The ACMA

Digital dividend

Reallocation

Digital dividend auction—results

ACMA media release - 27/2013- 7 May

The Australian Communications and Media Authority (the ACMA) has announced the outcomes from the digital dividend spectrum auction, which concluded this morning.

All three bidders—Optus Mobile, Telstra and TPG Internet—secured spectrum in the auction, resulting in total revenues of nearly $2 billion.

Optus Mobile secured 2x10 MHz in the 700 MHz band and 2x20 MHz in the 2.5 GHz band for $649,134,167.

Telstra secured 2x20 MHz in the 700 MHz band and 2x40 MHz in the 2.5 GHz band for $1,302,019,234.

TPG Internet secured 2x10 MHz in the 2.5 GHz band for $13,500,000.

Four companies initially applied to participate in the auction. However, Vodafone Hutchison Australia withdrew before the auction, which started on 23 April 2013.

Following is a table of the auction results:

Bidder

Spectrum secured

Total price

700 MHz band*

2.5 GHz band*

Optus Mobile

2×10 MHz

(20 MHz in total)

2×20 MHz

(40 MHz in total)

$649,134,167

Telstra

2×20 MHz

(40 MHz in total)

2×40 MHz

(80 MHz in total)

$1,302,019,234

TPG Internet

Nil

2×10 MHz

(20 MHz in total)

$13,500,000

Total spectrum sold

2×30 MHz

(60 MHz in total)

2×70 MHz

(140 MHz in total)

$1,964,653,401

Total spectrum unsold

2×15 MHz

(30 MHz in total)

Nil

N/A

FIGURE 1: AUCTION RESULTS

*Under the allocation limits, a single bidder could not acquire more than 2×25 MHz (50 MHz in total) in the 700 MHz band and more than 2×40 MHz (80 MHz in total) in the 2.5 GHz band.

 

‘The auction process itself ran smoothly and resulted in the allocation of spectrum to the companies that valued it the most,’ said the ACMA’s Chairman, Chris Chapman.

Demand in Clock Round 1 of the auction led to three unsold lots in the 700 MHz band. In the 2.5 GHz band, demand exceeded supply in the first round but reached equilibrium at the end of Clock Round 3, at which point the clock rounds closed.  This level of demand during the clock rounds meant prices payable by bidders are only marginally above reserve prices.

‘The auction tested the market and the auction’s conclusion is another important step toward realising Australia’s digital dividend,’ said Mr Chapman.

‘This decades-long process of spectrum reform has already transformed the television industry, delivering greater diversity and better technical quality of television services to viewers. It will be complete when the new licences in the 700 MHz band become operational at the beginning of 2015.’

‘By making spectrum previously required for analog television transmissions available to meet rising demand for high-speed wireless broadband, the digital dividend auction will well position the Australian telecommunications industry to deliver fast, ubiquitous and symmetrical mobile broadband connectivity to consumers and industry,’  Mr Chapman said.

Attached is the aggregate demand in each clock round (Figure 2) and the frequency assignments in each band for each successful bidder (Figure 3).

For further information about the digital dividend auction, please see the backgrounder.

For more information, please contact: Emma Rossi, Media Manager, (02) 9334 7719 and 0434 652 063 or media@acma.gov.au.

 

Backgrounder to the digital dividend auction

On 23 April 2013, the Australian Communications and Media Authority (the ACMA) commenced the digital dividend spectrum auction. The auction was held to reallocate radiofrequency spectrum in the 700 MHz band (the ‘digital dividend’) and the 2.5 GHz band.

The 700 MHz band is becoming available as a result of Australia switching from analog to digital television services. Analog services are being progressively switched off across Australia. This will be completed by 31 December 2013.

The 2.5 GHz band is currently used for electronic news gathering (ENG) services, which are being migrated to other parts of the spectrum. As the characteristics of the licences in the 700 MHz and 2.5 GHz bands complement each other, the ACMA decided to reallocate the spectrum in both bands in a single auction.

