Kordia Sale to Woosh: Spectrum Management Failure

Radio spectrum in the 2.3-2.5GHz bands is best known for use with broadband. It is the 2.4GHz “Public Park” that millions of New Zealanders use on a daily basis for Wi-Fi, Bluetooth, and other wireless data applications.

In 2007 when the sale of this broadband spectrum on both sides of the public band was contemplated, the Government of the day was worried about competition and the efficient use of the spectrum.

Cabinet has indicated a preference for strict acquisition limits and use-it-or-lose it provisions, in order to prevent spectrum hoarding and to facilitate the development over time of strong competitive conditions.” (Discussion Paper)

40MHz was set aside for regional providers while around 200MHz was put up for auction as national rights – with individual acquisition caps of 40MHz. Lots were sold at an average of $23k/MHz across the band, to a small list of New Zealand companies and one overseas investor – a subsidiary of Canada’s Craig Wireless.

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Coming up on six years later, none of the national spectrum rights are in widespread use. CallPlus subsidiary Blue Reach deployed a small WiMAX system in Auckland around the time of the Rugby World Cup, but has since swapped spectrum with Vodafone, necessitating a change in technology. Vodafone has not publicly expressed interest in using the spectrum, however a business case exists.

Meanwhile, the small bits of regional spectrum are in huge demand by operators who actually use it, but didn’t have the cash up front to participate in the auction process. In some parts of the country fights over use of that regional spectrum have become underhanded and acrimonious.

In 2011 a struggling Woosh was sold to Craig Wireless, erasing more than $100M in shareholder value. With government approval, that deal allowed Craig to take control of Woosh spectrum, bringing their holdings in the 2.3-2.5GHz band up to 70MHz.

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This week the landscape changed again, with government-owned Kordia selling its 2.3GHz rights to Woosh owner Craig, concentrating 45% of the national rights in the hands of Craig Wireless – a company unlikely to build in New Zealand as it struggles with a cash haemorrhaging local subsidiary and against a forceable de-listing from the Toronto Stock Exchange.

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The government’s policy of treating radio spectrum as a tradable property right has once again failed to bring a benefit to New Zealand. In the manner of Esau, the government has sold its birthright for a bowl of lentils. Now while homegrown providers like Araneo, Inspire, and Netsmart fight over regional crumbs yet deliver astounding benefits to rural New Zealand, an opportunist Jacob in the form of Craig Wireless has accumulated more and more unnecessarily fallow national spectrum.

Without significant change in radio spectrum management policy, New Zealand is destined to see the story above played out again and again, to the detriment of its people and industries.

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