No single bidder will be able to buy more than four blocks in the first auction round. This is less than the 80MHz to 100MHz recommended for full 5G services by the GSMA, an international mobile operator trade association.
The rights are not tradable, are nationwide and buyers must use them for 5G mobile services.
More spectrum later
Licence terms start later this year and finish at the end of October 2022. The government will hold a further, long-term auction for the spectrum that year. The government says it expects to free up more spectrum later.
Bidders in the March auction will have to return existing 3.5GHz management rights to the government.
This affects Vodafone more than any other carrier. It is possible Vodafone’s existing 3.5MHz holding will fall. Returning existing spectrum will help flatten the playing field. There will be a refund for returned management rights.
Radio Spectrum Management, part of the Ministry of Business, Innovation and Employment, will use a simplified version’s of a combinatorial clock auction. In effect, this starts with the seller offering blocks at the reserve price. If the demand for blocks is greater than the supply, it increases the price.
Beyond the three mobile carriers
New Zealand has three existing mobile networks. There are 16 spectrum blocks on sale and each bidder can buy four in the first auction round. That means the government expects a fourth buyer to enter the auction.
This is a departure. The earlier auction for 700 MHz band spectrum was tailored to cater for the three mobile carriers; Spark, Vodafone and 2degrees.
The obvious candidate is Dense Air. The company owns 70 MHz of 2.5 GHz spectrum. At the moment Dense Air acts as a wholesaler to the mobile carriers. Spark’s tiny South Island fixed wireless broadband 5G project uses Dense Air spectrum.
Other parties may be interested in the spectrum. Few of New Zealand’s Wisps1 could afford the $500,000 deposit or the $250,000 per block asking price. Yet if they were to act collectively a bit might be possible.
If the government doesn’t sell all 16 lots in the first auction round, it may offer them to existing bidders.
Given that the amount of spectrum being auctioned is not enough for carriers to offer a full blown 5G service, it looks as if will be some time before New Zealand gets all the benefits of the technology. There’s enough bandwidth for fast data speeds, but, as things stand, maybe not enough for carriers to deliver the gigabit plus speeds 5G hype has promised.
Wisps are small, local wireless internet service providers. They cover rural and remote gaps in markets not served or poorly served by bigger telcos. ↩︎
Communications Minister Kris Faafoi says the government will offer spare 3.5GHz spectrum to mobile networks and Māori by the middle of next year. He should put some aside for the Wisps or wireless internet service providers.
Carriers need extra spectrum to offer fuller 5G mobile services. A full 5G service needs 80 to 100 MHz of spectrum to delver the faster speeds and other benefits 5G promises.
Vodafone has a 5G network, at present it only allows fast downloads. Among other things, it needs more spectrum for faster uploads.
Spark also runs a 5G network. It’s tiny and only serves a handful of South Island towns. At the moment it is only used for fixed wireless broadband customers. Spark is leasing spectrum from another company. It needs its own.
Next year’s auction is an interim move. The licences auctioned run until the end of 2022. Usually governments sell spectrum licences for 20 years or so. By 2022 the government plans to have a longer term alternative in place.
In an ideal world, both the temporary fix and the long-term 5G allocation will leave capacity for New Zealand’s Wisps.
Wisps are often owner-operator businesses. You might find the boss climbing a pole somewhere in the bush or driving a quad bike to a remote site. They are an important lifeline for some rural communities.
New Zealand has a couple of dozen Wisps, maybe 30. Most of them depend on the 3.5GHz spectrum to connect farmers and other rural customers. For many remote users this is the only practical way of connecting to the outside world.
The government is working with 17 Wisps to boost coverage in remote areas.
Radio waves in the 3.5GHz spectrum band are, in effect, line-of-sight.
From an engineering point of view it should be possible for Wisps to go on using these frequencies while the big telcos use the same spectrum in busier areas.
Yet that’s not how licences usually work. So we need a mechanism to stop the big guys from using their financial clout to muscle in on the smaller players.
In February Faafoi said there will be spectrum for Wisps to carry on operating. There needs to be. These companies are a vital link in New Zealand’s telecommunications chain. Their customers are the nation’s largest exporters. They could do with some answers now so they can plan.
Susan Strongman interviews 5G opponents for the RNZ web site. It’s an interesting read on a number of levels.
