Last week Hong Kong’s major cellcos officially submitted their comments to the independent regulator CA on how it should go about reassigning 900/1800 spectrum once those licenses expire. The submissions from HKT, SmarTone and 3 Hong Kong made one thing clear: the only thing they agree on is that the government’s overall spectrum roadmap is a needlessly expensive joke that benefits nobody but the government.
The consultation paper [PDF] from the Communications Authority currently in circulation is proposing three possible reassignment options:
Option 1: Offering right of first refusal (RFR) to incumbent 900/1800 spectrum holders on all their existing spectrum holdings.
Option 2: Recall all 900/1800 spectrum and auction it off again.
Option 3: A hybrid approach under which all cellcos would be offered some RFR spectrum, with the rest to be auctioned. There are four variants of how Option 3 could play out in terms of which spectrum would be designated as RFR (to include letting cellcos decide for themselves).
The CA favors Option 3, partly because it implemented a similar arrangement in 2013 when it reassigned 1.9-2.2 GHz spectrum, and partly because it’s worried that the first two options will result in 2G mobile services getting cut off prematurely.
SmarTone said in its submission that it also backs Option 3 “as it best meets the objectives for spectrum assignment: ensuring customer service continuity; efficient spectrum utilisation; promotion of efficient competition and encouragement of investment and promotion of innovative service.”
On the other hand, Hutchison-owned 3 Hong Kong argued that Option 1 “is the only rational and reasonable choice”:
To take away the spectrum from the existing MNOs would effectively be penalising investment previously made by the MNOs and discouraging provision of innovative services to consumers. This would set a bad precedent for investors when it comes to future investment decisions on technology evolution.
The costs of re-configuring networks and replacing lost capacity would divert resources from expanding coverage or introducing innovative services to consumers. Such disruption to customer service, investment and innovation will cause substantial damage to Hong Kong’s international reputation for high quality, low cost telecommunications services.
3 HK argued that if the CA insists on Option 3 – which calls for 2 x 10 MHz of spectrum in the 1800 MHz band to be offered as RFR – it should also add 2 x 5 MHz of 900-MHz spectrum to RFR “to ensure both continuity of mobile services and quality of user experience”, particularly in regards to 4G coverage in underground MTR tunnels and platforms. 3 HK also said 60% of the 900/1800 MHz spectrum should be divided equally among the four cellcos “to create a level-playing field.”
Meanwhile, HKT – which has been hammering the government for months over its spectrum policy – said the entire consultation process was pointless as long as the government insisted on sticking to its “archaic” mobile spectrum principles and practices:
… It is HKT’s strong view that the consultation cannot sensibly go ahead without the implementation of a new, forward-looking plan for spectrum management to meet the future needs of the industry and society.
HKT provided a long list of requirements for a new spectrum management plan, which include:
- Providing a clear road map for adequate spectrum (“adequate” meaning 1,340-1,960 MHz of spectrum that will be needed to support services like IoT and smart cities by 2020)
- Granting “utility” status to mobile operators and facilitating their access to buildings, land, the MTR, etc. for cell site installation and opening up street furniture
- Overhauling the basis for charging spectrum utilization fees (SUF), preferably as a flat fee based on a percentage of revenues
- Automatic renewal of spectrum, which would incentivize investment development of innovative services.
SmarTone echoed the call for a “clear spectrum roadmap with faster and more spectrum supply”. The cellco also suggested the CA start by accelerating release of the 700-MHz and 3.5-GHz bands. Both bands are in regulatory limbo in Hong Kong at the moment – the 700-MHz band won’t be freed up until the CA switches off analog TV broadcasts, which it won’t do until it is fully coordinated with China’s analog-TV switchoff plan, while the 3.5-GHz band is being jealously guarded by satellite players currently using it for extended C-band services.
SmarTone also agreed that the SUF was set too high, and that the CA should follow GSMA guidelines [PDF] for setting reserve prices and minimum fees conservatively.
3 HK concurred that the SUF was too high compared with international benchmarks, and amounted to a “spectrum tax”to fill government coffers that was against the public interest and would result in higher prices for consumers.