Ihug will press on with cellular spectrum bid

By RICHARD BRADDELL

Internet service provider ihug will bid in the cellular spectrum auction despite the High Court's firm rejection yesterday of its bid to delay the sale.

In court, counsel for the Attorney-General said that ihug had on May 25 proposed using 2.5MHz of a 10MHz block of second-generation radio spectrum to build a network in Auckland, using technical assistance provided by Lucent Technologies.

The High Court at Wellington yesterday declined ihug's application for judicial review on the grounds that the Government's refusal to cap individual ownership of second-generation spectrum was a policy matter. There was no breach of statutory power that the court could inquire into.

It also accepted the Crown's motion to strike out ihug's claim, awarding $5000 in costs to the Crown.

Second-generation, or 2G, spectrum supports the same sort of digital GSM services that are operated by Vodafone, while 3G is touted as the future for mobile internet and multimedia.

After the ruling, ihug director Nick Wood said he had not expected to win, but that the ruling confirmed the need for a separate regulatory body, as recommended by the telecommunications inquiry. Ihug would still bid in the auction, on its own or in partnership.

The court case served to attune the public to the risk that Telecom and Vodafone could use the auction to confirm their market power at consumers' expense.

Mr Wood also criticised the manner in which Clear Communications was able to buy up all the LMDS radio spectrum, thus excluding other potential users.

Ihug had sought a judicial review after the Government adopted a Ministry of Economic Development recommendation that it not limit individual ownership of second-generation spectrum in the auction beginning on Monday. The Government has divided the 60MHz of third-generation - which is also being offered - into four lots that must be separately owned.

Among the ministry's considerations was the possibility ihug would not succeed in buying the spectrum, even if there was a cap, and that it believed its network rollout plans were technically difficult, particularly given existing user rights.

But the situation became more complicated at the end of last month when the International Telecommunications Union ruled that the 2G spectrum going under the hammer could also be used for 3G.

The merits of the 2G spectrum, which is in the 1710 to 1880MHz band, had not escaped the attention of ihug. In March the company urged the Government to cap ownership as it had with 3G.

Of 11 submissions made by industry players to the ministry, only Telecom, Vodafone and Transpower opposed a cap.