HONG KONG-Hong Kong’s usually efficient telecom regulators are struggling in their efforts to license third-generation (3G) spectrum, while avoiding the damaging costs of European-style spectrum auctions.
The Office of the Telecommunications Authority (OFTA) has proposed a complex “hybrid” scheme that includes pre-qualification on merit, followed by an auction to raise cash, deferred payments, or royalties. The scheme also mandates 3G licensees to open 30 percent to 50 percent of their 3G networks to independent service providers.
An OFTA spokesman said in December that licenses would now be issued in mid-2001. Launch of 3G services will depend on the availability of equipment, said the spokesman. “We expect service sometime in 2002,” she added.
In October 2000, OFTA invited bids from consultants to fine tune and implement its licensing scheme. The consultants were due to report by early January 2001, but had not even been appointed at that time.
On 5 January, 2001, OFTA held a workshop to hammer out the regulatory environment for the open network proposals. Topics included the precise means of measuring and reporting 3G network capacity, so OFTA can monitor compliance with the proposed requirement that a certain percentage of spectrum-provisionally 30 percent to 50 percent-should be made available to mobile virtual network operators (MVNOs) not affiliated with operators to market and brand as their own.
Some observers have called for a free market approach to trading network capacity, but OFTA does not think four licenses would bring about sufficient competition in the supply of network capacity to ensure its “open network” policy objective is met by pure market forces.
OFTA has twice consulted industry over the method for assigning 3G licenses. In its first consultation document in March 2000, the agency proposed a beauty contest for 3G licenses and argued auctions would increase operating costs, seriously dampen the rollout of services, favor rich operators rather than innovative ones, and increase costs to consumers.
The authority’s second consultation paper, issued in October 2000, acknowledged the defects of a beauty contest as being arguably less transparent and more subjective, possibly yielding undesirable windfall profits to licensees, and difficult to administer because the 3G business model is not clear.
Because neither beauty contests nor cash auctions alone were able to meet OFTA’s policy objectives, it instead proposed a hybrid open network as a means of allowing more players to participate and increase service competition. The plan envisages only four 3G licenses, which has provoked some criticism, including a call from New T&T, a fixed-line carrier in Hong Kong, which yet has no mobile network, asking for a “premium discount” to be given to new entrants to the 3G industry, because they will have to shoulder the cost of building a network from scratch.
