HKT revives spectrum trading debate but unhelpfully glosses over complexities

Hong Kong
Credit: Sean Pavone/Shutterstock

ITEM: Hong Kong incumbent telco HKT has issued an open letter to the Hong Kong Government to express in no uncertain terms – again – that it is very “disappointed” with how regulator OFCA is handling spectrum allocations, and has, among other things, insisted that the government introduce spectrum trading as a way to get spectrum pricing down to market-driven levels.

If it doesn’t, says HKT, Hong Kong will be relegated to “third-class citizen” status in the global arena of mobile service development. [Not too dramatic, then. – Ed.]

The basic gist of the letter [PDF] is that Hong Kong needs “a forward-looking, accommodating and holistic approach to spectrum policy, not a simplistic spectrum auction that is purely designed to maximize Government revenues at the expense of the spectrum policy objectives.” To that end, HKT raised the issue of spectrum trading – a market-driven mechanism that would allow cellcos to buy and sell spectrum when they need it based on market demands, as opposed to waiting around for the government to auction off spectrum chunks every few years at inflated prices.

And they are inflated, according to HKT, which points out that spectrum prices in Hong Kong has been going up over the years to the point that HK spectrum is now the most expensive in the world.

HKT’s argument is that Hong Kong spectrum is overpriced in part because there’s no mechanism for the market to determine spectrum value. Spectrum trading is one solution, and one that the HK government actually promised to introduce in 2007. Nearly ten years later, no spectrum trading policy exists, and the government has decided to engage another consultant to revisit the issue on the grounds that the mobile market has evolved considerably since it first considered spectrum trading.

In a market where the telecoms regulator prides itself on taking a laissez-faire approach, you’d think spectrum trading would be a no-brainer. On the other hand, it’s not quite that simple.

According to a spectrum policy review [PDF] that Ovum, Indepen and Aegis conducted for the government in 2009, spectrum trading is feasible for the Hong Kong market, but only if additional competition safeguards are put in place.

In a broader context, spectrum trading has been considered by regulators worldwide for a long time, but not many have implemented it. HKT cites markets like Singapore, Malaysia, Taiwan, Australia and India that have adopted spectrum trading. However, according to this 2014 ITU discussion paper [PDF], “Where trading rules have been approved, initial trading levels have often been disappointing, leading to questions about the utility of the concept.”

Regulators also balk at the idea of leaving spectrum management to the market – partly because of the concept of spectrum as a public resource, but also because of concerns over unintended or unforeseen consequences of spectrum trading, from hoarding, windfall gains and anti-competitive behavior to interference issues, the impact on international co‐ordination/harmonization efforts, and the potential impact on investment and innovation, among others.

All of these could be mitigated with more regulation, perhaps, but surely if there’s one thing telcos don’t want more of, it’s more rules to comply with. And leaving it entirely to the markets to sort out is likely to be messy and confusing in the short term (and possibly the long term).

None of this is to say spectrum trading is a bad and unworkable idea. It’s certainly a disruptive one from a regulatory point of view, which is likely why so many regulators are hesitant to implement it (that, and the fact that governments really don’t want to lose their spectrum cash cows if they can help it). And there’s no doubt that serious reform is needed in how spectrum is allocated and priced as we head ever closer to the 5G era where spectrum matters more than ever.

The point is that spectrum trading is a complex solution for a complex industry – much more so than the HKT letter makes it look.

That matters because HKT’s open letter isn’t really to the HK government so much as it is to HK consumers in an attempt to whip up public support for its proposals.

Which is totally fair, given that (1) the government is conducting a public consultation in this very issue, and (2) a recent study commissioned by HKT found that most consumers in Hong Kong are completely unaware of the issue or that the government is currently seeking their opinion about it.

However, while it’s good to raise public awareness and get consumers engaged in the debate, the problem with getting the public involved in technology policy issues is that they often don’t understand the technology – certainly not to the level required to make a policy decision about it. Even if you boil it down to a simple pocketbook issue – “This spectrum policy is going to raise your monthly bill!” – it amounts to asking consumers to support a complex and nuanced issue they don’t understand in overly simplistic terms.

As persuasion tactics go, this has its drawbacks.

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