Vodafone, Telecom may get to delay competition

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Vodafone and Telecom may get the opportunity to delay competition for five years at a bargain price

Auckland, Tuesday 24 April 2007 - According to Martin Wylie, CEO of CallPlus and Slingshot, a couple of millions dollars is all it could cost Vodafone and Telecom to impede competition in wireless broadband for five years. That’s a bargain for them,” he says.

“If the Government allows Vodafone and Telecom to bid in the upcoming spectrum auction they will get a real deal – competition held at bay for a fraction of the cost they spend on their legal fees in a month,” says Mr Wylie. “The rational is puzzling. How does letting the dominant incumbents purchase scarce resources that allow them to do the same thing differently, do anything to encourage competition or consumers? We need to ensure that three blocks of this scarce resource go to emerging players to give them the opportunity to invest.”

Whilst CallPlus welcomes the Government’s decision to pro-actively initiate an early auction of the 2.3GHz spectrum band, it is concerned by the proposed rules for the auction.

The spectrum is strictly limited and will be critical to the plans of new entrants and competitors such as CallPlus, Woosh, Kordia and others looking to invest in networks to compete in the wireless broadband space.

“The Ministry of Economic Development and Minister Cunliffe have voiced they want to promote competition and maximise the benefits for consumers from the spectrum auction,” says Mr Wylie. Unless they prevent Vodafone and Telecom from bidding in this auction they will fail on this stated objective.

“There is only enough spectrum to allow two or, at the most, three bidders to gain access to sufficient spectrum to deploy nationwide networks. Telecom and Vodafone, with their deep pockets to bid, can ensure emerging competitors do not get their hands on spectrum that could be used to effectively compete with them.

“The Government appears to be relying heavily on a ‘use it or lose it’clause to discourage this, which would see spectrum being taken back after five years if certain criteria are not met. The logic of this utterly flawed. The problem is the penalty is peanuts to the big players. Ironically for the smaller guys the level of the ‘use it or lose it’ is a big barrier to investment.

“Using their existing 3G spectrum assets Telecom and Vodafone will be able to provide services and improvements in their current technologies to offer faster broadband wireless. But for new players the 2.3GHz spectrum is critical, who without existing networks or spectrum and looking at WiMAX to deploy their own networks.

“The Australian government precluded Telstra from bidding for WiMAX spectrum and I hope that Minister Cunliffe will seriously take this on board before they finalise the rules for the auction,” concludes Mr Wylie.

ENDS

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