Adam Suckling Deputy Chair
Australian Communications and Media Authority
At the end of last year the ACMA published our position on what we consider will be the best outcome for a large number of valuable expiring spectrum licences (ESL). We also kicked off a second round of consultation on pricing for this spectrum.
The outcomes from this process are highly consequential, not least because these licences currently support more than 30 million mobile phone services across Australia relied on by 99 per cent of Australian adults, as well as some NBN services.
Like many decisions made by regulators, our preferred views on the future of these licences have generated feedback and debate, much of it in Communications Day.
This is welcome. Robust debate and scrutiny are important to developing effective spectrum management arrangements that promote the public interest.
However, the debate has also generated criticisms on three topics that we believe warrant some clarification: the promotion of the public interest; the OECD’s recent spectrum assessment; and the pricing of the spectrum.
ACCAN has said our approach fails to promote the public interest. The ACMA totally rejects this claim.
Promotion of the long-term public interest is the primary object of the Radiocommunications Act and the basis for our decisions on the best available option for expiring spectrum licences.
Consistent with the Radiocommunications Act, we developed and consulted extensively on a set of public interest criteria to guide us. These include facilitating efficiency, promoting investment and innovation, and enhancing competition.
Government policy was clear that we should also take into account Australians having continuity of mobile services throughout the renewal process and beyond, as well as supporting services in regional and remote areas and allowing for new technological advances.
Based on our deep understanding of the Australian telecommunications market and after rigorous assessment against our criteria and the Government’s policy priorities, our preferred view is that we should renew the mobile operators’ licences.
As previously stated, a key reason as to why this is in the public interest is that 99 per cent of Australian adults rely on the essential services provided over this spectrum. Renewal best ensures the continuity of these services.
This outcome might have been different if we had found evidence that there was a new terrestrial mobile operators interested in acquiring this spectrum to enter the market. But after three years of extensive consultation, we found no evidence of such a potential entrant.
Renewal will also provide an investment time horizon that matches the next generation of mobile connectivity in 6G, the rollout of new low earth orbit satellite technologies, and network sharing agreements such as that between Optus and TPG.
These last two have real potential to improve connectivity, competition and consumer choice in regional, rural and remote Australia.
In the midst of the debate between stakeholders on our stated views, the OECD published a broad survey of the Australian economy.
In this report the OECD said the ACMA “could consider reserving (spectrum) capacity explicitly for new entrants” and that such an approach would drive competition and lower prices.
While the OECD was talking in general terms, some stakeholders and print media presented the OECD’s recommendation as a relevant consideration in the ESL process.
The ACMA strongly supports improving competition in the Australian market. However, the OECD proposal is highly theoretical in the context of ESL. Currently all ESL spectrum is allocated. We don’t have spectrum sitting on a shelf somewhere.
To give effect to the OECD’s recommendation as part of the ESL process, we would have to reclaim multiple bands of spectrum already used by incumbents and expiring at different times over a five-year period.
Again, given we have found no evidence of a potential new mobile network competitor, this would severely undermine mobile services received by millions of Australians.
The OECD itself points to the challenging conditions in Australia of size, population density and capital support which mean Australia has repeatedly failed to sustain a fourth mobile network operator.
Put simply, reserving encumbered spectrum in the ESL bands for a yet-to-be-identified new mobile network entrant is the high-risk, high-cost, uncertain-reward option.
The third matter that we consider warrants comment covers the debate on draft prices that our peer-reviewed methodology has produced.
As the Minister for Communications recently pointed out, the valuation of the spectrum is “the result of a heap of work” by the ACMA.
We commissioned three spectrum and industry experts to provide us with advice on spectrum matters: Plum Consulting, Frontier Economics and Ian Martin Advisory. We have had our pricing methodology reviewed by DotEcon, another highly respected organisation.
The ACMA’s goal all along has been to develop a transparent, objective and defensible model for establishing a market rate for the licences that are expiring.
Our position is that the pricing for the renewed spectrum should reflect fair market value. Changes in asset values – both rises and falls – are part and parcel of this approach.
Needless to say, when it comes to matters of money, stakeholders have strong views.
ACCAN asserts that we have ‘discounted’ the spectrum on the basis that our model has produced a value that is lower than nominal prices paid for the spectrum over the past 15 years.
This characterisation is not correct.
The ACMA has not discounted the price. We have instead set a new price for this spectrum based on extensive international benchmarking of its fair market value today.
That value is lower today because the world has changed and the value of key ESL spectrum blocks has fallen.
For instance, some low band spectrum has seen decreases in value of around 40-55 per cent. The value of other spectrum bands has increased over the same period. But overall, given the make-up of the bands expiring under ESL, the total spectrum value has decreased over time.
There is then, no discount, no price cut, no windfall for incumbents. It is a new price reflecting today’s value of the spectrum.
Across the aisle, the ATA and mobile network operators claim that ACMA’s spectrum prices are too high and will stifle investment. This is a familiar refrain in the world of telecommunications.
Representatives of the mobile operators have access to the assumptions in our methodology and know the drivers of spectrum valuation of the model.
We are currently consulting on this revised set of prices and methodology. We welcome modelling and evidence from those who think prices are either too high or, indeed, too low.
Other matters raised in the debate include potential network rollout obligations on mobile operators which are matters for the government.
This week, the ACMA will release technical frameworks for consultation covering the first tranche of spectrum licence renewals. We are moving forward in the ESL process to provide certainty to carriers and consumers of the future of mobile services in Australia.