Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited
3G licence awards Thaid up in knots
Article Type: Rearview From: info, Volume 13, Issue 4
A regular column on the information industries
As we have noted in previous Rearviews, despite a lengthy period characterised by political infighting and economic complexity, India has finally awarded 3G licences even if several problems remain unresolved. Hard though it is to believe, the same factors in another Asian country, Thailand, are proving even harder to resolve.
The initial licence, providing 15 MHz paired in the 1900 MHz was awarded without a tender in February 2000. The joint licensees, the only occupants of the 1900 MHz bandwidth, were the state-owned incumbents, the Telephone Organization of Thailand (TOT) and the Communications Authority of Thailand (CAT), acting jointly as ACT Mobile using the brand Thai Mobile. Subsequent upon the creation of the regulator, the National Telecom Commission (NTC), three further 3G licences were to be awarded some time in 2003, with services commencing in mid-2005, but none of this took place – the NTC did not even commence operations until October 2004.
Hutchison-CAT Wireless Multimedia upgraded its CDMA 800 MHz licence covering Bangkok and 25 provinces to cdma2000 1xRTT capability in March 2003. The other private mobile operators were market leader Advanced Info Services (AIS) which mainly used GSM and was due to begin trials of W-CDMA in May 2005, Total Access Communication (often known as DTAC) and True Mobile (the former TA Orange now majority owned by TelecomAsia but using the “Orange by True” brand).
The main difficulty was that the private incumbents still legally remained concessionaires of the TOT and the CAT, and the regulator was not in a position to issue licences to these companies until the Council of State had given it the authority to do so. The obvious way around this problem was for the private incumbents to set up new companies that could then apply for concession-free licences, although it was alleged that the TOT and the CAT were to get first shot at a 3G licence in the 1900 MHz band. Rather oddly, the issue of the original jointly-held licence tended not to get mentioned, although in August 2005 the regulator stated that it was considering reclaiming this licence which was not being used.
In November, the Administrative Court invalidated the selection of members for the National Broadcasting Commission, thereby in principle holding up progress for up to one year since both this body and the NTC needed to approve 3G launches (which involved broadcasting). DTAC’s response was to request permission to conduct trials of 3G over its existing GSM 1800 MHz network. The NTC, with the government’s support, was able to find a way around the problem without violating any regulations when in August, the Council of State ruled that the allocation of 3G spectrum should be the sole responsibility of the regulator, and it gave in-principle approval for AIS to launch trial 3G services although critics claimed that this would be illegal. Meanwhile, in July, the NTC had rejected a request by True Corp. for a 3G licence on the grounds that its subsidiary, Samut Prakan Media, had no network of its own and had not confirmed details of a leased network.
In August 2006, Hutchison-CAT announced that it would be launching a three-month trial of cdma2000 1xEV-DO in ten provinces on 1 October. In January 2008, AIS announced that it now intended to proceed with the (as yet unlicensed) launch of 3G services using its existing 900 MHz spectrum. This would not necessitate asking the permission of the TOT but would require a new revenue-sharing agreement to be negotiated. In April, the regulator announced that licences covering 45 MHz would be awarded in August, but in the meantime AIS, DTAC and True Move would be allowed to launch in the 850 MHz and 900 MHz bands provided they adhered to 3G regulations. AIS immediately responded that it would launch 3G/HSDPA, branded as “3GSM Advance”, in Chiang Mai in May followed by Bangkok in June – and duly did so. However, it only gained an initial 100 subscribers, noting that even a few thousand would overwhelm its network.
In May, DTAC announced that it no longer intended to roll out 3G via a joint venture with the CAT but would instead be going it alone. In June, the CAT gave permission for DTAC and True Move to launch services in the 850 MHz band asking the regulator to switch spectrum usage by the CAT and DTAC to clear a 5 MHz band for True Move. However, in September 2008, DTAC announced that it would be delaying its 3G launch until at least 2009Q3 as there appeared to be insufficient demand for data services, while in December, True Move announced that it would initially look to launch 3G over its 850 MHz network – it did so in April 2009 – while considering whether it could afford to bid for a 2100 MHz licence.
Eventually, it was resolved that there would be an auction in 2009Q3 for 15-year licences in the 2100 MHz band open only to Thai nationals – but in June 2009 the date was set back to January 2010. Initially, it was proposed that three licences would provide 10 MHz paired and a fourth 15 MHz paired, but in October 2009 this was changed to 2x10 MHz paired at $137.4 million apiece and 2x15 MHz paired at $155.3 million apiece. The new licences would lie outside the concession system.
