Govt gives away hundreds of millions in corporate welfare to telcos

The Herald reports:

The Government has abandoned plans to auction radio spectrum.

Instead, it will directly allocate the 5G-friendly to telcos for a 20-year term – on the proviso that they make commitments to better address mobile calling and broadband gaps in rural and small-town NZ.

The move means Communications Minister David Clark has gone for public good over a windfall for Crown coffers that could have run to hundreds of millions, based on previous spectrum auctions.

Clark says the arrangement means more people will get better mobile coverage more quickly, and in more places.

This is a terrible decision. It is crony capitalism and corporate welfare at its worse.

The bad outcomes are numerous:

• It entrenches the incumbent telcos and locks out any other party that may have wanted to bid. In the supermarket sector they claim they want more competition and in the teclo sector they are handing over an asset worth maybe half a billion dollars to incumbents
• The taxpayer misses out by not having an auction for the spectrum. Based on the 4G auction it could raise anywhere from $300 to $500 million – even more. An auction allows you to find out how valuable it is. This is money that could have been spent on doctors and nurses that instead has gone to incumbent telcos
• The trade-off of helping extend rural connectivity also suffers. By doing a quid pro quo, you don’t necessarily get the best outcome there either. The proper way to extend rural connectivity (which I fully support) is to tender it out.

In the meantime, Spark – which paid $149m for its 4G spectrum at the 2014 auction – said in an NZX filing that “in return” for it receiving an 80MHz allotment of 5G spectrum, it will commit an additional $24 million in funding to the Rural Connectivity Group between 2023 and 2025 (the RCG is a joint venture formed by Spark, Vodafone and 2degrees for the public-private Rural Broadband Initiative).

So Spark paid $150 million for its 4G spectrum and for the 5G spectrum it just has to contribute $24 million to rural broadband.

If this had been done by a National Government, Labour and the entire left would be howling loudly, alleging corruption and deals for corporate mates.