"Even if the proportion of handsets falling short of the [connectivity] threshold is accepted, ACMA has not provided any evidence of the extent to which these handsets are actually used in fringe coverage areas rather than metropolitan and large regional centres," it said.
However Telstra communications and policy managing director Phil Burgess welcomed the government's decision and the three-month CDMA extension.
"We are also pleased that the minister has provided clear direction to Telstra and to consumers about how to proceed to make sure this transition is completed: Telstra has to fix remaining problems and consumers have to make the transition."
The ACMA, according to its report, had to consider "the extent to which a signal emitted from a base station is of sufficient strength to enable the connection and maintenance of voice calls using only an appropriate handheld mobile phone handset".
Telecommunications analyst Paul Budde said while scuffle is an indication of positive industry reform, the kinks in Next G will take longer than three months to iron out.
"Next G won't be solved in three months because the core of the problem is that it is built on 850MHz technology which is not standard 3G in the rest of the world," Budde said.
"There won't ever be a mass market for these non-standard phones and consequently there will be little incentive for mass production."
Budde said Telstra will need to build more towers around regional black spots as well as replacing affected customers' standard phones with Blue Tick mobiles.
He agreed with the ACMA statement that people in Next G black spots will need to sacrifice "stylish more portable" phones for larger Blue Tick devices because of signal processing strength.
Telstra spokesman Peter Taylor said signal strengths are variable in all cellular networks and said call drop-out rates are the same as CDMA and 2G.
"Next G call drop-outs are no different than other mobile networks like CDMA and 2G," Taylor said.
"A small number of customers have the wrong handset for their area which affects drop-outs."