While both frequency bands are suitable for wireless broadband services, their different propagation characteristics allow them to be used in complementary ways. Spectrum in the 700 MHz band is suited to providing coverage over a wide area and with high in-building penetration. Spectrum in the 2.5 GHz band, with its abundant bandwidth but less effective in-building and distance propagation, is suited to providing high-data capacity in more densely populated, high-demand areas.

The ACMA’s overriding responsibility is to ensure that the spectrum is allocated efficiently to maximise the overall public benefit derived from the spectrum in accordance with the objectives of theRadiocommunications Act 1992.

A summary of the key auction dates is as follows:

  • 7 May—auction ended and results announced.
  • 23 April—auction commenced.
  • 28 March—eligibility deadline. This was the date by which auction applicants had to submit completed auction forms and make an eligibility payment (that is, a deposit) to participate in the auction. This was also the last date by which auction applicants could withdraw from the auction.
  • March–April—mock auctions conducted.
  • 24 January—application deadline. This was the date by which interested parties had to submit completed auction forms and pay the application fee to participate in the auction.
  • 3 January—the auction was advertised and applications opened. The ACMA published the Applicant information package (which provides detailed information on the spectrum products on offer, the auction rules and how interested parties can participate in the auction) and announced the reserve prices.

700 MHz and 2.5 GHz band spectrum licences

The auction offered parts of the 700 MHz band and the 2.5 GHz band as spectrum licences (detailed information on the spectrum products can be found in section 2.2 of the Auction guide). The Minister for Broadband, Communications and the Digital Economy imposed ‘competition limits’, which limited the total amount of spectrum that a single bidder can acquire in each band in the auction.

Licences for the 700 MHz band will commence on 1 January 2015. In most cases, licences for the 2.5 GHz band will commence on 1 October 2014 (except for the Metro Perth region and the Regional Western Australia region, which will commence on 1 February 2016).

In general, the licences issued in both bands will be of 15 years duration.

The minister has also directed the ACMA to notify successful bidders of the balance of the winning price payable for spectrum secured at auction:

  • No earlier than 19 August 2014 for spectrum licences in the 2.5 GHz band (except for the Metro Perth region and the Regional Western Australia region).
  • No earlier than 1 October 2014 for spectrum licences for the 700 MHz band and the Metro Perth region and the Regional Western Australia region in the 2.5 GHz band.

 Auction format

The ACMA conducted the auction using the combinatorial clock auction (CCA) format. The CCA has been used widely used overseas as it has proven particularly useful for auctioning spectrum, especially in a ‘packaged’ format.

The CCA consists of two major stages (over three different types of rounds):

  • an allocation stage (comprising clock rounds and a supplementary round), which determines the spectrum that each bidder secures
  • an assignment stage (comprising assignment rounds), which determines the specific frequency ranges awarded to each successful bidder from the allocation stage.

Further information on how the CCA can be found in section 3.1 of the Auction guide.

A key benefit of the CCA is that it enables bidders to bid for any combination (or package) of the spectrum on offer that is best suited to their business requirements. As the CCA is a package bidding auction format, it ensures that a bidder can only secure the entire package. This means there is no risk of the bidder securing some of the spectrum in the package but not all of it, as would be the case with more traditional auction formats. The auction awards the spectrum to the highest value combination of packages.

The CCA also provides incentives for bidders to bid truthfully and it reduces the risk of gaming behaviour.

Auction software provider and auction results verification

Following a tender process, the ACMA engaged Power Auctions to provide the online auction system, expert advice and support to the ACMA for the auction. Power Auctions is based in the US and is a world leader in the CCA format.

The ACMA also engaged the Smith Institute Ltd to provide auction results verification and related services for the auction. The Smith Institute is based in the UK and has extensive experience in supporting regulators who have auctioned spectrum using the CCA.

Unallocated spectrum

Any spectrum lots that are left unallocated may be later offered for allocation by a procedure and at a time to be determined by the ACMA.

As the ACMA has just taken the spectrum to market, it would be unlikely to return to the market in the near term.

 

Last updated: 25 March 2014

Most commented

Most read

Back to top