The Federal Government is facing accusations it is auctioning off wireless spectrum to mobile phone companies at inflated prices to bolster its ailing finances.
Last month Communications Minister Senator Stephen Conroy stepped in and took away the power to set the reserve price of the auction from the Australian Communication and Media Authority (ACMA).
Senator Conroy yesterday revealed he had set the floor price for the 700 megahertz spectrum at $1.36 per megahertz per population.
AM understands the Federal Government is hoping to net between $2.5 billion and $4 billion this financial year by auctioning off the wireless spectrum, which was freed up through the switchover from analogue to digital television broadcasts.
Optus has raised its concerns, saying the floor price is unworkable and double that of auctions for comparable spectrum in other developed economies.
The company's senior management is understood to be in talks this weekend.
Vodafone has already exited the race by declaring it would not participate in the auction under the current terms.
Telstra says it is considering the announcement in detail as part of its auction strategy.
In releasing the floor price details, Senator Conroy argued the high quality spectrum is equivalent to "waterfront property" and the price will ensure a reasonable return on the investment.
He said he expected a competitive bidding environment for the sale, which will be held in April next year.
'Politics, not policy' But Opposition Communications spokesman Malcolm Turnbull says the Government's high price is being driven by politics and not policy.
"Why is the Government spending tens and tens of billions of dollars to subsidise fixed-line broadband in its fibre to the premises NBN rollout and yet at the same time is seeking to extract the maximum dollar from the industry and, eventually, the public, from the sale of wireless spectrum?" he said.
"The only conclusion for that can be is that it knows that this is its only chance of getting a surplus in the budget this year.
"This is being driven, not by policy, but by politics." Mr Turnbull says the auction will be a dud if Optus decides to follow Vodafone and pull out of the bidding.
"If the auction process fails, because only one person turns up, or only one person is left standing, then that is just a complete debacle, that would be yet another policy failure by Stephen Conroy," he said.
Mr Turnbull says the sale of the spectrum is important for both taxpayers and the telecommunications industry.
"The Government's got to make sure it gets a fair buck for the taxpayer, but it's also got to make sure that there's a competitive market," he said.
He says if telcos are forced to spend more money to buy the spectrum they may decide to charge unaffordable prices for consumers, and this problem would be compounded if only one telco bids.
"If there's no competition, there is absolutely no barrier to very high prices being charged [for consumers]," he said.