Auction summary - 800 & 1800 MHz PCS allocation 1 (1998)

The first Personal Communications Services (PCS) auction ran for 88 rounds from 20 April to 25 May 1998, with nine applicants. The total revenue from this allocation exceeded $350 million with the total of high bids $347.4 million and $2.7 million in bid withdrawal penalties. $196.6m was bid for the 800 MHz lots, and $150.8M for the 1800 MHz lots.

The PCS auctions made spectrum available to support the government’s decision to open the Australian telecommunications market to full competition from 1 July 1997. Public consultation confirmed that additional spectrum was required to facilitate mobile telecommunications competition and expedite the introduction of PCS in the 1800 MHz band. A brief history of mobile telephony in Australia is useful to place the PCS allocations in their historical context.

AMPS

In 1987, Telstra, then Telecom, launched Australia’s first cellular mobile telephone system based on the USA AMPS (Advanced Mobile Telephone System). AMPS operated in the 825-845/870-890 MHz part of the band and used the analogue standard. Optus, which became Australia’s second carrier in 1991, commenced reselling Telstra’s AMPS service in 1992. Also in 1992, the government decided to phase-out the analogue AMPS system in favour of the digital GSM (Global System for Mobiles) system. The AMPS system was phased-out between 1 January 1997 and 31 December 2000.

GSM

As noted above, the government decided to introduce the digital GSM system. It was to be operated by 3 competitors, Telstra, Optus and new player Vodafone, which had been selected by tender for the award of the third Australian public mobile carrier licence. The three carriers were allocated approximately 8 MHz of paired spectrum each in the 890-915/935-960 MHz part of the 900MHz band for a fixed annual fee. The spectrum was authorised by PMTS B (Public Mobile Telecommunications Service Class B) apparatus licences. The three GSM systems commenced operation during 1993.

PCS

Following public consultation by the Spectrum Management Agency (SMA) during 1996 and 1997, the Minister made a re-allocation declaration under s153B of the Radiocommunications Act 1992 (the Act) for the 800 MHz band formerly used for AMPS and the 1800 MHz band. A total of 2x75 MHz had been identified in the 1800 MHz band to be suitable for PCS purposes. However, in response to industry comment, the government decided to auction only 2x45 MHz during the first three auctions and make the remaining 2x30 MHz available at a later date.

This required the Australian Communications Authority (ACA – established 1997) to re-allocate the following parts of the spectrum by issuing spectrum licences for Personal Communications Services (PCS):

• 2x20 MHz from 825-845/870-890 MHz in metropolitan areas
• 2x5 MHz from 825-830/870-875 MHz in regional and outback areas
• 2x10 MHz from 835-845/880-890 MHz in regional and outback areas
• 2x45 MHz from 1710-1755/1805-1850 MHz in metropolitan areas
• 2x15 MHz from 1710-1725/1805-1820 MHz in regional areas

The Minister also directed the ACA to implement competition limits to increase the likelihood of new entrants acquiring spectrum.

The ACA offered the spectrum in 230 lots at the first PCS auction in April/May 1998. Unsold lots were again offered at the second and third PCS auctions in September 1998 and May 1999. The first PCS auction was a simultaneous multi-round format, while the second and third were open outcry auctions. A total of $381 m was received for the spectrum sold at the three auctions.

The 800 MHz spectrum progressively became available as the AMPS system was phased out. 2x5 MHz of this spectrum (830 835/875-880 MHz) was not reallocated outside metropolitan areas during these auctions in case a residual AMPS service was required in country areas. It was eventually allocated in February 2001 (the Remaining 800 MHz auction).