BAY OF PLENTY COUNCILS
BROADBAND BUSINESS CASE STUDY
RADIO SPECTRUM AUCTION SUMMARY
April 2007
GDI
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PO Box 782 Spring Hill, Qld 4004.
Telephone: +61(7) 3832 1222
Facsimile: +61(7) 3832 1212
Email: [email protected]
Bay of Plenty Councils Broadband Business Case Study – Milestone S3
Contents
1
INTRODUCTION ....................................................................................................................... 3
2
PURPOSE ................................................................................................................................. 4
3
SUMMARY ................................................................................................................................ 4
3.1
3.2
3.3
4
THE IMPORTANCE OF WIRELESS DISTRIBUTION TECHNOLOGIES FOR THE BAY OF PLENTY ....... 4
LICENSED AND UNLICENSED WIRELESS BANDS ...................................................................... 4
2.3GHZ WIRELESS AUCTION.................................................................................................. 4
CONCLUSIONS ........................................................................................................................ 5
DISCLAIMER
This document has been prepared by Gibsons Digital Innovation (GDI) from information provided by the client and from other
sources. Our procedures do not necessarily include confirmation of validation procedures of that information and this document is
provided to the client for its exclusive use and benefit only. No other party should rely on it for inferences or forecasts made
therein. GDI accepts no responsibility to such parties.
In addition, certain inferences and forecasts have been drawn and made on the above basis although every effort has been made
to ensure that such inferences and forecasts are reasonable, no responsibility can be accepted by GDI for eventual outcomes.
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Bay of Plenty Councils Broadband Business Case Study – Milestone S3
1
Introduction
This document is a supplementary part of a project and series of deliverables required by Bay of
Plenty Councils to develop a broadband business case study for the Bay of Plenty region. The
project recognises that a wider geographic availability of broadband services is an economic
enabler, and that a lack of these services is increasingly an economic disabler.
The report is the third supplementary deliverable S3, summarising the potential for the announced
‘managed spectrum park’ to support service delivery over wireless broadband in the Bay of Plenty
region, and the auction of nationally owned spectrum slots to be auctioned in May 2007. This
report and its relationship to other reports in the project is illustrated in figure 1 below:
Figure 1 – Deliverables Structure
Deliverable S3 is the Subject of this Report. More detail is provided in deliverable S2.
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2
Purpose
The purpose of this document is to summarise deliverable S2 and propose the format of a letter to
the Ministry of Economic Development (MED) regarding suggested changes to the tender process
to improve the availability of the 95MHz allocation in the 2.3GHz band to be auctioned for
broadband wireless delivery.
3
Summary
3.1
The Importance of Wireless Distribution Technologies for the Bay of Plenty
Wireless (radio) technologies are fundamentally important to the economical delivery of broadband
services, especially in regional areas where population density is low and the cost to reach homes
and businesses rises rapidly using conventional copper or fibre optic cables.
The telecommunications industry benchmark for economical service delivery is the ‘number of
properties passed by a cable route’ to assess the viability of any such distribution technology. In
the Bay of Plenty, and other regional areas of New Zealand, it becomes uneconomic to deliver
broadband services via cable based technologies outside metropolitan areas. The advent of new
wireless technologies, and especially the WiMAX standard (IEEE 802.16x), offer economical
connection of broadband services in regional areas.
3.2
Licensed and Unlicensed Wireless Bands
These wireless technologies are available in forms that operate in both licensed and unlicensed
wireless bands. In the Bay of Plenty at present, all wireless services are delivered over unlicensed
wireless bands that are subject to uncontrolled interference from other services. The result is that
wireless service providers are losing range and customers because these bands are experiencing
congestion as new types of service are delivered.
The Ministry of Economic Development (MED) understands that wireless technologies are
essential to broadband delivery in New Zealand, and are planning to auction wireless spectrum in
the 2.3GHz band that will be licensed, meaning service providers will be allocated specific bands
for their exclusive use, thereby virtually eliminating interference from other services and ensuring a
wide geographic reach. This auction represents an important opportunity for the Bay of Plenty to
ensure regional areas can be served effectively with wireless technologies, and where necessary,
lobby the government to improve the auction process to ensure this is the case.
3.3
2.3GHz Wireless Auction
The MED has released a number of documents setting out the structure and intentions of the
auction, and this project has identified a number of concerns that indicate the auction could have a
negative effect on the availability of spectrum for regions.
