ACCC Seeks Advice on Competition Issues around 5G Spectrum Allotment

In a media release dated 26 February 2020, the Australian Competition & Consumer Commission, or ACCC, announced that it is looking for advice and suggestions on any competition issues related to the approaching spectrum allocation which would affect the rollout of 5G services throughout Australia.

ACCC is expected to advise Paul Fletcher MP, Minister for Communications, Cyber Safety and the Arts, whether specific restrictions should be put during the auction to safeguard as well as promote competition. Also, the commission will suggest how to apply the restrictions, if approved.

The 26 gigahertz (GHz) spectrum band auction is anticipated in early 2021 and would be managed by the Australian Communications & Media Authority (ACMA). The 26 GHz spectrum band would allow the release of an array of advanced new services with the help of 5G technology. 5G services would increase the potential of the Internet of Things (IoT).

The 5G spectrum would not only aid in boosting IoT’s capability but will also facilitate technological innovation across various sectors like mining, agriculture and manufacturing. It would also be beneficial for small companies and customers who stay in the cities as well as regional towns throughout the country.

According to Cristina Cifuentes, ACCC Commissioner, allocation of spectrum in an economically efficient manner is essential for the implementation of leading-edge 5G technologies. It would also promote competition amongst the spectrum users.

On this front, ACCC wishes to know from the industry experts as well as other stakeholders interested in knowing about spectrum allocation and its usage. The stakeholders are not restricted to the telecommunication sector and can be from other sectors as well.

Further, ACCC is looking for opinions concerning the probable demand for the spectrum licences (26 GHz), the possible applications for the spectrum, the target market where the spectrum would be applied as well as any competition issues linked with the allocation of the spectrum.

The statutory authority is taking advice on possible competition issues linked with the allotment of spectrum licences in the broader 26 GHz to 28 GHz band.

Background:

The ACCC had received a request for guidance from the Minister of Communications, Cyber Safety and the Arts on 19 October 2019 concerning competition issues related with the planned spectrum as well as apparatus licence allotment of the 26 GHz & 28 GHz bands.

Considering the timing of the decision of the Federal Court on the planned merger between TPG Telecom & Vodafone Hutchison Australia, the Minister approved to extend his appeal for ACCC advice to 15 May 2020.

A Member of Parliament, Paul Fletcher, on advice from the ACMA, stated the allotment of licences for the spectrum in the 26 GHz band through an auction, scheduled to take place in the early parts of 2021. Mr Fletcher made the announcement on 25 October 2019. The ACMA proposes to allot 2400 MHz of spectrum in the 26 GHz band across 29 defined regions. Under the Radiocommunications Act 1992, the Minister holds the right to supervise ACMA to build procedures on imposing allotment limits on the sale of the spectrum licences. It could be possible that the limits imposed are based on the amount of spectrum that a participant can purchase and apply to specific bands of spectrum. In making such a move, the Minister needs ACCC’s advice on allocation limits.

The Minister, on this front, wrote a letter to ACCC requesting for advice related to the allocation limits that should be imposed in 26 GHz spectrum auction and has asked for guidance by 15 May 2020. The Minister also asked ACCC to consider any scope of possible competition issues related to the apparatus licencing regime throughout the complete 26 GHz and 28 GHz bands.

ACCC’s Approach to This Advice:

The ACCC plans to carry out its evaluation built on the criteria mentioned below:

• Promotion of competition in downstream markets for the long-term interests of consumers as well as to promote investment in infrastructure & innovation.
• Assist in the implementation of 5G technologies, which includes opportunities to obtain 5G spectrum in the future & technical needs for using 5G services.
• Encourage the cost-effective allocation and usage of spectrum, to boost public value from the spectrum, which comprises of lessening the risk of spectrum exploitation, under-utilisation as well as irregular spectrum holdings.

The assessment of ACCC, based on the above three criteria, will help in settling the final advice to the Minister.

Importance of Competition for the Allocation of Spectrum:

A spectrum is considered as a limited resource and makes an essential contribution towards the supply of various services in several downstream markets, comprising communications services. However, there is a considerable entry barrier with respect to gaining access to the spectrum in most of these markets.

Allotments of the spectrum through spectrum licencing signifies an essential investment point for current operators as well as new competitors looking to offer services in downstream markets that depend on the spectrum. Competition in the allocation assists in confirming that the spectrum is allotted at an effective cost to those for whom it is valuable.

In the mobiles market, the spectrum portfolio of an operator is a key contributing factor of its power to compete efficiently. Spectrum allows admission to the new market and can affect the quality of service and network capacity along with the geographic regions in which the operator can provide services.

Due to lack of enough spectrum, it would become challenging for operators to compete efficiently in the downstream market, which in turn will impact the consumers who might suffer from the effects of an uncompetitive market like increased prices, weak service quality followed by a shortage of options.

To promote competition at the time of allocation and post the allocation, ACCC is looking at potential concerns such as scope and result of monopolisation of spectrum due to allocation. Concerning the allocation, there is a possibility and probable impact of irregular spectrum holdings. Another issue regarding the allotment could be the possibility of under-utilisation of the spectrum. ACCC also has a question as to how the allotment would promote investments in downstream markets for the long-term gains of consumers.

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