Building capacity with 2.5 MHz
While perhaps not as “beachfront” as the 700MHz spectrum, analysts predicted a competitive – and much longer – auction for the 2.5 GHz spectrum to be sold in the Digital Dividend auction.
The higher frequency of 2.5GHz spectrum makes it less effective for reaching rural areas or improving in-building coverage, but the mobile industry believes the band is critical to bolstering data capacity for 4G service in urban areas where coverage is already strong but high data demand is straining mobile networks.
While the 700MHz auction will likely end in one round of bidding, Ovum’s Kennedy predicted the 2.5GHz auction could go much longer because of its relatively low reserve price. The government is selling the 2.5GHz spectrum at just 3 cents per MHz POP, compared to $1.36 for the 700MHz spectrum.
As with 700MHz, Kennedy predicted Telstra will be a "strong bidder" for the 2.5GHz spectrum. Of Australia’s top three telcos, Telstra has the least amount of spectrum at that frequency and is only number two for 1800MHz, he said. "I think they're going to try and make up for it by bidding hard at 2.5[MHz].”
Background: 4G in Australia: The state of the nation
While Vodafone isn’t expected to bid for 700MHz, the company has said it would consider a move for some of the 2.5GHz spectrum.
Gartner's Johnson said Vodafone will focus on 2.5GHz spectrum because the frequency is suited to metro areas where Vodafone is focusing its investment.
However, Kennedy noted that Vodafone has a great amount of 1800MHz spectrum and it probably would not be a "disaster" if the telco chose not to bid, he said. "They can afford to be fairly choosy."
Meanwhile, Optus already has significant spectrum in the nearby 2.3GHz band, so it may have less need for 2.5GHz, said Coughlan.
Kennedy agreed but said not to count out Optus. "It will be interesting to see whether they do go hard on 2.5 [GHz] or not because I think that might tell us something about what they expect to see happen over the medium term on 2.3 [GHz]."
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