Telstra blasts plan to 'set aside' mobile spectrum for Optus and TPG, but not it

Telstra has rebuked the government and regulators over a proposal that would guarantee Optus and TPG - but not it - some re-farmed mobile spectrum in a forthcoming auction.

The telco said it is also “very concerned” that its existing spectrum holdings in adjacent bands could preclude it from buying up as much extra spectrum as it wants in future auctions.

Telstra was forced onto the defensive by the government, which recommended guaranteeing Optus and TPG a slice of 900 MHz spectrum in upcoming auctions for them to continue to run 3G services.

The government did not guarantee Telstra a similar slice of spectrum but asked the Australian Competition and Consumer Commission (ACCC) if there were “grounds” to do so. [pdf]

There is a rift between the telcos not only over whether spectrum should be guaranteed in the first place, but then over the price to be paid for it.

Both TPG and Optus say unequivocally that Telstra should not be guaranteed any 900 MHz spectrum.

Further, TPG argues it should get the guaranteed spectrum at the auction’s “starting price”.

Telstra is incensed at that prospect.

“This would be an unprecedented and extremely aggressive regulatory intervention, fundamentally distorting the market and utterly inconsistent with the proposition market forces should determine the highest-value use for spectrum,” Telstra said [pdf]

If TPG and Optus were handed guaranteed spectrum at lower prices, Telstra suggested any bids it made should receive a similar discount.

“In the event that ‘guaranteed’ spectrum is priced at anything less than the final unit price achieved at auction for the relevant band (excluding any assignment bids), equivalent downwards adjustments must be made to the final unit price payable by the other successful bidders in order to place all persons acquiring spectrum in the auction on a fair and even footing - noting that even a slight difference in price/MHz/pop can cause the price payable to differ by millions of dollars,” Telstra said.

But the forthcoming auction - of 850 MHz and 900 MHz spectrum, which may be used for 4G or 5G services - poses an extra problem for Telstra: its ability to buy more spectrum could be constrained by the amount of similar spectrum it already owns.

The ACCC said that Telstra holds 46 percent of sub-1 GHz spectrum in metro areas and 54 percent in regional areas. 

“TPG also holds a substantial amount of low-band spectrum. By contrast, Optus holds significantly less lowband spectrum (only 15 percent of total low-band spectrum available) than Telstra and TPG,” the ACCC said.

“Given the substitutability between the sub-1GHz bands, this would suggest that a crossband limit that applies to overall holdings in the 700 MHz band, 850 MHz band, as well as any spectrum acquired in the upcoming 850/900 MHz allocation would be a reasonable option.”

Unsurprisingly, Telstra is against this idea, and Optus and TPG are in favour.

“We are very concerned that including existing holdings in any allocation limit set could reduce, rather than enhance, competition in the downstream mobile market, especially if such limits are designed to reduce asymmetry between MNO [mobile network operator] holdings,” Telstra said.

“No MNO currently holds a spectrum monopoly, and there is nothing inherently anti-competitive about asymmetric holdings”.

Telstra argued that other telcos were “spectrum-rich, and arguably spectrum inefficient, relative to rivals who may have numerically higher holdings”, though it redacted its evidence of this.

Both Optus and TPG raised concerns about Telstra’s dominance, and saw limits in the 850/900 MHz auction as necessary to addressing historical imbalances in spectrum between the major telcos.

“The historic imbalances in sub-1 GHz spectrum, together with significant subsidies for site deployment from state and federal governments, have been major contributors to Telstra’s competitive advantage in regional and remote Australia,” TPG said. [pdf]

“The current holdings of low-band spectrum are not balanced and there is a risk that absent allocation limits, low-band spectrum could be concentrated in the hands of a single player,” Optus added. [pdf]

The ACCC must provide advice on these issues to Communications Minister Paul Fletcher by February 19.