Improve competition - keep unsold spectrum on the shelf

2degrees' purchase of 10MHz of 700MHz digital dividend' spectrum will leave at least 5MHz of the scarce resource unsold and the company is recommending it stays that way.

CEO Stewart Sherriff is asking the government to await the outcome of the upcoming Telecommunications Market Review rather than damage long term competition by selling the unsold spectrum to Telecom or Vodafone.

"Spectrum is the motorway for mobile operators, and in the next few years that motorway will be built on 1800MHz spectrum, which all mobile operators already own. There are no mobile devices or networks using 700MHz that can be deployed in New Zealand right now, so there's no pressing consumer need to sell the remaining portion of that band," says Mr Sherriff.

Yesterday, 2degrees committed $44m, buying 10MHZ of 700MHZ spectrum. It needed to do so because the government was selling the 18-year rights to those airwaves now, even though it will be several years before the company can build networks that give it a return on that investment.

The government must now decide what to do with any unsold spectrum, which deep-pocketed Vodafone and Telecom would like to lock-up so that 2degrees cannot buy it at a later date.

Mr Sherriff says it would be easy to make the wrong call now.

"It's time to take a close look at the state of competition, examine the different stages of investment each provider is facing and make decisions based on the future of a strong, three-player market," he says.

He says the bigger question is where real competition to the two vertically integrated incumbents will come from. "This is bigger than mobile. We've made it clear we intend to leverage the government's UFB to provide a fixed and mobile alternative, with innovative services that have the same impact our mobile market entry did just four years ago."

"But first, we need to make sure we have real competition in mobile. There are real challenges faced by post pay and business mobile users, which will become apparent as the government proceeds with its market review," he says.

Mr Sherriff says he will write to Communications Minister Amy Adams asking her to put the 700MHz on the shelf and let the market review provide insights that deliver more for consumers.