Executive Summary
2. In April 2003, Cabinet agreed to a policy for the renewal of commercial spectrum rights at expiry [POL Min (03) 9/1]. Subject to case-by-case assessment, replacement rights will be offered to existing right holders five years before expiry, and that if the renewal offers are rejected, the rights will be reallocated by auction. The policy requires the offer price to approximate the market value of the rights and produce a fair financial return to the Crown.
3. The Ministry of Economic Development (MED) has conducted a case-by-case review for the renewal of management rights used for cellular services in the 800 and 900 MHz bands, which are due to expire in 2011 and 2012. The review indicates that these bands are being used and will continue to be used for cellular services until at least 2015. The review, however, shows that incumbent operators, Vodafone New Zealand Limited ("Vodafone") and Telecom Corporation of New Zealand Limited ("Telecom") have ample spectrum to operate nationwide cellular services. Potential market entrants, New Zealand Communications Limited (previously Econet Wireless New Zealand Limited) and TelstraClear Limited ("TelstraClear"), have also expressed interest in gaining access to spectrum in these bands, as they are more economic for providing coverage in low population density areas.
4. While there will be ongoing use of these bands for cellular services, a balance is required in setting the appropriate proportion of existing spectrum holdings between the needs of incumbents and those of potential entrants to have sufficient spectrum to run a nationwide network. Analysis indicates that existing spectrum holdings are not fully or efficiently utilised. There is a strong public policy case for reallocating a proportion of that spectrum that is not foreseen to be reallocated via other contractual or market mechanism.
5. It is proposed that freeing up 7.5 MHz1 in each band to the open market would strike the best balance between providing certainty for incumbents and making the mobile market more attractive to new entrants.
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