What is the Digital Dividend?

Telstra, Optus and Vodafone are expected to bid for 4G-capable spectrum this April.

On 23 April, the Australian Government will auction radio airwaves called spectrum to be used for 4G mobile services. Here’s a handy guide to this major event in the wireless world.

What’s being auctioned?

The Australian Communications and Media Authority (ACMA) will auction 2x45MHz (45MHz uplink plus 45MHz down) of spectrum in the 700MHz band, as well as 2x70MHz of spectrum in the 2.5GHz band.

Broadcasters are handing over the spectrum as part of the transition to digital television. The spectrum will be available to Digital Dividend auction winners at the end of 2014 after broadcasters turn off analogue signals.

Broadcasters used the 700MHz spectrum for analog TV signals and the 2.5GHz spectrum for electronic news gathering.

The government released auction rules for the spectrum sale in December.

Why does it matter?

If spectrum is real estate for mobile services, the 700MHz spectrum under auction is beachfront property for 4G services.

The low-frequency nature of 700MHz means it can travel long distances, making it ideal for improving mobile coverage in regional areas. Low-frequency spectrum can also travel more comfortably through buildings, enhancing indoor coverage.

While the higher frequency of 2.5GHz spectrum makes it less good for reaching rural areas or improving in-building coverage, 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 testing mobile networks.

Who will bid for spectrum?

Telstra, Optus and Vodafone Hutchison Australia are expected to bid in the auction. While Telstra and Optus may bid for both bands, Vodafone has said it will not bid for the 700MHz spectrum under the current terms.

4G in Australia: The state of the nation

Vodafone has said it might not bid for 700MHz because it already has a strong reserve of 1800MHz spectrum to support its 4G expansion plans. However, the telco may still bid for 2.5MHz spectrum because it requires a lower minimum bid (3 cents per MHz POP for 2.5GHz compared to $1.36 for 700MHz) and more of it will available through auction.

New entrants are not expected to bid, according to analysts.

Under auction rules, however, the Australian Communications and Media Authority (ACMA) will not reveal who has applied to participate, who registers as a bidder or how the bidding proceeds until after the auction has finished.

“This is an important part of protecting the integrity of the process and minimising the risk of price signalling or collusion,” an ACMA spokesman said. “After the auction has concluded, the ACMA will announce the names of the winning bidders, the spectrum they have won, and the price they have paid or will pay for the spectrum.”

What does the Digital Dividend mean for competition?

Optus and Vodafone may see the auction as an opportunity to close the customer gap with Telstra.

IBRS analyst Guy Cranswick has said the auction could be an opportunity for Optus to better compete with Telstra.

“Telstra’s mobile network is known to be very strong,” he said. As the number two carrier, Optus would want to make sure they “keep almost lock step” with Telstra, “even if it’s a couple steps behind”.

Under auction rules for the 700MHz spectrum, carriers can buy up to 25MHz of the 45MHz of spectrum available. Without Vodafone bidding, that could lead to either Telstra or Optus getting more spectrum than the other.

Is the Digital Dividend enough?

Maybe not, the mobile industry has said.

“According to industry, it is also important to progress planning to define the quantity and timing of the release of future spectrum resources for mobile broadband post the ‘Digital Dividend’ and the need for a comprehensive policy review about how efficiently spectrum is allocated and managed,” according to a Deloitte report commissioned by the Australian Mobile Telecommunications Association (AMTA).

AMTA chairman Warwick Bray has said the mobile industry will continue to work with the ACMA to identify new allocations of spectrum suitable for mobile. The industry can also make more efficient use of existing spectrum, he has said.

Find official information on the Digital Dividend on the ACMA website.

Follow Adam Bender on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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Tags Australiamobilewirelessguide4gspectrumauctionDigital dividend

More about AMTAAustralian Mobile Telecommunications AssociationHutchisonIBRSOptusTelstra CorporationVodafone

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