Communications Minister Stephen Conroy has dramatically upped the ante in his campaign to overhaul Australia's communications sector and, at the same time, reinforce his strategy for a high-speed national broadband network, reports The Australian newspaper this week.

Conroy has told the free-to-air television networks that he wants them to surrender powerful broadcasting spectrum that is the most sought-after around the world for new-generation mobile phone and other wireless services.

This is in addition to the spectrum that the free-to-airs currently use for traditional analog broadcasting, which is due to cease following a switchover to full digital services in 2013.

The spectrum that Conroy is focusing on is in the 2.5-2.69 GHz bandwidth and has proved to be the most prized spectrum in the US because of its propagation potential for high-powered point-to- multipoint penetration.

"This spectrum is the key to guaranteeing the success of multiple service wireless deliveries in the last kilometre or so to the home," one communications industry expert says.

Currently this spectrum is being used by the free-to-air TV networks for outside broadcasting services such as press conferences and other news gathering purposes. Not surprisingly, the television networks, which are used to getting their own way, are resisting pressure to hand over this spectrum and claim privately that this could reduce the capacity of their digital spectrum by up to a quarter if they have to find another outlet for services now carried on the 2.5 band.

But Conroy is unlikely to be impressed by this argument. For a start he sees the real possibility of significantly enhancing the value of the so-called digital dividend by including the 2.5 band in the auction of spectrum, currently used by the free-to-airs for their analog services, which is in the less powerful 520-820 MHz range. "We could well be looking at a return of billions of dollars rather than a figure of just over $1 billion which has been the forecast up to now," one government source says.

This prospect is boosted by the recent sale of spectrum in the US which nearly doubled expectations of $USl0 bn after the 2.5 band was included in the TV networks analog spectrum auction. Another pointer to the potential value of this for the Australian government will come next year with Britain planning to bundle 2.6 GHz and digital dividend analog spectrum into a super spectrum auction.

Conroy's decision to put the 2.5 band on the block is also clearly designed to increase the pressure on Telstra to accept his demands for structural separation between its wholesale and retail activities. Unless it agrees to this demand, Telstra will be banned from bidding for any of this spectrum including the 2.5 GHz band, which would significantly disadvantage it against other telcos as the industry migrates to 4G wireless services.

The underlying strategy for the success of Conroy's $43bn NBN project is to turn this into a communications hub inside every home and business in the country a one-stop shop for receiving and transmitting information from a broad range covering everything from television and the internet to phone services.

As Conroy has made it clear that the viability of this scheme must involve the high-speed NBN fibre optic replacing Telstra's current cable backbone into the home, there is additional pressure on the telco to find a compromise that will enable it to get into the NBN tent. But if Telstra meets his demands, it will be free to engage in any spectrum auctions and will not be pressured to offload its 50 per cent stake in the Foxtel pay-TV operator.

The detailed thrust of Conroy's strategy for all of this will become clearer when he releases a green paper on spectrum allocation in the next week or so. In the meantime the clear signal he has sent to the free-to-air camp is that it had better get used to the prospect of losing this spectrum and start looking at alternative technologies for delivering the services currently carried on the high-powered bandwidth.

He is also believed to have made it clear that the rent the FTAs currently pay for this valuable spectrum is a "pittance" and should be hundreds of millions of dollars a year rather than hundreds of thousands of dollars.

This line is unlikely to be pursued and is more part of the cut and thrust that will continue between the minister's office and the FTAs over the future shape of the industry, which will involve a major restacking of their spectrum when it moves to digital only broadcasting.

Conroy will retain the harsh anti-siphoning restrictions that discriminate against the pay-TV industry's ability to carry sports programming, will drop his support for a fourth free-to-air TV licence and will allow the FTAs increasing flexibility for sports coverage on their digital channels as a trade-off for this bigger fish.

Conroy is now proposing competition reforms in the communications industry that rival, not just those affecting Telstra, but the NBN concept itself.

Success will put Conroy ahead of any of his predecessors in this portfolio, whether Labor or conservative.

Failure will relegate him to the ranks of the also-rans who foundered on the rocks of government intervention into this highly complex area of communications development.