Comments wanted on spectrum price-setting formula

A draft formula for calculating future prices of radio spectrum rights has been released for public comment today by Broadcasting Minister Steve Maharey and Associate Communications Minister David Cunliffe.

The Ministry of Economic Development commissioned the consulting firm Covec to report on proposals for the price-setting formulae. Their work was then peer reviewed by Pricewaterhouse Coopers.

Steve Maharey said the Covec report represents a first step in developing a formula, rather than a statement of government policy, and it has been released at this time to provide the basis for discussion only.

“The government has a general objective of maximising the value of spectrum to society as a whole, while providing certainty to licence and potential licence holders. We want to encourage a vibrant radio industry which meets the diverse listening interests of New Zealanders.”

Under the Radiocommunications Act 1989, spectrum rights can be issued for a period of up to 20 years. Spectrum rights created under the Act start to expire from 2010 onwards.

In May of this year, the government announced its policy on the renewal of these rights: commercial spectrum rights were to be reallocated five years before expiry for a further 20 years, subject to review on a case by case basis to ensure consistency with international radio obligations and the general objective of maximising the value of the spectrum to society; the Crown should receive a fair financial return for the use of the spectrum in the future period; and spectrum rights were to be reallocated to existing right-holders based on price-setting formulae that estimate the market value of the rights. If existing right-holders did not wish to pay this price, the respective rights were to be reallocated by way of auction.

David Cunliffe said the government is aiming for a relatively simple methodology for the price-setting formulae which utilises publicly available information such as past prices of spectrum rights.

“The government will consider all feedback and conduct its own further analysis before making decisions consistent with the policy announced in May, ” said David Cunliffe.

The government is inviting feedback on the report from all interested parties. Written submissions should be received by the Ministry of Economic Development by 10 December 2003.

Written submissions and further information: Jeremy Traylen, Resources and Networks Branch, Ministry of Economic Development, PO Box 1473, Wellington, email: Jeremy.traylen@med.govt.nz.

Note: The Covec report, and the Pricewaterhouse Coopers peer review are available at http://www.med.govt.nz/pbt/rad_spec/rights-at-expiry. An Excel calculation tool is also available to assist in analysis of the Covec formula.

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