Why limits are crucial as telcos fight over 5G spectrum

In recent days I’ve been interested to read in this masthead comments from both Telstra and Optus regarding the upcoming auction of low-band 5G spectrum.

Readers might wonder why this rather arcane issue is attracting such passion from the telcos. What is “spectrum” and why does it matter?

“Low-band” spectrum will be auctioned later this year.Credit: Glenn Hunt

First, “spectrum” refers to the invisible radio frequencies that wireless signals travel over. Those signals are what allow our mobile devices to operate.

Mobile networks use radio frequency spectrum across different ranges. Generally, the lower the frequency, the further a signal can travel.

The Government regularly reallocates blocks of spectrum, particularly to support the huge growth in mobile communications. In 2019 there were 28 million services in operation, compared to 6 million 20 years prior, and mobile networks today carry very large amounts of data—whereas, 20 years ago, they carried almost exclusively voice services.

Another factor driving the allocation of new spectrum to mobile is the introduction of the latest mobile technology, fifth generation or 5G.

In 2018, mid-band 5G spectrum was auctioned. This is the spectrum that mobile network operators are currently using to provide 5G services.

Earlier this year we allocated spectrum in the 26 gigahertz band (also called “millimetre wave”) to five companies (Telstra, Optus, TPG, Dense Air and Pentanet) who paid a total of nearly $648 million for it.

As readers now know, spectrum in the 850/900 megahertz band (also called “low-band”) will be auctioned later this year.

This spectrum was historically used for the first digital mobile phones which operated in Australia, GSM phones, from around 1991. This spectrum is still being used to provide 3G services.

This spectrum will also be suitable for 5G services, which is why it is now being reallocated. Successful bidders for this spectrum will receive a 20-year licence to use the spectrum across Australia. Spectrum is allocated in a competitive auction process managed by Australia’s communications regulator, the Australian Communications and Media Authority (ACMA).

Federal Minister for Communications, Urban Infrastructure, Cities and the Arts Paul Fletcher.Credit: Alex Ellinghausen

The chief aim is to use this scarce public resource wisely. The amount that bidders pay at auction for the spectrum licences is an indicator of the value they attach to the spectrum.

ACMA gives me advice on the ground rules, such as the total amount of spectrum up for offer (72 megahertz in this case) and the design of the licences to be auctioned. I also get advice from the Australian Competition and Consumer Commission (ACCC) on which auction limits best foster competition.

For the 850/900 MHz auction the ACCC recommended an allocation limit be imposed so that no one bidder could hold more than 40 per cent of low-band spectrum used for mobile services following the auction.

Setting allocation limits is important to heighten competition. It stops one bidder from purchasing all of the spectrum at the expense of other participants. If limits were not set, a bidder with very deep pockets might choose to buy up all the spectrum: this would prevent competitors from obtaining this critical and limited resource.

To promote competition, encourage investment in infrastructure, including in regional Australia, and support ongoing deployment of 4G and 5G technologies for the benefit of consumers, it is important to maximise the opportunity for all mobile operators (both existing and potential new entrants) to acquire the spectrum they need.

I will weigh up the issues carefully before making a decision on the limits that will apply in this spectrum auction. In making this decision I need to consider a range of issues, including which limits will best foster competition, including in regional areas, and the effective and efficient allocation of spectrum.

I welcome the passion and commitment of the mobile operators, and of course will consider what they say. But ultimately I must make a decision on the merits as I see them, to strike the right balance between supporting an efficient allocation of spectrum and achieving the Government’s communication policy objectives: to make connectivity available, as efficiently and economically as possible, to Australians everywhere.

Paul Fletcher is Minister for Communications, Urban Infrastructure, Cities and the Arts.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.