Thai 3G: it comes down to this

30 Oct 2012

The various sides in Thailand’s 3G war of words have faced off in front of parliamentary and senate committees, the press and of course the court of public opinion. With each side standing their ground, now is the time to take stock and form an opinion.

In many ways the entire episode reminds me of Bill Clinton’s impeachment. Everyone remembers he was found guilty of sexual misconduct. Few remember he was impeached for lying to the senate under oath.

Likewise, the NBTC is accused of designing a fixed auction. The NBTC and the three winners of the bid are telling everyone that the bidders did not collude.

The only highlights were how one commissioner told the panel to slit his throat if he was wrong, only to be upstaged by another who swore to the gods that if he was corrupt for his family and parents never again to be reborn as human and to spend eternity as low level animals. One of those two drama queens is a lawyer, the other, with a PhD in engineering.

The NBTC actually asked the Ministry of Justice’s department of special investigation to investigate the auction for collusion. The department’s director-general said this was the first time in the department’s history that an organisation had asked his department to investigate itself. He also said that looking through the documents, there seems to be no collusion and he expected the case to be cleared quickly.

Under Thai government procurement rules, allowing bidders to collude carries a one to five year prison sentence. State officials designing an auction that is fixed carries a five-year to life prison sentence.

Another interesting quirk in the testimony was that the NBTC brought along an expert witness from the attorney general’s office, Jitnara Nawaratana, to the parliamentary hearing who testified that 10 MHz would not allow them to compete effectively. This contradicts earlier statements from Colonel Setthapong Malisuwan that he expected a number of new entrants to bid for a 5-MHz slot, target urban areas and MVNO themselves nationwide.

But more importantly, it was a shrewd strategic move in that if the regulator could get the attorney-general’s office to testify for them, who would be left to prosecute them?

Many have expressed their confusion as to the fuss about the auction. After all, the reserve price was met and Thailand desperately needs 3G. Not counting the politicians who have only just jumped on the bandwagon, there are three distinct groups that oppose the auction, most of which have done so since the spectrum cap was reduced back in August.

Academics, most notably Dr Somkiat Tangkitvanich of the Thailand development and research institute, feel angry that the auction has been botched despite their advice which has not only been ignored but overturned without due process. Many feel betrayed by the NBTC.

The design of the auction was open to public debate in a series of public fora. The final draft out of that lengthy process featured a 20 MHz cap to ensure competition. The NBTC changed that spectrum cap arbitrarily without going back to the public, instead asking for comments via email. It them rammed through the revised draft with a 15-MHz cap.

In other words, all the hard work of the pricing sub-committees and all the work of the public hearings was scrapped on a whim.

The reason cited by NBTC telecom chair Setthapong Malisuwan, that he prevented a 20-20-5 duopoly for the next 15 years, was not unconsidered in the hearings. During the early public hearings, an N-1 formula was discussed and thrown out as it clear that without new competition, the third player would only wait 90 days to go and get the spectrum without any competition, hence it would not lead to genuine competition.

Besides, that third placed player is the only one with a long-term 14-year contract on 15-MHz of 850, so even if did end in a 20-20-5 scenario, it would really be 20-20-20 anyway. One must keep in mind the bigger picture of all the major bands, 850, 900, 1800 as well as 2.3, 2.6 and 700 for LTE.

The second group that is very vocal are the political activists and the survivors of the Black May 1992 military crackdown on anti-junta protests that left at least 52 dead and hundreds injured. General Suchinda Kraprayoon staged a coup in 1991 accusing the previous government of buffet-style corruption, promising he would not become prime minister, then appointed himself prime minister anyway.

The idea for an independent regulator was born out of the Black May protests. The survivors see parallels between the military junta giving TelecomAsia, the precursor to True corporation, a concession for two million fixed lines and Thaksin Shinawatra's Sattel (now Shinsat) a concession for the the Thaicom satellite fleet and what is happening now with the 3G concessions.

An independent spectrum regulator, free from government control, would ensure freedom of press and provide checks and balances against abuses of state power.

After he left politics General Suchinda was rewarded for his generosity and became chairman of TelecomAsia.

But at another level, the 3G spectrum auction is but a prelude. It is the Hobbit to the Lord of the Rings trilogy. What is really at stake is TV and radio licensing due 2013. It is no secret that politicians on both sides want to retain control of the media and without the NBTC as an independent regulator, TV and radio fall under the direct control of the Prime Minister’s office.

It is said that the real reason for the Ministry of Finance's actions against the NBTC (its deputy permanent secretary having accused the NBTC of fixing the auction and asking the counter corruption commission to investigate the NBTC) is that the current government wants to get rid of this NBTC and replace it with another that is more subservient to its requests. Some go as far as saying that they want the constitution reworded so that the NBTC is appointed by the cabinet rather than the senate.

Then there are the businessmen who are growing more and more frustrated that every decision, every controversy is working towards domestic interests. The continued existence of foreign dominance notification, the weird (for lack of a better word) decision on the illegal TrueMove H 3G deal with CAT (easy, if it's illegal just re-write it with True so it is legal and nobody needs to be punished for breaking half a dozen laws) and now the 15 MHz spectrum cap.

Ultimately, the current mess is a symptom, not an event in itself. You cannot run a competitive auction if there is no competition and there will be no competition in the Thai market unless two changes are made.

The foreign dominance notification has to go. According to leaked US diplomatic cables, it was designed as an easy way to get at Shincorp’s assets by the military government at the time, worded under the umbrella of national security. That clause has been removed, which has left the FDN running around like a headless cockroach.

If the lone domestic player lost the 3G auction, would they have any reason not to use the FDN to make sure nobody won?

The wholesale market to backhaul access must be regulated. Right now, access to backhaul lies firmly in the hands of the two state telcos, CAT and TOT. The NBTC’s recent attempt to impose a 20% retail price reduction without any regulation on wholesale is a recipe for disaster (unless your name is CAT or TOT).

Without an open wholesale market, it would be impossible for a new entrant to come and bid. Indeed, it makes the current bid seem quite generous as it is a high-risk market given that everything depends on the whim of two spoilt, irrational state enterprises.

The NBTC should have spent the last year fixing these fundamental problems, not running around conducting road shows with rabbits and turtles talking about how great 3G is. It did not do its job and now Thailand faces a tough question: Forge ahead with this injustice or go back and fix the problem? Simply re-running an auction without revoking the FDN and imposing wholesale reform will not significantly change the outcome.

The five-member telecom board has ratified the auction and announced it will issue the licences soon. Many feel that is it the lesser of two evils; that pushing ahead with this mess is better than the deal with the devil that is the concession agreements with CAT and TOT.

After all that has been said and done, two powerful threats to the successful issuing of the licences remain.

Senator Paiboon Nititawan, after listening to testimony, says he remains unconvinced that the five-member telecoms sub-board has the authority to ratify the auction and rather that it has to be the full eleven-member NBTC board.

He has written to the ombudsman and if he agrees, the ombudsman will file a lawsuit against the NBTC at the administrative court.

The other outstanding threat is the one from deputy permanent secretary of finance Supha Piyajiti who says the NBTC broke public sector procurement rules in conducting the auction and by designing a fixed auction.

While there is little doubt that the auction did not follow usual government procedure, the question remains whether the NBTC is bound by the relevant acts as it is an independent organisation, not under the control of the finance ministry. This line of inquisition now lies with the counter-corruption committee.

The next few weeks will be riveting indeed.

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