Release of Consultant's Report for Public Comment
14 November 2003
Under the Radiocommunications Act 1989, spectrum rights can be issued for a period of up to 20 years. Spectrum rights created under the Act start to expire from 2010 onwards. In May of this year, the government announced its policy on the renewal of these rights:
- That commercial spectrum rights be reallocated five years before expiry for a further 20 years, subject to review on a case by case basis to ensure consistency with New Zealand’s international radio obligations and the general objective of maximising the value of the spectrum to society;
- That the Crown should receive a fair financial return for the use of the spectrum in the future period; and
- That spectrum rights be reallocated to existing rightholders based on price-setting formulae that estimate the market value of the rights, and that, if existing rightholders do not wish to pay this price, the respective rights be reallocated by way of auction.
Cabinet directed officials to develop proposals for the price-setting formulae. Following an open request for proposals, the consulting firm Covec was commissioned to write an initial report for the Ministry of Economic Development. In addition PricewaterhouseCoopers were commissioned to peer review Covec's work.
In commissioning this work, the Ministry expressed a preference for a relatively simple methodology that would utilise publicly available information such as past prices of spectrum rights. The formula developed by Covec calculates a unique renewal price for each individual spectrum right by applying a growth factor to the original acquisition price of the right. The growth factor represents one estimate of how much the net cashflows from the use of rights in the renewal period compare to the net cashflows from the current period.
The Covec report represents a first step in developing a formula. It is therefore released as a basis for discussion only and does not represent a proposed government policy. The government invites feedback on the report from all interested parties. An Excel calculation tool has been provided to assist you in your analysis of the Covec formula.
The government will consider all feedback and conduct its own further analysis before making decisions consistent with the policy announced in May. The Ministry will be reporting back to Cabinet by 31 March 2004.
Written submissions should be received by 10 December 2003 and addressed to:
Jeremy Traylen
Resources and Networks Branch
Ministry of Economic Development
PO Box 1473
WELLINGTON
email: jeremy.traylen@med.govt.nz
If you would like to meet directly with officials then please indicate your request at an early date. Reasonable extensions to the consultation process will also be considered if requested at an early date.
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