Many Australian telcos are ready to shell out a significant sum for the mmWave spectrum. In fact, most have paid considerably more than telcos in comparable markets. This reveals that Australian telcos are serious in their intentions to use the mmWave spectrum to tap fixed line and enterprise as well as mobile revenue markets.

Spectrum Auction

A total of $647m of successful bids was raised in the spectrum auction for 2400MHz of spectrum in the 26GHz band. This was equivalent to A$0.0127 per MHz/pop or around US$0.0098. This may seem to be just a mere fraction of the amount telcos have paid for the lower band spectrum. For instance, TPG, under David Teoh, paid a massive $2.75 per MHZ for the 700MHz band less than five years ago. Nevertheless, the latest results are still at international highs.

According to New Street Research analyst Ian Martin, at nearly US 1c per Mhz/pop, these prices are five times higher than those paid in most other mmWave auctions, such as in Taiwan (US 0.14c), Thailand (US 0.2c), and Finland (0.18c). Nonetheless, the prices were close to early auctions such as those held in Korea (US 0.4c) and Italy (0.3c). “However, those countries may not be the best benchmarks for spectrum likely to be used initially for 5G business connectivity and in support of edge services,” Martin said.

Martin further suggests that the prices paid and motivations therein lie closer to the United States, where a roughly similar price was paid for mmWave spectrum in 2019: “Broadly, the high prices are consistent with our thematic view that the corporate, government and business segment of the telecommunications market is inherently a growth segment. Firms will pay more for telco inputs currently going through a massive structural change partly brought on by NBN Co’s push into the segment, 'lift-and-shift' of IT onto the cloud, emerging edge compute, and demand changes accelerated by the response to COVID.”

NBN Bypass

“The value in NBN bypass for residential broadband is also an important motivation for this auction we think, with both Telstra and TPG now paying NBN Co over A$1bn pa in access charges. However, the case for use of mmWave for residential broadband is longer, slower, and less clear. The economics required to solve the technical issues and manufacture of devices at sufficiently low cost requires global scale; while most global markets don’t have an uneconomic NBN to compel the bypass case.”

Apart from Telstra, Optus, and TPG, the other two winning bidders were Dense Air and Perth-based Pentanet, which spent just under $8m on 400MHz in Perth.