Two U.S. companies are taking their respective technologies to the Australian market, following third-generation spectrum purchases in the country last month.
Qualcomm Inc. paid $79 million for 10 megahertz of paired spectrum in all capital cities through a company called 3G Investments (Australia) Pty. Ltd. Arraycomm Inc. paid about $4.6 million for 5 megahertz of unpaired spectrum in all capital cities through a subsidiary called CKW Wireless Pty. Ltd. Both companies have 30 days to pay for their licenses.
The auction of 1.9 GHz spectrum concluded March 22 after 19 rounds, bringing in about $577 million, well short of the federal government’s budget forecasts of $1.3 billion. The other auction winners included four of the country’s incumbent wireless operators-Hutchison Telecommunications (Australia) Ltd., Optus Mobile Pty. Ltd., Telstra 3G Spectrum Holdings Pty. Ltd. and Vodafone Pacific Ltd.
The fact that auction totals were much less than other 3G auctions around the globe most likely offered the opportunity for the new players to enter the market. Australia is a fairly competitive wireless market, with five active carriers using spectrum in the 800 MHz, 900 MHz and 1.8 GHz frequency bands. The carriers have a total of more than 10 million wireless subscribers, and the country’s wireless penetration rate is around 45 percent.
Qualcomm said it plans to deploy cdma2000 networks in Australia, with commercial service expected in October 2002, when the licenses take effect. The 2-by-10 megahertz licenses cover a total of 12.3 million potential customers in Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Darwin and Canberra.
The acquisition marks a possible new direction for Qualcomm, which is known mainly as a technology company after spinning off its former handset and infrastructure divisions. Its U.S. spectrum investments were spun off into Leap Wireless, although it is a minority shareholder in Vesper, a fixed wireless operator in Brazil. Qualcomm also holds a small stake in Korean operator Korea Telecom Freetel in conjunction with Microsoft and CDPQ. Sources also say Qualcomm recently purchased a principal stake in Romanian NMT operator Telemobil, with plans to transition the carrier to CDMA 450 technology.
Qualcomm said it is still evaluating its options in terms of working with a strategic partner in Australia or building out a cdma2000 network on its own. “We usually do get together with some strategic partners,” said Michael Luther, Qualcomm director of finance and investments.
Qualcomm-backed cdma2000 technology is not planned to be nearly as widely deployed as wideband-CDMA technology by mobile operators around the globe, and the move is seen as an attempt by Qualcomm to maintain ground in markets where CDMA technology is currently deployed.
Hutchison Telecommunications, Cable & Wireless Optus and Telstra operate CDMA systems at some level in the country. Qualcomm said it is also working with AAPT, another Australian CDMA carrier that has not yet rolled out service.
“Qualcomm is a strong believer in the growth prospects of CDMA in the Australian market and entered the latest auctions committed to acquiring appropriate spectrum to support a high-quality, high-capacity cdma2000 1x/1xEV system,” said Dr. Irwin Jacobs, chairman and chief executive officer.
The Australian government said it was happy to see additional competition in the market. “The successful auction bidders include proponents of two competing, but compatible, technologies for the delivery of 3G services-W-CDMA and cdma2000,” said John Grant, executive manager, spectrum marketing group, Australian Communications Authority. “That means that Australian consumers will be likely to have choice between these technologies, and that’s further good news for the consumer.”
Luther said Qualcomm will use the spectrum to showcase the capabilities of 1x and 1xEV technologies and their time to market advantages over General Packet Radio Service and W-CDMA networks. “We hope to offer commercial services as of the first day the licenses are available,” he added.
Luther said the company is evaluating other opportunities for acquiring spectrum around the globe, specifically in Asia and Latin America.
Arraycomm also plans to showcase its technology, i-Burst, which has yet to be deployed, in Australia. The company chose the Australian market because it offered the only auction to date that has sold unpaired spectrum separate from paired spectrum. Joseph L. Hagan, chief financial officer and executive vice president of Arraycomm, said data-only i-Burst technology is specifically suited for time division duplex, or unpaired, frequencies.
“Typically in the European auctions, people were in effect bidding on a package of paired and unpaired spectrum,” he said. “We think the Australian telecommunications authority had good foresight in unlinking the two.”
The ACA said its objective in auctioning 3G spectrum was to leave the door open for every business case. “In deciding how to package the spectrum, we weren’t aware of any bidder who might be interested solely in the unpaired spectrum,” Grant said. “The fact that our auction rules have allowed the entry of a new player vindicates our approach.”
Arraycomm said it expects to partner with local content and service providers to develop its Australian network. In addition, it said it could work with European 3G license winners, which now have paired and unpaired spectrum, to take advantage of the unpaired portion of their licenses.
The company has had plans to develop i-Burst in the United States for some time, although it does not currently have spectrum for the system. Hagan said the company is in discussions regarding a partnership with a U.S. carrier. A Federal Communications Commission-licensed market trial is scheduled to begin by the fourth quarter of this year in San Diego, delivering broadband wireless data services to paying customers, Arraycomm said.
Hagan said i-Burst is a complementary, rather than competitive, technology to 3G networks. The system would provide cost-effective portable broadband data services for both consumer and business users. He noted the technology offers data speeds of 1 Megabit per second, and in a 5-megahertz slice of spectrum, the technology could handle a total of 20 Mbps per cell.
Telstra 3G Spectrum Holdings was the largest buyer in the auction, spending more than $149 million for 15 megahertz of paired and 5 megahertz of unpaired spectrum in all capital cities and 10 megahertz of paired spectrum in regional areas. Vodafone had the second-largest purchase, paying $124.7 million for 10 megahertz of paired spectrum and 5 megahertz of unpaired spectrum in all capital cities, plus 5 megahertz of paired spectrum in regional areas. Optus paid $122.4 million for 10 megahertz of paired spectrum in all capital cities, 5 megahertz of paired spectrum in regional areas and 5 megahertz of unpaired spectrum in Sydney, Melbourne, Brisbane, Adelaide and Perth. Hutchison won 15 megahertz of paired spectrum in Sydney and Melbourne and 10 megahertz of paired spectrum in Brisbane, Adelaide and Perth for $96.4 million.
Ten lots of 58 lots available did not attract bids, and those lots will be allocated at a later data, said ACA.
