Between the lines: Spectrum auction a poor second to 'beauty parade'

It's time the Government called a halt to its radio spectrum auction and looked for better ways to hand out the cellphone frequencies of the future.

Australia, Germany and Italy have completed their short auctions since bidders fired their first shots for New Zealand's lots four months ago.

None of the 16 still-active bidders know if they will get the chance to offer swept-up mobile services - or any services at all, in the case of new entrants.

Despite the Ministry of Economic Development's attempt to tinker with the rules yet again, there is still no end in sight for the interminable bidding and game-playing it has engendered.

So if the auction were stopped now, what would be gained? First, it is worth remembering that an auction is not the only way to hand out spectrum, even if it seems the most profitable.

Another option, and one that would have settled the issue long ago, is a "beauty contest." Potential spectrum users would go to the Government with a business case, outlining what their plans are and how long they will take to implement.

The Government hands spectrum to those it considers will make the most of it, with the consumer also in mind.

The formula has worked many times over around the world. But the British Government decided to try an auction in May, and raised $72 billion.

Countries scrambled to adopt the auction process, and used the cash for anything from paying off national debt to increasing a pension fund.

But those countries had crowded networks and high populations, unlike us.

It must be said that New Zealand has used the auction process for years. But equally, the frequency on offer this time is seen as far more valuable.

Back before our present auction began, the Government indicated that it did not choose the process because it was a money-making exercise. Instead, Trevor Mallard, then Acting Minister of Communications and Commerce, said the intention was that an auction would bring technology onto the market as quickly as possible.

So if it's not a money-making exercise, why is the auction continuing?

The drawn-out process is not helping to deliver the e-economy that the Government's e-summit targeted last month. Nor is the auction guaranteed to produce the best outcomes to assist that goal.

Telecom is still hoarding unused spectrum that it acquired by auction 10 years ago. And it could happen again, with the successful bidders in this auction choosing not to make use of what they get.

The Government has the right to change the rules, as it may be about to do again. It could bring the auction to a halt and instigate a "beauty parade."

That would require bidders to put away their chequebooks while they developed business plans to make best use of the spectrum. The process might take six months.

In the short term the Government would forgo the revenue it might have gained from the auction process. Longer term, revenue-sharing deals could deliver more.

It comes down to a simple choice: money in Treasury's coffers or a clear signal that the Government is positive about developing the e-economy.