Thailand’s previous telecom regulator went too far in centralising power and favouring a strong state sector. Now that a new regulator has been selected, it is time to look back at its predecessor’s failings and pray that they will learn and take the middle path this time.
Back in June 2010, on the eve of the aborted 2.1 GHz 3G auction, I sat down with former DTAC CEO Tore Johnsen and we discussed how the regulator had gone from one extreme to the other.
The bidding documents did not allow for licensees to run their own core network, forcing them to lease networks from state-owned CAT Telecom and TOT Corporation. They would not be allowed to re-use their 2G networks, presumably to offer a level playing field for new bidders (not that any entered the bid) nor would they be allowed to get an extension on their 2G network concessions.
The problem was that Thailand was going from a case where each telco had their own fiber network and huge amounts of redundancy to one where only the state telcos would be allowed to have a core network. The plan was to move from a fully discrete model to a fully centralised model without first exploring the possibility of voluntary infrastructure sharing based on market forces and a regulator ensuring fair and open access.
That would have been bad enough if the two state telcos did not compete with the concessionaires too. Both CAT and TOT have their own 3G networks.
It was clear (and this was not Johnsen’s comments) that the powers that be were eager to offset the loss of revenue share (now at 30%) when the concession fees are returned directly to the exchequer by shifting to a model where the state telcos would have a monopoly on backhaul.
The regulator, the National Telecommunications Commission, also laid down rules for coverage roll-out. Johnsen said that 50% in two years was easy, but 80% coverage in four years would be very difficult without infrastructure sharing between competitors or even frequency sharing in very remote areas. All of which is technically possible; all of which was not allowed under the auction rules.
But none of that happened. The bid was scuppered by the courts and the new regulator, the National Broadcasting and Telecommunications Commission, if confirmed (there are still legal challenges as to the legitimacy of its selection), will have to carefully look at all of this see what it can learn from the mess its predecessor made.
In the meantime, Thailand has moved ahead with 3G without licensing or concession conversion. DTAC, now under new management, has pushed ahead and launched 42 MBPS HSPA+ on its 10 MHz chunk of 850 it had from its 1G AMPS days. AIS is pushing ahead with its in-band migration on 900 MHz (of which it has the entire band to itself) and TrueMove is rapidly rolling out on 850 with a new agreement that is not quite a concession, not a licence and nobody seems to be quite sure what it is.
There are many problems with this scenario.
There is no fair and level playing field. Under the new status quo, AIS’ concession still runs out in 2015, DTAC's in 2018 and TrueMove’s new agreement has effectively extended their concession, which was to run out in 2013, by another 14 years, an extension that is being challenged in the courts by DTAC.
Concessions were never designed to actually end, but there are many in government and especially in concession holders CAT and TOT who actually expect that when the concession ends, the 20 or 30 million customers of DTAC and AIS will be transferred to them. Concessions usually are converted before expiry with a lump sum paid and a licence issued in its stead.
Then there is the matter of revenue share. AIS and DTAC are on 30% revenue share while TrueMove is not only paying much less, but is getting CAT to invest in its physical network - masts and land - for it under the pile of agreements. That said, AIS and DTAC are in pretty good financial shape while TrueMove has yet to turn a profit and is barely keeping its head above water in terms of debt. What does “fair and level” mean when the financial strengths of players are so wildly different?
This situation is much more significant to national development when one factors in the fact that copper penetration is only to 25% of households.
Moreover, when 2.1 GHz licences are finally issued, what happens with the current 3G networks built out on oddball frequencies under concession? How can they be reused? If the new regulator follows the same logic as the old regulator, they cannot be. So AIS and DTAC will be forced to bid for a separate network. But this catalogue of events leading up until this future bid would mean that the price bid would be much lower than what could have been had the 2.1 GHz band been auctioned off years ago. With a 14 year contract and 15 MHz of 850 spectrum, TrueMove might even forgo 2.1 GHz entirely if the dynamics are right.
Time will tell which way the NBTC will go. But things are not looking too good with an overly conservative make-up and half the board having military titles to their name.