Digital dividend spectrum auction FAQ | ACMA

Digital dividend spectrum auction FAQ

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What and when is the digital dividend auction?

The ACMA will reallocate radiofrequency spectrum in the 700 MHz and 2.5 GHz bands by a single auction (the digital dividend auction) in April 2013.

On 14 December 2012, the Minister for Broadband, Communications and the Digital Economy directed the ACMA that it must commence the digital dividend auction no later than 30 April 2013.

The spectrum in the 700 MHz band is becoming available as a result of the switchover from analog to digital television across Australia. The conversion of analog television services to digital enables the transmission of more television services using less spectrum space. As a result, the spectrum that is currently used for analog television can be made available for other purposes. The 700 MHz band is highly valued and is considered to be the ‘waterfront property’ in the spectrum world.

The 2.5 GHz band is currently used for electronic news gathering services (including television outside broadcasts). Spectrum in this band is being relocated worldwide to meet increasing demands for wireless broadband services. As the electronic news gathering services are able to migrate to other, less valuable, parts of the spectrum, the ACMA is also preparing to reallocate the 2.5 GHz band to facilitate new uses.

As the characteristics of the 700 MHz and 2.5 GHz bands complement each other, the ACMA has decided to reallocate the spectrum in both bands in a single auction.

The digital dividend auction is an exciting moment for Australia—it will pave the way for communications companies to provide exciting new services to their customers.

What will the spectrum sold at auction be used for?

Successful bidders will decide how to use the spectrum they acquire. There are, however, a number of likely uses for the 700 MHz and 2.5 GHz bands, including wireless and mobile broadband services, mobile telephony and energy network services.

Who will participate in the auction?

Anyone can participate in the auction. We’ve been contacted by a wide range of stakeholders, including organisations from the telecommunications, energy and mining industries.

How much revenue will the digital dividend auction raise for the government?

We can’t speculate on exactly how much revenue the auction will raise—but like at any auction (and subject only to the reserve prices being met), the spectrum will be worth whatever bidders are willing to pay for it.

Our responsibility is to ensure that the spectrum is allocated efficiently. We’re focused on running a competitive and transparent auction.

One of the benefits of using the combinatorial clock auction (CCA) methodology is that only those bidders who value the spectrum the most will win it.

When will the ACMA announce the reserve prices?

On 3 January 2013, the ACMA announced the reserve prices for lots in the 700 MHz and 2.5 GHz bands.

With regard to lots in the 700 MHz band, the Minister has directed the ACMA to set the reserve prices at $1.36/MHz/pop. In the lots in the 2.5 GHz band, the ACMA has set reserve prices at $0.03/MHz/pop.

What is the Applicant information package (AIP) and when will it be published?

On 3 January 2013, the ACMA published the AIP.  The AIP sets out the spectrum products on offer and give prospective bidders all the information they need to decide whether to participate in the auction. 

Where can I find the consultation documents for the auction?

The ACMA published the draft legislative instruments and a consultation paper in April 2012.

We also undertook further rounds of formal consultation on the draft legislative instruments in July 2012, as well as between August and September 2012.

The final instruments are included in the AIP and provide the legal basis for the rules and processes that govern the auction.

For more information on the ACMA’s consultation processes for the auction, click here.

What are some of the rules that will be included in the legislative instruments?

The ACMA has published the AIP which includes the legislative instruments for the auction.  The instruments set out what is being offered, how the auction will be run and how people can participate. They will include rules on: 

  • the manner in which auction participants can communicate
  • how any associations between applicants will be treated
  • payments and fees for the auction.

What happens if a bidder breaches the auction rules?

Bidders who breach the auction rules risk significant penalties. This can include the ACMA not awarding the bidder a licence for any spectrum they win at auction.

What are the ‘competition limits’ and how do they relate to the auction?

On 14 December 2012, the minister amended his direction to the ACMA on the maximum amount of spectrum any bidder can acquire in the 700 MHz band.

The amended competition limits are 2×25 MHz paired in the 700 MHz band. Previously, the limit was 2×20 MHz paired. The competition limits for the 2.5 GHz band remain unchanged at 2×40 MHz paired.

The competition limits will place a cap on the maximum amount of spectrum that any one bidder can acquire in each band in the auction.

What is the ACMA doing to engage with stakeholders?

We’re taking our stakeholders along with us as we prepare for the auction. This means sharing our policy development and seeking input along the way. A summary of our stakeholder engagement can be found here.

What is the combinatorial clock auction methodology and what are its benefits?

The ACMA will use the combinatorial clock auction methodology for the auction.

The CCA is a type of auction format, widely used overseas, that has proven particularly useful for auctioning radiofrequency spectrum.

Bidders for radiofrequency spectrum typically have different, and unique, spectrum requirements.

To accommodate all comers, the spectrum is first broken down into a series of ‘lots’.  Bidders can bid on the combination, or ‘package’, of lots that is best suited to their requirements.

As the CCA is a package bidding auction format it ensures that a bidder can only win the entire package.  This means there is no risk of the bidder winning some of the lots in the package but not all of them, as would be the case with more traditional auction formats.

The auction awards the spectrum to the highest value combination of packages.

The ACMA and its expert advisors consider the CCA is the auction format that provides the best incentives to bid truthfully and reduce the risk of strategic behaviour.

What has been the reaction from potential bidders to the CCA?

The reaction from potential bidders has been positive. We previously held two industry workshops that gave attendees a detailed understanding of the CCA. The workshops featured presentations from Professor Peter Cramton, Project Co-Director and Senior Auction Expert at Power Auction. Professor Cramton is an expert on auction design.

From late February to early April 2013, we will conduct mock auctions and provide bidder tutorials to ensure that prospective bidders are familiar with using the online auction system, understand the fundamentals of the CCA format and can confidently participate in the auction.  Click here for more information.

I am a business and I want to acquire spectrum in the 2.5 GHz or 700 MHz band. How do I do this?

Interested parties had until 24 January 2013 to submit an application to participate in the auction.

What kind of training will the ACMA provide for potential bidders and when will it occur?

From late February to early April 2013, we will conduct mock auctions and provide bidder tutorials to ensure that prospective bidders are familiar with using the online auction system, understand the fundamentals of the CCA format and can confidently participate in the auction.   Click here for more information.

Who is Power Auctions?

Following a tender process, we awarded the contract to Power Auctions to provide the online 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.

Who is the Smith Institute?

The ACMA has engaged the Smith Institute Ltd to provide auction outcome verification and related services for the digital dividend auction.

The Smith Institute is based in the UK and has extensive experience in supporting regulators who have auctioned spectrum using the combinatorial clock auction methodology.

 

Last updated: 31 January 2013

 

Last updated: 19 May 2017