Conroy sets Digital Dividend auction price, ups spectrum limits

New spectrum limits encourage bidding war even if Vodafone sits out.

The Australian government appears to have avoided a possibly low-revenue Digital Dividend auction with new rules issued today by Communications minister, Stephen Conroy.

Conroy amended competition limits so that carriers can buy 25MHz of the spectrum in the 700MHz band that will be made available in the auction, up from the original maximum of 20MHz. He also set the reserve price to $1.35 per MHz per population, in line with analysts’ expectations.

The Digital Dividend auction, scheduled for April 2013, will reallocate Australia’s 700MHz and 2.5GHz spectrum. The spectrum is important to the mobile industry because it can be used for 4G LTE services. The spectrum will become available when broadcasters turn off analog service at the end of 2014.

The Australian Communications and Media Authority (ACMA) was preparing auction rules in November 2012 to be released, including reserve prices which are the minimum amounts a company must pay to participate in the auction. However, Conroy directed ACMA to give him the opportunity to set the reserve prices.

With 45MHz of spectrum available in the 700MHz band and Vodafone Hutchison Australia possibly not bidding, the change allowing carriers to buy 25MHz makes it more likely there will be higher bidding and that none of the spectrum goes unsold.

The government is selling 45MHz of the frequencies, but the auction rules previously capped each carrier to 20MHz each. As a result, Telstra and Optus would have been able to get 20MHz each without engaging in a bidding war, and the remaining 5MHz would have gone unsold.

“These directions provide certainty for industry and confirm that the ACMA will proceed with the auction in April 2013,” Conroy said. “They ensure the best outcome and a fair price for the industry, consumers and the Commonwealth.

“This spectrum is seen as the ‘waterfront property’ of spectrum and the Government has made a significant investment to free it up. It is important that we get a reasonable return on this valuable public asset.”

Telstra has seen the announcement and "will consider it in detail as part of our auction strategy," a Telstra spokeswoman said.

Vodafone declined to comment, but the carrier has said it may not bid because it already has strong spectrum assets in the 1800 MHz band.

Optus was contacted for comment.

Follow Adam Bender on Twitter: @WatchAdam

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