• Telstra, Optus at loggerheads over 26 GHz spectrum cap
• Incumbent lobbies for asymmetric spectrum allocation, despite regulator's concerns
• Outcome unlikely to alter competitive dynamic in Australia

Australia's planned sale of millimetre wave (mmWave) spectrum for 5G mobile services is still a year away, but already the country's major telcos are polarising in their views on the fairest way to allocate those airwaves.

While Optus is backing an approach that could well lead to a three-way split when frequencies in the 26 GHz band are auctioned off, Telstra is lobbying for a spectrum cap that could see one player come out on top...and significantly boost operators' mmWave spend in the process.

The Australian Competition and Consumer Commission (ACCC) late last week published a handful of documents, with confidential elements redacted, it received in response to the 26 GHz allocation consultation it launched in February. The weightiest responses came from Telstra and Optus, which differed in their opinions on a number of points, most notably the amount of spectrum any one player should be permitted to acquire.

Australian Communications and Media Authority (ACMA) plans to auction 2.4 GHz of 26 GHz spectrum "in early 2021" but has not yet set a firm date.

Optus insists that it would be in the best interests of end users to restrict auction participants to a maximum of 800 MHz of frequencies – i.e. a third of the available spectrum – across all geographic areas.

"An allocation limit of 800 MHz will allow networks to deliver peak speeds greater than 20 Gbps, consistent with ITU 5G specifications; while ensuring the market would see at least three mmWave networks," the telco said in its submission.

"Importantly, it would ensure that no single operator can be dominant in the deployment and establishment of 5G services in this band," it added.

The single dominant operator it fears is clearly Telstra. Indeed, later in the document Optus refers to the incumbent's dominance in the enterprise space and speculates that the allocation of mmWave frequencies could help rivals to challenge in this area. "But the success of this new technology to disrupt existing markets will depend on the ability of operators other than Telstra to acquire sufficient 26 GHz spectrum," it notes.

Its fears do not appear to be unfounded.

Telstra has called for a bandwidth cap of "at least 1 GHz," pointing out that operators need this much spectrum to support peak speed 5G services. Such a limit will benefit both end users and Australia's global competitiveness, Telstra insists, "by facilitating competitive differentiation between operators which makes the optimal use of the available technology." However, Telstra insists that a 1 GHz cap would be enough to mitigate the potential risk of spectrum monopolisation.

Whatever the regulators decide, there will of course be a significant impact on the amount of money raised through the auction, or to put it another way, the amount the operators will have to spend.

"A limit of at least 1 GHz will maximise allocative efficiency, by increasing the likelihood of competitive tension during the auction and price discovery," said Telstra.

Translation: we're willing to use our financial muscle to secure more spectrum than our rivals. And we think we can secure a competitive advantage by doing so.

The operators' comments come in response to February's consultation paper in which the ACCC expressly stated concerns that asymmetric spectrum holdings in the mmWave bands could weaken competition.

"We would be concerned if, for example, as a result of this allocation it was possible for one operator to obtain the majority of spectrum available, or if an operator was precluded by the allocation of spectrum, from being able to offer its desired services and compete effectively in the short or long term," the document read.

Interestingly, there has been no published submission from Vodafone, the market's third mobile operator which recently won court approval for its takeover of fixed broadband provider TPG Telecom and is another likely buyer of mmWave frequencies.

But whatever its stance, and whatever the final decision of the Australian government, the 26 GHz allocation process is unlikely to significantly alter the current competitive landscape in Australia. The big three mobile operators together serve 87% of the retail mobile market, Telstra being the leader by some margin with a 41% share... which coincidentally is just about the same as the share of 26 GHz spectrum it wants. Whether the incumbent gets a larger slice of the 26 GHz pie than its rivals or not is unlikely to significantly shake its market position. More of the same for consumers.

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