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Carriers vs cops: Australia's spectrum conundrum

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Internet Security Threat Report 2014

Australia, like other countries subsidising the broadcast and consumer electronics industries rolling out digital TV, is now preparing to auction the old analogue TV spectrum for the best price possible.

The obvious answer is a spectrum auction, the obvious customer the telco industry. That has the tech press wildly imagining a new golden era of cheap broadband, somehow believing that the same carriers that price a mobile gigabyte at up to $80 will become more generous with the LTE services they're going to launch over their new, expensive spectrum.

What should happen to the "digital dividend" (which everybody except Treasury seems to regard as some kind of social description rather than a purely economic one) is a lively debate, and currently centres on whether emergency services should have any of the newly-available spectrum.

The emergency services argument, mostly prosecuted by the police (but presumably cheered on quietly by fire brigades and ambulance services), is that there will be plenty of spectrum to go around. The switch to digital TV will make 126 MHz of spectrum available; emergency services just wants 20 MHz of this.

The counter-argument, prosecuted by the telecommunications industry and mostly supported by the tech press, is that the whole 126 MHz has to go on the auction block to maximise the number of new services Australia will get.

The carriers' case is being ably prosecuted by John Stanton, head of the industry's representative body, the Communications Alliance. His position is that if the industry gets the whole of the available spectrum at auction, emergency services organisations can then negotiate with the industry for access to the spectrum.

But who is right?

The telcos' position: spectrum equals LTE

Today's mobile networks portion the spectrum out in 20 MHz blocks. While technologies like LTE-Advanced will work in a 20 MHz channel, higher performance implementations – the maximum downlink speeds above 100 Mbps that get the tech press so excited – need wider channels, like 40 MHz.

Hence the clash with emergency services. To allocate 40 MHz each to three bidders needs 120 MHz: keeping back 20 MHz for emergency services leaves only room for two 40 MHz blocks (with 26 MHz as the odd-man-out leftover).

If they can persuade the government to preserve the entire digital dividend for the auction, mobile telcos Telstra, Optus and VHA (the merged Vodafone-Hutchison entity) are the winners: there's really nobody around to bid against them.

It's unlikely that an emerging fourth mobile carrier would find investors to pitch a brand-new network against the majors. Investors would need to back a company not just to win the spectrum auction, but to roll out the whole vast infrastructure of a new, competitive mobile network – and to survive the cash burn of acquiring customers in a relatively mature market.

In other words, the industry position in this debate is really the position of the three mobile carriers that dominate the market.

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