Telstra has been barred from buying any more 700 MHz spectrum for its 4G network at an auction next year, after the government heeded advice from the competition watchdog.

The Australian Competition and Consumer Commission (ACCC)'s advice to Communications Minister Mitch Fifield was that mobile users would be better served if the remaining spectrum was bought by Optus, Vodafone or TPG.

It said this could be enforced by setting a limit on the amount of 700 MHz spectrum any one carrier is able to hold to 2x20 MHz – the amount Telstra bought in the original 2013 auction.

Fifield said in a statement he had agreed to the allocation limit.

"This means that no mobile network operator can own more than two 20 MHz blocks of spectrum in the 700 MHz band, ensuring that the auction promotes competition and that the spectrum is allocated in the long‑term interests of end-users," he said in a statement.

A Telstra spokesperson criticised the move as "an unnecessary restriction, without any evidence of a problem to justify it".

“We are disappointed with the decision to limit how much spectrum any party can hold in the 700 MHz band," a Telstra spokesperson told iTnews.

“Fair and open spectrum auctions are essential in ensuring the success of Australia’s mobile market continues.

"The restrictions put in place for this auction are likely to reduce the amount of money raised for taxpayers. It may also mean the spectrum isn’t used as efficiently as possible.

“The onus is now on our competitors to invest and actually deliver their own services to customers, rather than trying to freeload off Telstra’s mobile network.”

The ACCC said it did not believe that barring Telstra from the auction would “constrain its ability to compete”, noting it already held over half of all available low-band spectrum.

“If Optus or Vodafone Hutchison Australia (VHA) were to acquire at least 2x10 MHz of 700 MHz spectrum, it would allow them to offer better capacity and quality of mobile services, and achieve better depth and breadth of network coverage,” the ACCC said.

“This would improve their ability to compete in the relevant mobile markets.

“If TPG were to acquire 2x10 MHz or 2x15 MHz of 700 MHz spectrum, it would be better placed to deploy a new 4G mobile network in Australia.

“We consider that a new entrant in the mobile market would promote competition for mobile services, place competitive pressure on the existing operators and fundamentally change the structure of the market.”

Telstra will have the chance to bid for any spectrum left unsold after the auction.

Fifield said unsold spectrum will be left open to all bidders - regardless of how much spectrum they already have - to "ensure that valuable spectrum is not left unused at the end of the process".

He has directed the ACMA to set a reserve price of $1.25 per MHz per head of population, equivalent to the 2013 spectrum auction.