Reviewing the ACMA’s Revised Approach to ESL Pricing

Telstra, a leading Australian mobile network operator, commissioned NERA and Aetha Consulting to evaluate the Australian Communications and Media Authority’s (ACMA’s) revised approach to benchmarking international spectrum prices for the purpose of setting renewal prices for Expiring Spectrum Licences (ESLs).

In its second consultation on setting prices for ESLs, the ACMA made significant changes to its methodology, moving from a bespoke approach to one more consistent with orthodox benchmarking methodology. While some of the proposed changes are well founded, our report shows that others compound to produce a substantial overestimate of the market value of spectrum, especially in the two lower band groups (Sub-1GHz and Lower 1-3GHz).

Our report presents a robust statistical approach for testing historical trends in spectrum prices and recommends that the ACMA makes the following adjustments to its approach:

Take account of dataset errors and omissions identified by our team;

• Replicate our statistical methods to identify and quantify time trends for spectrum prices and adjust benchmarks within the lower band groups to account for the statistically significant downward price trend across 2015–2025;
• Exercise caution when determining where in the broad range of market value estimates to set the 2025 value for each band, considering the asymmetric risk of setting renewal prices too high; and
• For future prices at the point of renewal, apply a negative forward trend—or, at minimum, refrain from applying inflation.

If these (or similar) changes are not implemented, there is a likelihood that Australian renewal prices will be set above market value.