Desperate to balance the budget Labor, Communication and Broadband Minister Stephen Conroy has moved to jack up the price of making telephone calls in Australia by directing the Australian Communications and Media Authority (ACMA) to set the reserve price for 700MHz spectrum at $1.36 per megahertz (MHz) per population.The move has infuriated carriers with both Vodafone and Optus looking to pull out of the Spectrum Auction.

The carriers claim the price set by the government will increase costs for consumers and is more than double what foreign governments have charged for comparable spectrum.

Conroy, who is known for his bully boy tactics, is struggling to control the roll out of the National Broadband network with costs blowing out, delivery timetables not being met and poor adoption where the network has been rolled out.

Conroy has also issued an amending direction to increase the competition limits from 2x20Mhz to 2x25MHz for spectrum in the 700MHz band.

Optus has hinted it may join Vodafone and walk away from the auction for the 4G spectrum. The move could result in the auction being thrown open to foreign competitors.

Conroy’s office has not said whether they will allow Chinese Company Huawei to set up a 4G network in Australia in partnership with a new communication player.

The Labor Government, who is struggling to hold onto a budget surplus, was expecting the auction to be completed by April 2013. The Government had hoped to deliver a $1.1 billion budget surplus in 2012-13.

Fairfax Media said “Telcos need more spectrum to carry data on their mobile networks and are struggling under increasing demand from consumers. The frequency up for auction – 700MHz – is occupied by analogue television signals. It is valuable because it is efficient and works well over long distances. Optus is trialling 4G services at this frequency.”

David Epstein, vice-president of corporate and regulatory affairs, said: ”Optus is studying the detail of the government’s announcement, but as announced it appears unworkable and out of line with international outcomes.

”It is likely to have the effect of restricting investment significantly, raising prices as costs are passed through to consumers and reducing consumer choice.”