Govt puts hold on auction of spectrum

By PAULA OLIVER

The Government called a temporary halt to its five-month-old radio spectrum auction yesterday, placing the sale on hold until it reveals its response to the controversial Telecommunications Inquiry.

In another chapter to the already lengthy saga, Communications Minister Paul Swain suspended the auction because bidders were concerned that changes to policy would affect how they could use the spectrum they are bidding for.

Mr Swain is due to deliver his response to the inquiry on December 18, and opinions are divided on how radical any changes will be.

The auction will resume, possibly with rule changes, a day after the announcement.

The Government's plan has taken two months to put together, and during that time, the auction of second and third-generation spectrum has been left largely untouched and free to end at any time.

Bids now stand at a total value of $143 million, after reaching a peak of $180 million.

The auction process has attracted heavy criticism from industry experts and bidders, who say its rules have allowed bidders to play games that can send its value soaring and plummeting within one day.

Mr Swain said it was necessary to halt the auction now, because bidders were becoming more concerned as the inquiry response date crept closer.

"When the auction began, much earlier in the year, there was probably a feeling that it would have been completed by now," he said.

"But it has been reported to me that bidders are uncertain, and the way the rules are structured they could delay the auction until the response anyway."

The auction's rules, which have already been changed twice, will be reviewed again during the suspension.

They will be tailored to ensure a quick end to the auction, Mr Swain said.

Critics of the auction say it has limped on for so long because the big players want it to.

The longer it goes on, the more customers they can claim, making it harder for a new player to enter the market.

Telstra Saturn chief executive Jack Matthews said yesterday that the auction had gone on long enough for most bidders to now know what each other wanted - which could lead to less competition.

"It's gone on far too long, and it seems to me that the first thing they should consider changing is not letting people withdraw bids," he said.

Mr Swain confirmed that this rule would be looked at, but would not comment on whether a "use it or lose it" clause, adopted in overseas auctions, would be added.

Such a move was recommended by the Telecommunications Inquiry, as a way to stop big players hoarding the spectrum they buy.

"I would think there would be a lot of objection to that ... ," Mr Swain said. "This auction may create short-term frustration, but in the long run the basic principles will encourage the industry."