Allocating spectrum in the consumer interest

Introduction

The ACMA has proposed the renewal of ESLs held by MNOs across seven bands that are due to expire between 2028 and 2032. The proposed renewal valuation is lower than the previous value by between $2.0 billion and $3.2 billion according to the ACMA’s estimates.[1] 

ACCAN recommends a competitive auction process for the allocation of ESLs consistent with past practice and still considered best practice around the world. At a minimum, MNOs holding ESLs should be required to provide an undertaking to the ACCC setting out how any discount received via a renewal will be passed through to consumers through retail price reductions or additional infrastructure investments.

ACCAN has concerns that the ACMA’s proposal for renewal of ESLs will not drive the best outcomes consistent with the long-term interests of communications consumers and will not deliver appropriate returns to Australian taxpayers. We detailed these concerns to the ACMA in our submission to the ESL Stage 3 - Preliminary Views Consultation (ESL Stage 3 Consultation).[2] Our submission was accompanied by an expert note provided by UNSW Business School Professor Richard Holden.[3]

Contradictory claims about investment risks poor outcomes

Spectrum is a finite, valuable public asset and a critical input to the delivery of mobile communication services by MNOs. Market assignment of spectrum via competitive auctions ensures that spectrum will be efficiently allocated and promote its efficient use.

MNOs and industry representatives do not support competitively auctioning ESLs. They claim that auction-based values will result in high prices that adversely affect the ability of MNOs to invest back into the network. MNOs have proposed pricing the ESLs conservatively.

Every dollar we spend on spectrum renewal competes directly with network buildout and other capital investments.[4] – Telstra

The competitive dynamics of Australia’s mobile market mean lower renewal costs can be expected to flow through to consumer benefit, either through increased network investment or consumer price (or both).[5] – Telstra

If prices are set below current market value, no efficiency concerns arise, and MNOs will have more capital available for network investment.[6] – Telstra

If set too high [ESL prices], it risks market consolidation, reduced investment, and delayed infrastructure deployment – particularly in regional areas.[7] – Optus

The business case for any future investment is expected to be weak, even ignoring ESL renewal fees. Additional financial burden, such as ESL renewal fees, would doubly weaken future investment decisions.[8] – TPG Telecom (TPGT)

Every dollar MNOs save on spectrum payments would ultimately be spent on network infrastructure and improving end-user experiences.[9] – TPGT

MNOs’ claims that paying more for spectrum will divert funds away from mobile network investments are directly contradicted by recent comments from Luke Coleman, the CEO of the Australian Telecommunications Alliance.

Mr Coleman stated:  

We have reached the geographic and economic edge of where telcos are willing to invest in terrestrial mobile infrastructure.[10] 

Mr Coleman further noted that:

Each subsequent round of that program [the Mobile Black Spot Program], the amount of investment that industry is willing to contribute has tapered off to effectively zero.[11] 

ACCAN notes that no commitments have been made by MNOs to pass on savings from ESL renewal through to consumers. For example, when subject to questioning by the Australian Financial Review, Telstra CEO and Managing Director, Vicki Brady noted that:

Telstra was not providing any guarantees on exactly how it would spend any money saved on spectrum costs.[12]

Ms Brady further noted that:

If we had to pay more for spectrum, what we would end up having to do is trade off less investment in the network, or we would have to pass it through some way in terms of higher costs.[13]

ACCAN considers that these statements indicate that the prospect of further material investments in terrestrial network infrastructure is limited, notwithstanding significant public subsidies being on offer. Accordingly, reducing spectrum license fees in a bid to increase network investment is likely to reduce commonwealth revenues, without driving public benefit through additional infrastructure investment.

If the claim by MNOs that high spectrum prices will put network investment at risk and add pressure to retail prices is being made in good faith, then they should be prepared to back up this contention by committing to sustained and measurable retail price reductions or additional network investment.

This commitment ensures that MNOs deliver public value in exchange for lower spectrum prices, so that ESL renewal does not result in a material financial loss to the Commonwealth (and the taxpayer), with no identifiable countervailing benefit to consumers or the public in the form of lower retail prices or improved network performance due to investment.

Industry should back up their claims about pricing and investment

Competitive, well-designed auctions will facilitate the efficient allocation of spectrum, reduce barriers to entry and drive investment and innovation in communications markets. ACCAN believes that competitive auctions should be undertaken for spectrum assets.