The matters of concern are:
i)
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Historically, spectrum auctions that offer national control of spectrum tend to be
used only in large metropolitan areas (ie Auckland, Hamilton, Wellington,
Christchurch etc) because better economies of scale apply in these large
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Bay of Plenty Councils Broadband Business Case Study – Milestone S3
concentrations of demand. This means suppliers who hold exclusive control of
wireless spectrum tend to stay in these large areas of demand and will not
invest in regional infrastructure in regional areas like the Bay of plenty. In effect,
the consequence is that valuable spectrum ideally suited to regional distribution
of broadband services is in fact denied to regional areas.
ii)
A sub section of the 95MHz to be auctioned, 15MHz, is likely to be reserved as
a ‘managed spectrum park’, meaning it will not be offered for national
ownership, and is to be used by regional suppliers. This is an
acknowledgement by the MED of the risks described in item i) above.
However, a number of high level design studies have been conducted with two
international suppliers of WiMAX equipment, Fujitsu and Motorola, to determine
whether this allocation of bandwidth for the managed spectrum park would be
enough to ensure competitive service delivery in two locations in the Bay of
Plenty – Whakatane and the Ruato to Rotoma region, small urban and
regional/rural examples.
While there are many engineering design options, we have formed the view that
it is unlikely that the 15MHz allocation for the managed spectrum park is
enough for competitive service delivery in these two examples.
It is necessary to protect the Bay of Plenty from the possibility that the
successful bidders for national broadband spectrum will decide not to deliver
services to this region because of perceived economic cost penalties compared
to more densely populated regions.
This concern has been formally raised with the Minister for Communications,
the Hon David Cunliffe, and directly with the MED with whom several
constructive meetings have been held.
The Bay of Plenty region has suggested a number of amendments to the terms
of the auction that would require successful auction bidders to either invest in
regional areas like the Bay of Plenty, or hand over part of their spectrum to
other providers who will commit to service delivery.
These suggestions have been positively received at the last meeting with the
MED in April, and have now been formally prepared in the form of a letter from
the region to the MED, copied to the Minister’s office, provided in appendix 1.
4
Conclusions
The wireless spectrum auction planned by the MED for broadband service delivery is
fundamentally important to the development of widespread broadband services in the Bay of
Plenty.
If the result of the auction were to be that auction winners did not opt to deliver services to the
region, the proposed 15MHz band for the managed spectrum park is inadequate for effective
competitive service delivery in the region.
At worst, the result would be that the Bay of Plenty would be unable to make effective use of the
newly available wireless spectrum for the delivery of broadband services.
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This project has taken the initiative and made clear to the MED and the Minister’s office that
changes must be made to the auction process to ensure more of the available band is available for
use in the region.
The next step is to send the letter, on behalf of all the councils in the Bay of Plenty in appendix 1 to
the MED seeking their agreement to the suggested changes to the planned auction process.
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Appendix 1
Letter to the Ministry of Economic Development
Attention: Ian Hutchings
Cc: Minister of Communications, the Hon David Cunliffe
Subject: Proposed Amendments to the Planned Radio Spectrum Auction for Broadband
Services Delivery.
Dear Ian
Thank you for your time on 20th April in Wellington to discuss the planned spectrum auction for the
2.3GHz band, described in the MED paper, ‘Radio Frequency Auction No. 9: Overview’.
As you are aware, the Bay of Plenty region is conducting a project to develop a broadband
business case study to identify ways to enhance the investment climate for broadband
infrastructure in the region, with special emphasis on regional and rural areas.
One important conclusion that has emerged from the project is that the effective use of wireless
technologies is essential to the delivery of broadband services in the Bay of Plenty. We support
the initiative of the Ministry to auction spectrum in the 2.3GHz band and this letter presents
comments on the planned auction process, and requests a number of changes to the auction that
we believe will enhance spectrum availability in regional areas of New Zealand.
Our principle concerns regarding the planned auction process are as follows:
i)
While the principle of the managed spectrum park is fully endorsed as a method of
providing spectrum to regionally based service providers, we believe the 15MHz
allocated for this purpose is too small. This is because the minimum 5MHz slots
required by distribution equipment, and frequency reuse and guard band demands
mean it will be effectively impossible to engender competitive wireless service
delivery in many regional communities.
We understand the difficulty in dividing the limited total band of 95MHz into an
adequate managed spectrum park, and allowing sufficient nationally allocated
spectrum for a minimum of three national service providers and believe it may be
difficult to increase the allocated spectrum for the managed spectrum park.
ii)
Spectrum auctions in New Zealand and internationally have shown that unless
steps are taken to force use in regional areas, national spectrum holders often
neglect regional areas, effectively denying access to the spectrum in these areas.
We note the ‘use or lose it’ intentions in the document ‘Radio Frequency Auction
No. 9: Overview’ and commend these intentions. However, we believe the currently
intended approach in this respect is not prescriptive enough and does not offer
regional areas an opportunity to proactively develop frequency utilisation plans with
the successful spectrum auction bidders.
We propose the following changes to the spectrum auction terms that would enhance the intention
to optimise the use of available spectrum in all areas of New Zealand.
