ITEM: Hong Kong’s telecoms regulator has made a decision on the fate of the city’s 3G spectrum licenses. In effect, OFCA has elected to stick with its original recommendation to take back a third of licensed 3G spectrum when the licenses expire in October 2016 and use it to award a new 3G license.
OFCA said it would auction the confiscated 2.1GHz spectrum at an SUF no higher than HK$86 million ($11 million) per MHz, with a maximum block of 2 x 20MHz. The auction for the new 3G license will be conducted in the fourth quarter of 2014. OFCA also said that “all interested parties” could participate.
Needless to say, the incumbent 3G license-holders who have opposed the plan from Day 1 are not pleased. All four have issued statements condemning the decision.
CSL chief Phil Mottram said the decision “risks causing disruption to mobile services for customers here in Hong Kong.”
HKT group MD Alex Arena said the HK government “is doing the public a disservice by opting for a solution that degrades service quality to all mobile users and, due to the high spectrum fees, essentially creates a new and regressive tax on consumers."
SmarTone said OFCA’s policy “is not in the public interest”.
Hutchison Telecom Hong Kong blasted OFCA’s “total disregard for public interest” and accused the regulator of ignoring public views and adopting “a pre-determined stance”.
With Hong Kong’s four 3G spectrum licenses set to expire in 2016, OFCA said it was faced with three choices: renew all of the licenses, take them all back and re-auction the spectrum again, or let licensees pay a spectrum usage fee (SUF) to keep two thirds of their spectrum, and auction off the remaining third to a new player.
OFCA favored the latter option, but the recommendation has been under fire from the city's four existing 3G licensees, who have spent the year commissioning several studies to make their case. Two key studies from Plum Consulting said OFCA was severely underestimating the impact of the proposal, saying it would result in poor 3G service and higher prices for consumers. Plum recommended that everyone simply have their 3G licenses renewed.
However, OFCA disagreed with Plum’s results [PDF], as well as its calculation methodology. For the most part, OFCA said Plum’s conclusions fail to take both the existence and rapid growth of 4G into account, and the fact that cellcos are already selling integrated 3G/4G plans, as well as handsets that can use both networks:
If MNOs find that their 3G networks are congested, they may develop this strategy further to move even more data traffic to their 4G networks to ensure satisfactory service quality and better user experience …
… In view of the current market situation therefore, a more objective assessment of service impact should, in the CA’s view, take into account the entire mobile network encompassing the 2G, 3G and 4G networks. Plum’s approach of restricting the assessment of service impact to 3G networks only, when it is commercially and technically viable for the MNOs to serve their customers using both the 3G and 4G networks and the MNOs are actively migrating their 3G customers to their 4G networks means that its findings would be incomprehensive, misleading and unreliable.
In other words, OFCA’s argument is that by 2016, cellcos will have more than enough 4G capacity to offload 3G traffic – to include refarming 2G spectrum for LTE – to minimize the impact of spectrum reallocation on existing 3G services.