Telcos unable to overturn $7.3bn bill to renew mobile spectrum

Telstra, Optus, TPG and NBN Co will pay just over $7.3 billion to keep expiring mobile and wireless spectrum licenses after the sector’s efforts to lobby for lower costs were rejected.

The Australian Communications and Media Authority (ACMA) today handed down a final price ruling [pdf] for the expiring licenses of $7.32 billion, $20 million lower than its preliminary finding of $7.34 billion last December.

ACMA chair Nerida O’Loughlin said that the regulator had heard competing views from stakeholders across the industry and found them to be incorrect.

“After all our analysis and testing, we have concluded that $7.32 billion represents the market rate. It is therefore the appropriate return, ultimately to Australian taxpayers, for the use of this valuable public resource,” Ms O’Loughlin said.

The pricing decision follows a lengthy consultation period during which telcos lobbied vigorously for lower spectrum licensing fees.

In February, the Australian Communications Consumer Action Network (ACCAN) suggested that carriers be required fill regional service coverage gaps in exchange for discount spectrum licences.

Telstra warned that such a move would force it to make “tough trade-offs” between containing costs and investing in mobile infrastructure.

Later that month it appealed directly to the Treasury to cap the prices of spectrum at $3.9 billion industry-wide in a pre-budget submission that claimed the ACMA was overvaluing the asset by $3.3 billion.

“ACMA’s approach to pricing is flawed and puts ongoing investment in jeopardy. If the proposal were implemented, the additional cost would be $3.3 billion for the industry and $1.3 billion for Telstra above the market value of the spectrum according to independent analysis that corrects flaws and errors in the ACMA’s analysis," the carrier wrote at the time.

At the time, telco industry lobby, the Australian Telecommunications Alliance, warned that the proposed pricing would make it harder for carriers to deliver fast reliable mobile broadband services at affordable prices.

“Australians want more investment in mobile networks – ACCAN wants higher taxes that’ll be paid for by consumers. Higher spectrum taxes mean less investment, or higher prices or both,” ATA chief executive Luke Coleman said at the time.

The pricing that ACMA released in December was already well above previously anticipated pricing which ranged from $5 billion to $6.2 billion.

The regulator’s pricing released today followed a fresh round of industry consultation that began in December when it revealed that it would set prices at $7.4 billion.

The regulator said that, as a result of the consultation process, it sought further advice from two consultancies UK-based economists DotEcon and local consultancy Ian Martin Advisory.

“Our advice is that spectrum pricing alone should not lead operators to increase prices for consumers, as their aggregate costs for this spectrum will be lower than what they currently incur,” O’Loughlin said.

“At the same time, the ACMA has remained mindful of the need to support continued investment in mobile and fixed wireless networks.

“We have refined the pricing approach to give licensees greater certainty and predictability, while ensuring Australians receive fair value for the use of public spectrum,” she added.

The pricing ACMA released today impacts expiring licenses spectrum in the 700MHz, 850MHz, 1800MHz, 2GHz, 2.3Ghz, 2.5Ghz and 3.4GHz bands.

The regulator revised pricing down for 700 and 850MHz bands down from $0.7405 and $0.7558 cents per MHz per capita respectively to 0.6618 and 0.6703 cents.

Pricing for spectrum in the lower 1GHz to 3Ghz bands were revised upwardly, with the 1800Mhz band having increased from $0.3030 to $0.3646 cents and 2GHz rising from $0.2757 to $0.3380 cents.

In the upper part of that band, prices also increased slightly following adjustments. The 2.3GHz band going from $0.1596 to $0.1754 cents and the 2.5GHz band from $0.1621 to $0.1774 cents.

The 3.4GHz band became slightly less expensive falling from $0.2052 to 0.1732 cents.

ACMA will open its first application renewal period from 18 June starting with the 850MHz and 1800Mhz bands.

The regulator said its preferred approach to the renewal process was to require applicants to apply within nine months of each application period’s opening with settlement to take place two months before the commencement of each license.