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Our intention is to propose ways to change the auction terms that demonstrate the following
requirements of national spectrum holders in a clear and measurable way:
i)
Spectrum that will not be used in regional areas within a specified period
must be sub licensed to service providers that will deliver service. If this is
not done, and there is a committed demand for spectrum that cannot be
provided from the managed spectrum park, spectrum will be transferred to
an applicant for managed spectrum park spectrum.
ii)
Regional areas and national spectrum holders will be encouraged to develop
service delivery plans that will provide service to regions that exceed the
number of potential customers that are already defined in ‘Radio Frequency
Auction No. 9: Overview’ with respect to the minimum number of TLAs to be
served.
We therefore propose the following terms for the auction that are supplementary or in replacement
of the currently proposed terms set out in the document ‘Radio Frequency Auction No. 9:
Overview’.
Condition 1
Conditions Applied to Managed Spectrum Park Licensees. We note the MED is still
considering whether to create a managed spectrum park. We believe this is essential to the
delivery of regionally based services and a partial defence against national spectrum holders not
delivering services into regional areas. We understand the difficult in allocating enough spectrum
for the managed spectrum park, and believe that if only 15MHz is allocated, as a minimum, the
following additional terms must apply to applicants for spectrum from the managed spectrum park:
a. Must provide services in the region within 12 months of being awarded the license to use
bandwidth from the managed spectrum park.
b. If condition a. is not met, the allocated bandwidth will be withdrawn and returned to the
base pool, or to the national spectrum licensee as appropriate – see condition 3.
c. Must advertise the broadband services throughout the whole of the coverage area served
by their spectrum license.
The timing of this condition is based on a requirement that no applicant for managed spectrum
park bandwidth will wait more than 12 months for confirmation of allocation of suitable bandwidth,
and the delay in delivering broadband services to the community will be no more than 18 months.
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Condition 2
Regional Commitments. The MED overview document describes a requirement to deliver
services into six of eight North Island TLAs by 2012, to comply with the ‘use it or lose it’ approach.
We seek the following amendments to this requirement:
a. Services must commence within two years of award of the spectrum, and reach 50% of the
population within three years. This will speed the delivery of services and allow for the
phased release of some parts of the spectrum.
b. Offer the option to substitute three of the eight TLAs required for the North Island for the
whole of the Bay of Plenty region1 for example, or any other region that satisfies the
following requirement:
•
The total population in the proposed aggregated area exceeds the population in the
three substituted TLAs.
Note that other aggregated regions in New Zealand can offer the same substitution, so long
as the result is that the aggregated region will offer service to a greater number of the
population than the substituted TLAs. This option allows an aggregated region to negotiate
a ‘preferred supplier’ arrangement with one or more of the successful auction bidders.
It is understood that most respondents to the auction could not make binding commitments
to coverage in any areas, or to achieve successful partnership agreements with third
parties for sub licensing agreements before being awarded the tender. This amendment
will allow the Bay of Plenty region, or any other region, to commence negotiations with
successful national spectrum holders to improve the viability of investment in the region in
a variety of ways and for the spectrum holders to be relieved of some of their responsibility
for regional rollout to potentially uneconomic areas through this substitution.
1
TLAs are therefore Tauranga, Whakatane, Rotorua, Western Bay, Opotiki, Kawerau
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Condition 3
Reallocation of National Spectrum to the Managed Spectrum Park. Assuming the first
allocation of regional spectrum will be the 15MHz for the managed spectrum park in any region,
we request that additional spectrum from the national spectrum allocation will be transferred to the
managed spectrum park in a defined regional area under the following circumstances:
a. Any application for spectrum from the managed spectrum park that cannot be fulfilled from
the 15MHz base allocation will in the first case be advised to contact national spectrum
holders to arrange a sub lease of spectrum that will not otherwise be used.
If applicants for capacity from this band cannot reach an agreement with any of the national
spectrum holders, a formal request for managed spectrum park bandwidth will trigger the
following actions if the application for additional spectrum is outstanding for more than 3
months:
i. All national spectrum holders who are not fully using their spectrum in a region
where the managed spectrum park is unable to accommodate demand will be
advised to confirm their intended use of their spectrum within 3 months. This
commitment must be confirmed with service delivery commencing within 12
months and will become a binding commitment for the national spectrum holder
even if they have an agreement with a sub licensee for the use of the spectrum.
ii. National spectrum holders who do not make or comply with the commitment
described in i above, will be advised their bandwidth allocation is to be
transferred to an applicant for managed spectrum park bandwidth for a minimum
five year period.
Y
y
The actions and timeframes are illustrated in figure A 1 below:
Figure A1 – suggested Reallocation Process for Spectrum
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