There’s no evidence that radio signals cause cancer. Radio waves are non-ionising radiation. In unscientific language that means it doesn’t mess with your body’s cells.
Radio waves can have a heating effect. That’s how microwave ovens work. Yet the doses for wireless technologies are far too low to have an effect.
It might be different if you put your head in front of a microwave transmitter, but the local cell tower isn’t hurting you.
If those arguments don’t convince you, then look at it from the other way around: if mobile phones did cause health problems, where is the epidemic?
There are an awful lot of radio waves. Start with broadcast TV and radio. Then mobile phones. Nearly everyone in the world uses mobile phones. On top of that most homes have wi-fi routers and devices along with Bluetooth and other things.
It’s been this way for 30 years. If radio waves were harmful, by now our hospitals would be packed with queues of sick people.
That said, it’s good to see people ask questions. We shouldn’t shut down debate on the subject. It would be easy to dismiss anti-5G campaigners as cranks, not so long ago people thought that about campaigners who objected to tobacco.
The arrival of Dense Air has big implications for New Zealand’s cellular market, apart from anything else it will spice up the next spectrum auction.
London-based Dense Air has purchased a considerable amount of New Zealand wireless spectrum from Malcolm Dick’s Blue Reach business and Cayman Wireless.
The company intends to set up a wholesale small cell mobile network. Dense Air says it will not compete direct with existing mobile carriers. It says it can begin operation “almost immediately”.
Dense Air now has rights to 70 MHz of spectrum in the 2.5GHz band. Of this, it acquired 30 MHz from former CallPlus owner Malcolm Dick who previously talked about running a similar wholesale cellular operation using his Blue Reach brand. The rest comes from Cayman Wireless which is a part of Craig Wireless, a Canadian company.
The New Zealand Herald reports Dense Air paid a total of almost $26 million for the spectrum. That is about 13 times the amount the owners paid for the spectrum in 2007.
There are implications for prices when the government decides to auction 5G spectrum some time in the next 18 months or so. If Dense Air decides to enter that auction it will push prices higher and could edge out cash-strapped 2degrees and Vodafone.
Dense Air is unknown in New Zealand. The company began operation in February of this year and part of US-based Airspan.
The company says it is a new class of wholesale network operator. It aims to “enhance and extend” coverage and capacity for existing mobile carriers and says it will run as a “carrier of carriers”.
Small cell sites
In practice this means Dense Air will build and run a series of 4G and 5G small cell sites. The aim is to compliment existing networks. It says that in most cases these will extend existing networks in places that need denser coverage. This might be places such as shopping malls, office parks, campuses or sports stadiums. Dense Air says its small cell approach can dramatically improve performance and capacity.
That said, Dense Air has more than enough spectrum to compete with all three carriers in New Zealand. Should it choose to do so, it could offer MVNO (mobile virtual network operator) services. This could be of interest to telcos such as Vocus or MyRepublic, both wish to offer mobile services but own neither spectrum nor their own cellular networks.
Telecommunications Commissioner Dr Stephen Gale says:
“We believe the power to regulate remains an important competition safeguard, especially with 5G networks and potential new entrants on the horizon”.
Money go round
In the past government spectrum auctions work by dividing available frequencies into blocks. Bigger blocks give carriers more bandwidth to play with. In simple terms more bandwidth can mean faster data speeds.
Spectrum auctions can make a lot of money for governments. Past auctions have poured gold into the public sector. The recent UK 5G spectrum raised £1.3 billion, around NZ$2.5 billion.
It may look like a windfall. Governments often treat the money that way. But it is more about moving money from one place to another. When telcos pay a lot for spectrum the cost is passed onto customers.
If they overpay, they may spend money that would otherwise be used to build towers and extend the network’s reach. Overpaying often means a network roll-out is slower.
Given the value of cellular communications to the wider economy, squeezing out the maximum amount of cash in a spectrum auction can be counterproductive in the long term.
New Zealand’s last spectrum auction took a more sensible approach.
The government realised the economy could be better served in the long term by a good mobile network than by a windfall. So carriers were offered a fixed price well below what it might have made in a competitive auction.
Not everything sold so one remaining block of spectrum was then auctioned off.
In the past different cellular services have run in different frequency bands.
This can still happen. Yet one of the features of 5G is that carriers are able to mash together greater amounts of bandwidth from different bands. Or to use an engineer’s language: they can aggregate spectrum.
