Regulatory uncertainties pave a rocky road for Dtac and pretty much everyone else

Image credit: Telenor

Dtac faces legal uncertainties as it hopes to acquire spectrum from TOT, while Thailand’s new constitution potentially muddies the regulatory waters for everyone else

Some people spend the Easter break on holiday with family. Others, such as Yozzo’s Allan Rasmussen, spend it reading legal documents and the new national constitution. It does not make for happy reading – certainly not for Dtac, and not for anyone who would prefer Thailand’s telecoms regulatory regime to be stable and independent.

The issue of TOT’s unused 64 MHz of spectrum on the 2300-MHz band has been an ongoing saga for the past five years since TOT was given a 15-year license as an incumbent. The state telco has tried and repeatedly failed to develop a business plan for the valuable spectrum.

Most recently, the National Broadcasting and Telecommunications Commission Board rejected a TOT’s business plan to develop 60 MHz of 2300 with a partner in a public-private partnership model and ordered the spectrum to be recalled for reallocation. But the state telco decided to ignore the regulator and said it would instead seek approval from the Attorney-General to hold a beauty contest to select a partner to develop 2300 anyway, the results of which are due no later than April 25.

Rasmussen pointed out a hitherto unreported issue with the 2300-MHz TOT beauty contest and the widely held expectation that Dtac will win. After all, True got the 850-MHz band by building out their non-commercial test network with CAT Telecom, and AIS was selected by TOT for 2100, so it would only be fair for Dtac to get TOT’s 2300 to balance things out in what would be a centrally-planned fix.

However, it is quite possible that Dtac would be disqualified under the NBTC Notification Regarding Mobile Virtual Network Service in Thailand BE 2556 (2013):

16.5 Mobile Virtual Network Operator (MVNO)

16.5.1 The Licensee shall provide telecommunications network service with the minimum capacity of 10% of its networks to the MVNO who is not the Connected Person in the Shareholding Structure with any licensee when receiving such service request.

Rasmussen pointed out that TOT is the third largest shareholder in Dtac, owning 5.58% of the company.

“TOT’s [2300 beauty contest] selection scoring is: Engineering 40% and Financials 60% – wonder how much the score is if you are a shareholder in one of the bidders,” he mused.

The fact is that two of the three telcos have gotten cut-price spectrum away from the auctions via back-door deals with the state telcos. This would not be an issue if all three operators get a similar deal, creating a level playing field. It was widely expected that Dtac would be selected for 2300-MHz for this reason, as well as to prevent them complaining about the other two arrangements.

If Dtac is disqualified for breaking the 2013 MVNO Notification, this would leave a very upset Dtac intent on levelling the playing field by trying to find ways of revoking the AIS-TOT and TrueMove-CAT partnerships.

TOT, the Attorney-General and the NBTC (not that they are involved, it seems from TOT’s point of view) could simply ignore the MVNO Notification, but this is hardly a better alternative, as it would bring huge uncertainty going forward. The regulator could at any time bring up the issue of the MVNO Notification and revoke Dtac’s license whenever they feel like doing so. In fact, the regulator could invoke its own recommendation to recall the spectrum at any time, leaving the 2300 partner on very, very shaky ground.

Constitutional crisis, maybe

Elsewhere, there is a major issue with the Frequency Act and the new Constitution.

On April 1, the new Frequency Act – a.k.a. the National Broadcasting and Telecommunications Act BE 2560 (2017) – was passed. On April 6, the new Constitution was signed, which immediately threw the status of the brand new NBTC Act into question, because that Act is mentioned specifically in Sections 60 and 274 of the constitution:

Section 60 The State shall maintain transmission frequencies and the right to access and utilize the satellite orbits, which are properties of the nation, in the interests of the country and the people.

The utilization of the transmission frequencies under Paragraph One, irrespective of the purpose of radio and television broadcasting and telecommunication or any other purpose, shall give regard to the utmost benefit of the people, the security of the State, and the public interest, and shall allow people to take part in the utilization thereof, as provided by law.

The State shall provide for establishment of an independent State organization entrusted with the duty to govern the operation pertaining to transmission frequencies in a manner specified under Paragraph Two. In this regard, such organization shall develop measures to prevent unfair exploitation of or excessively unnecessary burden for consumers, interference of frequencies, the acts that result in obstructing the freedom of knowing or hindering the receipt of true information or news of the public, and prevent a person or a group of persons from utilizing frequencies with no regard to the rights of the general public. The organization shall further determine the minimal proportion to be undertaken by the users of frequencies in the interest of the public, as provided by law.

Section 274 The National Broadcasting and Telecommunications Commission, as established by the Act on Organization to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunications Services B.E. 2553, shall be an organization under Section 60 Paragraph Three. The Council of Ministers shall amend the Act in accordance with the provisions of this Constitution and present to the National Legislative Assembly for consideration within one hundred and eighty days as from the date of promulgation of the Constitution.

Section 60 is not too controversial, though one would question whether an NBTC that reports to the Digital Economy Commission (chaired by the Prime Minister) and has to enact Digital Economy policy could be considered independent. The whole idea of an independent regulator in the previous two acts was to remove it from the auspices of the executive branch, not to have it report directly to the head of the executive branch without an independent budget. Then there are the worrying references to national security and “true information”.

However, the real issue is the transitionary Article 274 that refers to the old BE 2553 (2010) NBTC Act and orders the Cabinet (Council of Ministers) to amend the BE 2553 NBTC act in accordance with the new constitution.

This means that by October 3, there will be a new NBTC Act. The question is whether it will be based on the new BE 2560 (2017) version or the old BE 2553 (2010) version as spelled out in the letter of the law in Article 274.

One would presume that after putting so much effort into centralizing power to the executive, they would not simply give it all away again in six months. Will the cabinet simply dismiss Article 274 out of hand? We will know soon.

Regardless of the outcome, the message for foreign investors is clear – there is no stability and that everything that is in turmoil today will change yet again in six months’ time.

The other question is whether amending the NBTC Act in accordance with BE 2560 (2017) would mean complying with Section 77 for public participation:

Section 77 The State shall enact laws merely to the extent of necessity and promptly repeal or improve the laws which are unnecessary or incompatible with the current context, or are obstacles to the livelihood or occupation so as to avoid burdens on the people. The State shall facilitate public access to and public understanding of the laws in order for people to properly act in compliance therewith.

Prior to the enactment of any law, the State shall conduct consultation with the stakeholders, thoroughly and systematically assess possible impact of the law, and disclose results of the consultation and the assessment to the public as well as taking such results into consideration at every stage of the legislation process. While the law comes into force, the State shall undertake an evaluation of the achievement of the law on a specified periodic basis, including the feedbacks from all stakeholders thereof, with a view to developing all laws in a manner corresponding with and appropriate for the changing contexts.

The State shall apply permit and committee systems in the legislation specifically only in case of necessity, shall explicitly prescribe rules for the exercise of discretion by State officials and the period of time required for implementation of each stage as provided by the law, and shall impose criminal penalty specifically only for serious offences.

Earlier the Council of State (the government legal advisory body) warned that the draft NBTC Act was incompatible with Section 77 and recommended the process be restarted. This recommendation was overruled by the Cabinet. Section 77 calls for public access and understanding of the law and consultation with stakeholders, neither of which happened during the gestation of the NBTC Act.

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