plan had been used for cellular management rights in New Zealand.

 

Auction results

Three bidders registered to bid in the auction: 2degrees, Telecom, and Vodafone.

In Phase 1, a three-lot acquisition limit applied. Telecom and Vodafone each bid for three lots and 2degrees bid for two lots, at a reserve price of $22 million (+GST) per lot. This left one lot unsold.

In Phase 2, the acquisition limit was relaxed to four lots. In the 62nd bidding round, Telecom won the bidding at a price of $83 million (+GST). Telecom’s acquisition of this fourth lot was subject to Commerce Commission clearance, which was subsequently granted on 30 May 2014.

Phase 3 resulted in Telecom being assigned the bottom position in the band, Vodafone the middle, and 2degrees the top.

The results are shown in the table below.

 

Table 1: Results of the 700 MHz auction

Bidder

Phase 1 results (price)

Phase 2 results (price)

Phase 3 results (price)

Total lots won (total price)

2degrees

2 lots
2x10 MHz
($44,000,000)

738-748 MHz
793-803 MHz
($0.00)

2 lots
2x10 MHz
$44,000,000 +GST

Telecom

3 lots
2x15 MHz
($66,000,000)

1 lot
2x5 MHz
($83,000,000)

703-723 MHz
758-778 MHz
($9,100,000)

4 lots
2x20 MHz
$158,100,000 +GST

Vodafone

3 lots
2x15 MHz
($66,000,000)

723-738 MHz
778-793 MHz
($2,000,174)

3 lots
2x15 MHz
$68,000,174 +GST

TOTALS

8 lots
2x40 MHz
($176,000,000)

1 lot
2x5 MHz
($83,000,000)

$11,100,174

$270,100,174 +GST

 

Government announcements

September 2010 announcement – digital switchover

August 2011 announcement – discussion document released

February 2013 announcement – auction confirmed

May 2013 announcement – consultation

September 2013 announcement – auction timing and details

September 2013 announcement – Waitangi Tribunal findings (WAI 2224)

October 2013 announcement – phase 1 results

November 2013 announcement – phase 2 announced

January 2014 announcement - phase 2 results

May 2014 announcement – assignment round options

June 2014 announcement - auction completed

 

Last updated 13 November 2018