If competitive auctions are not pursued, on the basis of industry’s contention that higher spectrum prices will reduce investment or result in higher retail prices, then industry should commit to delivering additional investment and retail price reductions equivalent to the discount received from the renewal of ESLs via a legal undertaking to the ACCC. This agreement would document that spectrum is being provided at discounted values to MNOs in exchange for reduced retail prices and commensurate future investment in mobile networks.

This is highlighted by TPGT’s claim that ‘every dollar MNOs save on spectrum payments would ultimately be spent on network infrastructure and improving end-user experiences’. Equivalent claims from other MNOs have indicated that the less they pay for spectrum licenses, the more they are likely to invest in infrastructure that will benefit consumers.

That being the case, an undertaking would ensure that investment occurs in the public interest. If the claims of MNOs are in fact genuine, they should commit to a combination of the following in exchange for discounted spectrum.

• Retail price reductions – subject to ongoing retail price monitoring by the ACCC communications market branch.

• Additional infrastructure investment – subject to oversight by the ACCC.

This would be consistent with achieving an economically efficient value for spectrum that is in the long-term interests of the public and consumers. These agreements should take into account similar network coverage obligations implemented in other jurisdictions.[14] 

To achieve this, the ACMA should engage with the ACCC on ensuring that ESL licensing conditions reflect the undertakings made by MNOs with the ACCC.

Barring such an agreement, the only conclusion that can be reached is that the intention of industry stakeholders is to retain any windfall gains from reduced spectrum pricing in the form of increased profits, at the expense of the taxpayer.

Conclusion

Auction mechanisms for allocating spectrum are the gold standard.[15] A competitive, well-designed auction process would ensure the efficient allocation of spectrum to its best and highest use. Should MNOs retain their ESLs via renewal at significantly discounted values, this must be backed by legally binding commitments from licensees to pass through spectrum cost reductions in the form of reduced retail prices or commitments to additional network investment to the benefit of Australian consumers.

References:

[1] Australian Communications and Media Authority, ‘Expiring Spectrum Licences (Stage 3) – Preliminary Views’ (Consultation Paper, April 2025) 3 <https://www.acma.gov.au/consultations/2025-04/expiring-spectrum-licences-stage-3-preliminary-views>

[2] ACCAN, ‘Expiring Spectrum Licences (Stage 3) - Preliminary Views’ (Submission, July 2025) <https://www.accan.org.au/accan-submission/expiring-spectrum-licences-stage-3-preliminary-views>.

[3] ‘Spectrum Licence Renewals in Australia - Professor Richard Holden’, ACCAN <https://www.accan.org.au/accan-submission/spectrum-licence-renewals-professor-richard-holden>.

[4] Telstra, ‘Expiring Spectrum Licences: Stage 3 submission’ (Submission, June 2025) 2

[5] Ibid.

[6] Telstra, ‘Expiring Spectrum Licences: Stage 3 submission’ (Submission, June 2025) 42

[7] Optus, ‘Submission in response to ACMA Consultation Paper Expiring Spectrum Licences – Stage 3’ (Submission, June 2025) 3

[8] TPG Telecom, ‘Expiring Spectrum Licences Stage 3 TPG Telecom Submission to ACMA’ (Submission, June 2025) 8

[9] Ibid.

[10] Australian Telecommunications Alliance, SIAA Policy and Strategy Forum Panel (Media Release, July 2025) <https://www.austelco.org.au/siaa-policy-and-strategy-forum-panel/>

[11] Ibid.

[12] Higher Transmission Costs Will Push up Prices: Telstra’, Australian Financial Review (10 September 2025) <https://www.afr.com/companies/telecommunications/higher-transmission-costs-will-push-up-prices-telstra-20250908-p5mtc9>

[13] Ibid.

[14] In supporting paper 3 of the ESL Stage 3 Consultation, the ACMA noted that ‘some spectrum managers are incorporating coverage obligations into spectrum-licensing frameworks to align connectivity goals with policy objectives’ and cited examples of this occurring in the UK, France, Peru and Brazil. Australian Communications and Media Authority, ‘Expiring Spectrum Licences, Stage 3 Supporting paper 3: Trends and developments in spectrum management, policy and technology, and markets (Report, April 2025) 2 <https://www.acma.gov.au/consultations/2025-04/expiring-spectrum-licences-stage-3-preliminary-views>

[15] OECD, Closing Broadband Connectivity Divides for All: From Evidence to Practice (OECD Publishing, 2025) 61 <https://www.oecd.org/en/publications/closing-broadband-connectivity-divides-for-all_d5ea99b2-en.html>