Meanwhile, the TOT was authorised in February 2009 to provide 3G branded as “TOT 3G” – but it is disputed whether this related to 1900 MHz, 2100 MHz spectrum or both. It announced that it would launch in December, but in early November the Ministry of Finance ordered the TOT to redo its business plan. It also stated that it wanted the TOT and the CAT to renegotiate the concessions prior to the 3G auction. The Minister added that that the Council of State had ruled that the 3G auction was the sole authority of the yet-to-be established National Broadcasting and Telecommunications Commission as stipulated by the 2007 Constitution, but the NBTC had yet to be set up.
In November, the government asked the operators to settle concession fees for access to their 2.5G networks for the remainder of their contracts as a precondition for the right to participate in the 3G auction. This represented 20 per cent of 2.5G revenues – the 3G licences were to carry only a 2.5 per cent revenue payment – or an outstanding $3 billion. This was to prevent them from transferring subscribers over to their 3G networks, thereby denying revenue to the government.
In January 2010, a draft bill setting up the NBTC together with the allocation of frequencies was finalised. It was then alleged that the 3G licensing would be delayed until such time as four new nominees to the NBTC were appointed. This was to occur on 23 February, and it was hoped that licences would be awarded by the year-end. The situation as of February 2010 was unusual at best. AIS appeared intent upon a shared launch with the TOT using the 2100 MHz band. The TOT was to take all of the revenue until an infrastructure-sharing/ revenue-sharing agreement was formalised. However, five MVNOs had already been licensed to use the TOT network – Loxley, Samart I-Mobile, 365 Communications, IEC International (which launched in January 2010) and M Consultant Corp. – each with a maximum capacity of 100,000 subscribers, which left little capacity spare for AIS. The TOT appeared to view all arrangements as informal/provisional so it was unclear when anything concrete would transpire.
In April 2010, the regulator threatened to exclude operators from bidding if they had not implemented Mobile Number Portability – but in the event, they were still testing at the official deadline of 1 September. In May, the regulator announced that it might be skipping over 3G straight to 4G using the 2100 MHz band and that only three technology-neutral, 15-year licences of 15 MHz paired would become available in September. In July, the regulator agreed to raise the minimum fee per licence to THB12.8 billion ($395 million) from THB10 billion. However, a Senate committee then asked for the fee to be raised to THB30 billion.
In August, eight bidders declared an interest – all Thai: Samart I-Mobile (part-owner Axiata not participating) and Loxley (with Asian partner), both MVNOs in Bangkok; AIS + subsidiary Advanced Wireless Network; DTAC + subsidiary DTAC Internet Service; True Move; and SK Wireless (a subsidiary of True). In practice, only five were eligible to bid. Proposals were due by 30 August. New rules stated that all operators would have a spectrum cap of 30 MHz which was a major issue for the TOT which already had 64 MHz. The surplus would have to be surrendered within one year from the date of the auction. The licences were to run for only ten years and to require nationwide coverage within five years.
Plans to convert concessions into licences were supposed to be dealt with by August 2010 but became mired down in legal uncertainties. At the end of August only three bidders remained: AIS (via AWN); DTAC (via DTAC IS); True Move (via Real Move – formerly S&K Wireless). Samart and Loxley opted to be MVNOs on the TOT’s network. Automotive company Win Win was disqualified. Although there were three licences on offer, the n-1 auction method was chosen to provide one licence less than number of bidders so only two could actually be awarded. The third might be re-offered within 90 days to attract an international operator.
In mid-September, the CAT persuaded the Supreme Administrative Court that the legality of the NTC’s right to assign licences should be re-examined (inviting the NTC to respond) and that issuing licences to private operators could constitute unfair competition for the CAT and the TOT. On 19 September, the day before the auction was due to commence, the NTC abandoned the auction until such time as the legal issues were fully clarified. This would require the Constitution Court to rule on the matter or the NBTC to be formed. The government promised to introduce the legislation as soon as possible, but this would still leave the auction delayed until 2011.
In conclusion, it is extraordinary, but true nonetheless, that no-one seems to be certain what spectrum is being used by the TOT – internet forums in Thailand constantly bicker over why some signals seem to arrive over 1900 MHz while others arrive over 2100 MHz. The most likely scenario is that the 3G licence was issued for 1900 MHz but is also being used to transmit using 2100 MHz spectrum. However, because it is only being used in Bangkok, the TOT’s so-called 3G service is very patchy in coverage, unreliable and (so many users claim) very slow (although others disagree). There is some 3G provision by private operators over their 2G spectrum – they still do not appear to have official licences but rather are “testing” – but this is also limited in coverage (mainly to Bangkok and Chiang Mai) and quality. In large parts of the world HSPA+ already exists and LTE is being introduced in 2011, so the fact that nationwide 3G is still unavailable in Thailand is perplexing. However, when the relevant political, legal and regulatory systems are taken into account it is hardly surprising that, as in India, vested interests operate so as to create gridlock.
Peter CurwenVisiting Professor of Telecommunications at the Department of Management Science, University of Strathclyde, Glasgow, UK.