Local spectrum is imminently affordable

Australian telcos that have been awarded 3G spectrum will not face the same economic hurdle their UK counterparts must now tackle, predicts Ericsson's new local managing director, Karl Sundstrom.

Sundstrom said that the exorbitant buying prices for spectrum at the completion of the UK's 3G (third generation) auction last week represent a considerable challenge to the successful bidders to justify the cost. Bidders in the Australian 3G auction, for which proceedings are expected to commence at the end of the year, should not expect to pay as much for bandwidth, he said.

After eight weeks of bidding rounds, the British government garnered 22.48 billion pounds ($A60 billion) from the successful bidders in the UK spectrum auction, which included Vodafone AirTouch, British Telecommunications, One2One and Orange.

Sundstrom said the UK carriers now face the challenge of paying for the spectrum and turning it into a profitable venture -- a challenge made more difficult by the expected decrease in prices for mobile usage over the next two years. He said the UK carriers must provide a multitude of voice, data and internet products via the spectrum in order to pay for the cost of the bandwidth rights.

In Australia, however, the networking dimensions of the communications market were vastly different to those of the UK, Sundstrom said. The UK market has access to some 60 million potential network customers, crammed into a relatively small area. This represents a more attractive business opportunity than Australia's network, which spreads out 20 million potential users over a much larger area, he explained.

Sundstrom added that the forthcoming 3G spectrum auction in New Zealand would not raise the same degree of fiscal exuberance as seen in the UK. New Zealand only has a potential market of 4 million customers spread out over two mountainous islands.

Ultimately, Sundstrom expects the UK carriers will rise to the challenge.

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