AUSTRALIA AUCTIONS PCS

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MELBOURNE, Australia-Australia’s long-awaited PCS spectrum auctions began at the tail end of April with nine bidders vying for 230 lots in the 800 MHz and 1800 MHz spectrum bands.

Marking a key stage in Australia’s long-term plans to establish a fully competitive market, the PCS (Personal Communications Services) auctions are expected to introduce both new wireless players and new digital mobile technologies. In charge of the auction is the Australian Communications Authority.

The 800 MHz band, still used by Telstra’s AMPS (Advanced Mobile Phone Services) network, is progressively shutting down over the next 20 months. In the five capital cities, 20 megahertz of paired spectrum is available with a further 15 megahertz on offer in 12 regional areas. The 800 MHz band will make way for digital mobile technologies such as CDMA (Code Division Multiple Access) and digital AMPS, especially favored by U.S. operators.

The 1800 MHz band in Europe is occupied by the GSM (Global System for Mobile communications) technology, and is of interest to incumbent cellular carriers hoping to ease congestion on their existing GSM 900 networks. In the 1800 MHz band, 45 megahertz is being auctioned in the capital cities and 15 megahertz in the dozen regional areas.

After the first week of the auction, the total high-bid value on the 230 lots reached $147 million. It is difficult to estimate what the auctions may reap, though one expert predicts they are unlikely to raise more than $400 million. The ACA’s first auction in the 500 MHz band in March 1997 garnered bids below estimates. The $400 million figure is a long way from the $17.9 billion harvested in 1996 by the U.S. PCS auctions, though some U.S. participants ended up bidding beyond their means.

In Australia, bidding was most spirited for lots in the capital cities-which account for 65 percent of the population-particularly in Sydney, Brisbane and Melbourne, followed by major regional centers.

The ACA’s manager of spectrum marketing, Ian Hayne, described the first week of auctions as a great success.

For the auctions, bidding caps are imposed on the incumbents Telstra, Optus Communications and Vodafone Group plc, restricting them from purchasing more than 10 megahertz in the 800 MHz band and 15 megahertz in the 1800 MHz band. The incumbent carriers also are prohibited from bidding on the first two in-time tranches of 800 MHz spectrum.

In addition to the three incumbents, the other bidders are Australia’s largest Internet service provider OzEmail, AAPT Wireless, Hutchison Telephone and OzPhone, as well as U.S.-based companies Catapult Communications and Global Mobility Networks.

The auction system being used is an Internet-based simultaneous ascending system, in which participants bid for standard trading units (STUs). It is based on the auction system used by the U.S. Federal Communications Commission for its PCS spectrum auctions. Unlike in the United States, however, the Australian auction process allows participants to bid for a block or STU of spectrum in a given geographical location rather than simply geographical area coverage.

“Growth in the Australian market is going to come out of diversification of the product base,” Hayne said. “Those serious about the Australian market, and (who) have mapped out a serious business plan, aren’t so much concentrating on the mobile market but on the enhanced-services market and in going head-to-head with fixed infrastructure.”

Getting to the auction stage hasn’t been without its hurdles. Last year, the auctions were delayed because of problems with the bidding caps set by the Federal Department of Communications. Matters weren’t helped following statements made by the ACA that major international telecommunications companies, particularly in the United States, had shown little interest.

However, it was the issue of inter-carrier roaming that appeared to prove the most difficult sticking point for some potential players. In question was the viability of entering a mature market-boasting the world’s second-highest per-capita use of mobile phones-without legislative powers forcing incumbents to provide new entrants access to existing digital cellular networks. It was viewed that the auctions too heavily favored incumbents.

The Australian Competition and Consumer Commission recently ruled against forcing incumbent telephony carriers to provide digital access, but warned that incumbents must offer access to new players through commercial negotiation. The ACCC has not ruled out declaring inter-carrier roaming services at a later date.

But opportunities exist for new cellular players. Australia still has close to 2 million analog subscribers who must migrate to a digital service by 2000.

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