Timing saves NZ from 3G auction disaster

By RICHARD BRADDELL

While telecommunications companies around the globe lick the financial wounds they suffered in the stampede to roll out third-generation mobile phones, New Zealand looks well placed to be one of the first countries to use the technology.

This year, Telecom will join international giant Vodafone in offering the so-called 2.5G services as an enhancement of their 2G networks.

Last week, Vodafone - which is using New Zealand as a centre of excellence for its global operations - said it was planning early introduction of some 3G services.

Telecom has indicated that it will have to follow suit.

Ironically, if New Zealand is one of the first countries to have 3G services, it will be largely because it was one of the last to get caught up in the rush to buy the radio frequencies that would use the new technology.

Not so long ago it seemed that third-generation mobile would change the world.

It would deliver internet and fullstream video to your mobile phone, laptop, or some yet-to-be imagined device. And while it might not clean your teeth or drive your car, it might do a jolly good job of giving you directions.

Naturally, the telecommunications equipment suppliers built up the hype.

It wasn't that difficult, given an audience already starstruck by an industry that was rapidly running ahead of itself.

Little wonder that in European auctions the bids for the radio spectrum necessary to support 3G rapidly exceeded the boldest estimates.

New Zealand was no exception to the hype - with predictions that the 3G frequencies might net the Government $2.5 billion - but the auction of spectrum here was fortuitously late.

By then the bubble had started to burst.

Only days before the auction began, the International Telecommunications Union ordained that existing mobile spectrum could also be used for 3G.

More crucially, it became apparent that 3G was over-hyped. For a start, only a small number of users would be able to use the full video capabilities touted for 3G before the capacity of an individual cellsite was exhausted.

It also became apparent that European operators were every bit as interested in gaining access to 3G spectrum, so they could ease congestion on 2G voice spectrum being used for voice, as they were in introducing new services.

Furthermore, even when 3G was introduced, it was never likely to extend outside urban areas because of the cost.

In New Zealand, as well as Australia, the demands on existing spectrum were far less acute. In fact, in New Zealand, most of the value-added services associated with 3G will soon be able to be carried on upgrades to the 2G network already operated by Vodafone and by Telecom when its CDMA network becomes operational.

Little surprise, then, that New Zealand's 3G auction was a tame affair compared with those in Europe, reaping only $140 million. And that included some other spectrum lots as well.

But, unlike some of the spectrum rights acquired so expensively overseas, New Zealand's relatively cheap frequencies look like being used soon.

Vodafone's chief executive, Grahame Maher, said 3G would be here sooner than expected because the company was trying to finalise discussions with vendors right now.

If so, that will spark a technology race with Telecom. Chief executive Theresa Gattung said recently that it would have to compete in the 3G space if Vodafone did.

All of which makes New Zealand much better placed to take advantage of 3G than most of the countries where the hype started.