One NZ's regulatory clearance to buy Dense Air a win for the telco

The Commerce Commission giving the green light for One New Zealand to acquire two 35 megahertz wide blocks of radio frequency spectrum in the 2600 MHz band from Dense Air, owned by Sidewalk Infrastructure Partners (SIP), is a regulatory win for the telco.

Dense Air's business is to build 4G and 5G service shared infrastructure for telcos to lease. 

Radio-frequency spectrum is a very valuable asset, and Dense Air paid Malcolm Dick almost $26 million in 2018 to take over the management rights, which expire in 2028. Once Dense Air decided to exit New Zealand, One NZ was quick to put a bid - the size of which has not been revealed - on the table, to up the telco's spectrum holdings.

The backdrop here is that newer wireless cellular technologies require a big chunk of bandwidth to provide the capacity and performance users expect currently. For 5G, the GSMA telco industry organisation says a minimum of 100 MHz is required; basically, the more the merrier is the rule here, but radio frequency spectrum is a finite resource.

In that context, the 2600 MHz lot is a nice addition to Vodafone's spectrum holdings, providing a further 70 MHz worth of bandwidth in a frequency range that has decent reach and data bearing capacity.

Whereas Spark is sitting neatly on substantial spectrum rights, 2degrees could do with more and has vehemently opposed One NZ being allowed to buy the Dense Air frequencies, saying allowing the deal to go through would hurt competition.

The Commerce Commission chairman John Small disagreed with 2degrees, saying allowing One NZ to buy Dense Air was unlikely to substantially lessen competition in any New Zealand market.

“Based on the evidence before us, we are satisfied that One NZ acquiring Dense Air’s spectrum is unlikely to substantially lessen competition in telecommunications products and services compared with the counterfactual. Post-acquisition, One NZ would continue to face significant competition from other retail mobile and broadband providers," Small said.

The counterfactual was 2degrees buying the Dense Air spectrum, which wasn't clear would happen.

2degrees chief executive Mark Callander expressed disappointment that One NZ has been cleared to acquire Dense Air, saying reducing spectrum [holding] disparities would improve the competitive landscape and ultimately lead to consumer benefits.

"But, it's time to move and keep fighting for fair," Callander said.

"We are, and will continue to be, a fierce competitor in the NZ telco market. We have also recently acquired additional 2100 MHz spectrum which will support our growth," he added.

Over the years, the telco landscape has become increasingly complex with multiple technologies being deployed to meet customers' insatiable demand for broadband. In simple terms, the telcos have mobility through wireless to do battle with, whereas fibre providers such as Chorus, Northpower, Enable and WEL have nearly unlimited bandwidth to bring to bear.

While One NZ said it will use the two 35 MHz blocks for boost its mobile experience, 2degrees could also have used the spectrum for fixed-wireless broadband access (FWA).

For telcos, the attraction with FWA is that it gives them an alternative to the fibre to the premises Ultrafast Broadband (UFB). While FWA cannot provide the high speeds and user capacity of fibre along with a highly consistent user experience, being wireless it reaches areas easier than UFB and provides adequate service levels for many.

Moving to 5G from 4G FWA provides a meaningful performance and user experience upgrade that telcos can market, and they have been pressing for infrastructure regulation changes such as taller cellphone towers for better reach and coverage recently.

It's also no secret that telcos are lukewarm at having to buy UFB wholesale, and want control over the last access segment that reaches customers, to improve average per-user revenue and margins.

2degrees will now have to think about what it needs to do on the mobile side of the equation, such as improving coverage using low-Earth orbit satellites if possible, and what it can offer instead of FWA.

As a related side note, wireless internet providers (WISPs) have managed spectrum park allocations near the Dense Air blocks and there could be coexistence issues cropping up with radio signal interference taking place.

One NZ spokesperson Matthew Flood said the telco has licence conditions that it'll honour, to make sure that there is no impact on other users in the band.

Update The chief executive of 2degrees is Mark Callander, and not Mark Aue.