‘Spectrum disparity’ making it tough for telco
2degrees has laid out a stark argument in its submission to the Commerce Commission about One NZ’s proposed takeover of Dense Air, a small firm that owns a big chunk of
5G spectrum. “2degrees’ lack of spectrum is limiting our ability to compete with Spark and One,” its submission says.
It states the deal, to which it “strongly objects”, would worsen the competitive landscape and create an “enduring spectrum disparity” that could potentially stop offering some products (the products concerned are redacted).
If the deal goes ahead, “One NZ and Spark [will] have a sustainable cost advantage over 2degrees in the provision of mobile and fixed wireless broadband services”, 2degrees says.
Two other paths to boosting spectrum — building more cell towers or acquiring more spectrum from another source — were not viable, in
2degrees’ view. “2degrees currently has significantly fewer spectrum holdings in MHz [megahertz] than One NZ and Spark [2degrees has 190MHz, One NZ has 260MHz usable spectrum and Spark 330MHz].
This discrepancy will only be enhanced post-acquisition as One NZ’s holdings will go to 330MHz [with the Dense Air acquisition],” the submission says.
Nixing deal would maintain Spark’s advantage
One NZ sought clearance to buy Dense Air on November 2.
At the time, One NZ chief executive Jason Paris said extra spectrum from the deal would give his customers the equivalent of “an extra lane on the motorway”.
In a statement of issues released yesterday, the Commerce Commission said it was mulling the deal.
The regulator acknowledged arguments raised by 2degrees — and that the counterfactual was 2degrees buying Dense Air.
Since mid-2022, 2degrees has been owned by Voyage Digital (NZ), a joint venture formed for the acquisition by Australian firms Macquarie Group and Aware Super.
The Commerce Commission also said nixing the Dense Air deal would maintain Spark’s spectrum advantage over One NZ.
In its submission, Wispa (the Wireless Internet Service Providers
Association, whose members collectively provide broadband to about 70,000 rural homes), asked the commission to consider: “Does this further a competitive market or does it just bolster much of the same, which limits scarce resources into the hands of only a few entities and prevents either new entrants in the market or innovative regional operators from growing?”
One NZ responds
“Dense Air ran an open process that gave all three major mobile network operators a full opportunity to participate, including 2degrees,” One NZ spokesman Matthew Flood said.
“At the end of that process, One NZ was selected as the preferred buyer. 2degrees’ attempts to stop One NZ now completing this purchase feel more like sour grapes than fighting for fair.
“There’s no requirement for all mobile operators to have exactly the same amount of spectrum to compete effectively for customers.
“The position today is that 2degrees, Spark and One NZ don’t have equivalent spectrum holdings, yet mobile markets are highly competitive,” Flood added.
“Each mobile operator has a range of options for how it configures its network and services using its available spectrum — whether it has equal holdings to others in a separate band makes absolutely no difference to the range of products and services that are offered to consumers.”
Spark did not make a submission. The Commerce Commission is scheduled to announce its decision on April 3.
Woosh, there it is
The UK-based Dense Air entered the
New Zealand market in 2018 when it paid US$17.5 million ($25.75m) to acquire a big chunk of 5G-friendly airwaves (specifically, rights through to 2028 for two 35MHz blocks of 2.6GHz radio spectrum).
Dense Air bought its total of 70MHz of spectrum from two parties: Cayman Wireless, a subsidiary of Canada’s Craig Wireless (a firm associated with the later days of failed Auckland wireless internet provider Woosh Wireless) and Blue Reach, owned by rich lister and CallPlus founder Malcolm Dick.
One NZ did not put a price tag on its pending deal. But with 5G network upgrades now well underway, and an ever-growing thirst for mobile data, it’s likely to be well north of the $25.75m that Dense Air paid.
Dense Air immediately leased some of its 5G spectrum to Spark but, as the potential One NZ-Dense Air deal was announced in early November, Spark said it no longer leased any Dense Air airwaves.
Quid pro quo
The three mobile operators have gained their existing spectrums through a mix of government auctions (historically, Spark has been the most aggressive bidder), direct allocations and horsetrading.
In October 2022, the government decided to forgo a 5G auction in favour of directly allocating an 80MHz chunk of 5G spectrum each to Spark, One NZ and 2degrees for a 20-year term.
As a quid pro, each telco agreed to spend at least $24m, beyond existing budgets, expanding provincial and rural 5G coverage.