While this already happens a little with 4G, Spectrum aggregation is central to 5G. How that works in practice will be interesting. It will be a challenge for phone makers.
Most people in the telecoms business expect 5G to use higher frequencies than today’s mobile phones. Depending on who you talk to, the options go all the way up to 95GHz.
This brings us to another challenge carriers face. Radio waves have different properties in different bands.
Low frequencies are useful for communicating with submarines or in mines. Shortwave radio is good for broadcasting over long distances. And so on.
Dealing with this is an engineering problem. There are also political challenges. In some cases existing spectrum users may have to give up their rights or move services to different frequencies. It can be disruptive.
Compared with some other countries, New Zealand is well placed to deal with these challenges.
UHF – ultra-high frequency
Almost all of today’s mobile telephone traffic takes place in what is known as the ultra high-frequency band or UHF. This is the spectrum from 300 MHz to 3GHz.
Some of the spectrum that will be used for 5G is in the next band up: super high frequency or SHF. That runs from 3 to 30 GHz.
UHF and SHF frequencies are microwaves. Which means the band is used by microwave ovens. It’s also used by Wi-Fi and other home wireless devices, satellite communications, radar and radio astronomy.
As you move into higher spectrum bands radio signals run into a different set of physical problems. At 5GHz and above signals get absorbed by solid objects.
The signals don’t propagate so well. So antennae cover shorter distances. In other words, you need to build more towers to give carpet coverage.
Bluetooth devices operate in part of this frequency band.
The devices have low signal power levels compared with cellular phones. They are only designed to work over a short distance.
Even so, you a taste of what to expect from a 5G cell site operating at this frequency by thinking about Bluetooth’s limitations around your house. The signals may pass through wooden walls, masonry can block them. So can metal frames.
When outdoors, microwave signals don’t tend to pass through mountains or hills. In effect, they only work in line-of-sight. A cell site operating at higher microwave frequencies that works for a customer in winter might struggle in summer when there are leaves on the trees.
Go beyond 30GHz and radio signals are affected by water molecules. That means rain — satellite TV users will already know about rain fade. From about 60GHz oxygen molecules get in the way.
This tells you something about the risks, although the power used for cellular phones would be many times lower than any weapon.
To keep things simple, let’s leave it at this: higher frequency radio waves are harder to use. On the other hand, they offer much more bandwidth and that means higher potential data speeds.
As a rough rule of thumb, higher frequencies mean faster data, but over shorter distances. Typically higher frequency sites will be in densely populated areas and will be only a few dozen metres apart.
When cell sites are a few dozen metres apart, you need a lot of them. They don’t need to be big. You could put them on existing telephone or power poles.
In New Zealand
For now, talk of higher frequencies and the problems using them is largely academic. Most of the planned 5G action here in New Zealand is in or around frequency bands already used by mobile phones.
When Spark managing director Simon Moutter outlined his companies plans he called for more spectrum below 1 GHz.
He says it will be needed to provide 5G services in rural areas. This will almost certainly mean the 600 MHz band, which is already in the government’s sights. Signals in this frequency band can travel over long distances.
Moutter also identified the “two most likely spectrum bands”. Spark wants the mid-frequency C-band and high-frequency mmWave band to be ready as soon as possible so it can put its 5G network in place in time for the 2020-21 America’s Cup in Auckland.
This shouldn’t be difficult in principle.
Is there enough for 5G?
There should be enough usable spectrum in the 600 MHz band and the C-band to give New Zealand’s three big mobile carriers all they need to build viable 5G networks.
Yet they are not the only possible bidders for 5G spectrum. Wisps — wireless internet service providers — do a fine job filling in the gaps in regional broadband coverage.
Wisps could also make good use of more spectrum. And the spectrum of most use to them happens to be the spectrum the carriers are keenest to buy.
Small regional service providers lack the financial clout of the mobile carriers, but they can argue the service they offer is as deserving. Maybe more, after all, wisps service New Zealand’s exporters.
Economic logic says a competitive auction is a way of ensuring spectrum goes to the bidder who stands to gain the most. This, the argument goes, means the most economically efficient use is made of each block of spectrum.
In practice, some bidders sit on unused spectrum. The last NZ auction made that unlikely as it included a use-it-or-lose-it clause.
Some less well-heeled organisations find it hard to buy the spectrum they need. How these issues will be addressed will become clearer when the auction terms are formally announced.