Horsley's Comment

OneTel's decision not to proceed its bid with the 3G spectrum auction demonstrates the auction may not have served its purpose and is no longer significant. It would appear the 3G auction is unlikely to impose $500 to $1,000 on the end-user.

What's critical for users is that 3G spectrum is sold, but price prevents services from being taken up. All the carriers are concerned about where spectrum providers are going and at Peter Costello's calm delivery of the final figure. Service providers are concerned because their owners and investors think this intrinsic asset is high-cost.

Given the auction is still months away, I observe (the Government) is trying to get things to settle down.

It would not be the best time for TNT and AAPT for example to get involved in bids. Mobile spectrum is a very difficult game for small players to play in - an industry that's got the risk of throttling off the smaller player, making it detrimental to regional innovation. Players will be asking if the spectrum sectors will be small enough for the smaller players to carry them.

The activities of late probably suggest to the Government they should pour carriers in it and re-think what is the fairest way to offer spectrum licenses. The fairest way to do it is for the Government to put out a discussion paper with their basic plans for the auction and it's timing, and get the industry involved with them through their feedback.

The ACCC's public consultations over price caps is improving telco industry activity. We've said to the ACCC inquiry to start off with a model with no price caps in markets where there'll be demonstrable failure. There might be price caps in fixed cable but no caps on anything else. The ACCC needs to resolve an incredibly complex pricing process, removing unnecessary regulations on the industry.

Everyone is waiting for Senator Alston to respond to the Telecommunications Industry Ombudsman's annual Telecommunications Services Report. ATUG is lobbying Tim Besley to come out with a robust response that telco service has been less than good. Besley has been more focused on reporting the effects of (poor) service, but should be saying to carriers they really need to lift their game. For example, Telstra's $2 billion Customer Access Network Enhancement Program to upgrade cables in streets will provide enhanced service and faster repairs to residents, but carriers should better inform and communicate with their customers. We're more concerned the Telstra-2 sale is the only thing lifting Telstra's game in the industry.

Finally, Southern Cross Cable's (trans-Pacific network) is a big event. The fact we'll get this dual-routed service to the US will increase cable capacity. They'll offer stacks of capacity and want people to take it. This will be a high quality service to customers and they will undoubtedly pass that onto their end-users at higher quality and price. I think it's one of the milestones in the telco window.

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