Bidders' wake-up call

Rule changes would enliven the Government's spectrum auction, reports PAULA OLIVER.

A clamp is likely to be put on the questionable bidding strategies being used in the Government's ongoing radio spectrum auction, following two weeks of activity which has seen the value of some bids fall significantly.

The four-month-old saga continues today, but bidding will be overshadowed by the Ministry of Economic Development's seeking feedback on four proposed rule changes. If endorsed by bidders, the changes could bring a quick end to the auction of second and third-generation (2G, 3G) spectrum.

Total bids now stand at just over $130 million, with the four big telcos - Telecom, Telstra Saturn, Clear Communications and Vodafone - each battling for a slice of 3G.

Auction spokesman Kevin Kelly has told bidders that the proposed changes are an attempt to speed the auction following suggestions that it has been moving too slowly. Two of the proposals relate to the controversial practice of withdrawing bids, which has seen the value of bids falling in recent days.

In one instance, Telecom withdrew $21 million worth of bids for 3G spectrum and then bid again, once the lot's asking value had fallen.

Some bidders are known to be upset at the way parties are withdrawing bids, an action that is preventing the auction from ending.

The length of the auction is also slowing plans to roll out a network using already available spectrum.

The ministry's first proposed rule change would see a withdrawn bid no longer counted as "activity."

Currently, the auction is scheduled to end after two rounds pass without any activity, but the withdrawn bids, seen as activity, have been enough to keep the auction rolling.

The change, if supported by bidders, would mean a withdrawn bid would not be enough to keep the auction going.

The second change would require bidders to offer more for a lot after a bid had been withdrawn.

This would have the effect of more quickly bringing the lot's value back to its previous level.

The ministry says that bidders must continue to be allowed to withdraw bids so they can navigate around the different lots in the auction.

Mr Kelly's notice says the ministry is also looking at increasing the bidding rounds to eight a day - from the present six.

The final, and potentially most effective, proposed rule change could see the auction end after just one round clear of bidding.

Under the present rules, there have been several one-off clear rounds, but they have been followed by another round with enough bidding activity to keep the auction going.

If implemented, the rule changes would take away any backstop for those bidders who elect not to bid in a round.

The ministry is accepting comments on the proposed changes until Friday afternoon.

It will then evaluate these comments before making any changes.

The ministry says any one or all of the rule changes could be implemented.