Making the 700MHz spectrum part of the Managed Spectrum Park means that…
I have long argued that the digital divide is less about access to computers and the Internet, and more about access to high speed broadband services.  Defined by government policy, the new digital divide is between urban and rural broadband users.

That divide is now being quantified thanks to a service that monitors broadband speeds.

Over the past 12 months, Truenet reported that average broadband speeds throughout New Zealand increased 6.5% to 11.5Mbps.

Assuming that my rural broadband connection is typical, my average speed of under 4Mbps means that rural users get around one third of what urban users take for granted.

Last week, we touched on a solution to this urban/rural digital divide.

That solution is based on the radio spectrum dubbed the “digital dividend”, being invoked as part of the “Commons” and thus available for all to use and benefit from.

The alternative, and where government policy is fixated, is for the digital dividend spectrum to be sold to mobile telcos for their exclusive use and profit for 20 years.

Of course, the telcos will pay for that exclusive access.  If international experience is any indicator, how much they pay is significant.

The Australian government has set a reserve price of $1.35 per MHz per head of population and is looking at a windfall gain of more than $NZ3.6 billion.

The Irish sold their digital dividend spectrum (along with other bands) last year and raised $NZ1.3 billion for spectrum that serves a population around the same as New Zealand’s.

The US sold their 700MHz spectrum for over $US19 billion or around $US1.12 per MHz per person.

Economic systems in the Commons

Economic systems in the Commons

If New Zealand sets a reserve price similar to Australia’s, then our government could expect to receive around $560 million.

In stark contrast, Vodafone NZ told Computerworld in 2010 that “a 700MHz auction could net the government between $150 million and $200 million…”

If Vodafone are correct in their price estimate, then it becomes easier for our government to find the political resolve to define the 700MHz band as a part of the Commons. Income of $200 million is much easier to forgo than a $560 million windfall.

Including the digital dividend spectrum as a Commons property, means that mobile telcos and independent wireless operators would then compete for the spectrum in any one area.

Contrasting Vodafone’s recent 22% price increase for their rural service against continuing price decreases for urban services, it is obvious that competition has got to be good for rural people and businesses.

One danger of treating radio spectrum as a Common, is that the resource will become over-subscribed, leading to a lesser quality of service.  This is the Tragedy of the Commons and is something that is experienced in some WiFi networks.

WiFi networks use unlicensed spectrum, the only obligation on users being that interference with existing users is avoided.  Think of this as being a public park with free entry to everyone.

A solution to this Tragedy of the Commons is already available in New Zealand.  This is the ‘Managed Spectrum Parks” service.  Think of this as being a publicly owned sports ground with gated entry that limits numbers in the park.

Making the 700MHz spectrum part of the Managed Spectrum Park means that competition will be enabled, spectrum will not be hogged for competition reasons and that rural fixed broadband users will get a quality of service unaffected by demand from a burgeoning number of mobile users.