Thai 3G: looking at the ombudsman's lawsuit

13 Nov 2012

There is a lot of misunderstanding flying around with the 3G auction situation in Thailand. I spent hours reading through the pages and pages of the lawsuit filed by the Ombudsman against the National Broadcasting and Telecommunications Commission and nowhere does it refer to collusion by the bidders or that the reserve price was too low.

There is also no doubt that the current concession system is a mess; it gives far too much power and money to the state telcos who have grown fat and idle over the years living off the concession revenue. Licensing needs to happen if the country is to move forward.

In my opinion, what should have happened was that the concessions needed to be terminated first, or agreed to be terminated at the same time. In this way incentives for the status quo to continue - an incentive verging on $3.3 billion a year in revenue share - would disappear.

After next year, revenue share less costs and USO projects will need to be returned to government coffers. That only means that Thailand can expect huge USO roll-outs come 2013. With so much at stake, it is hardly surprising that the situation has descended into the farce we see today.

But remember what happened last time? Of course you do, only it did not really happen as you remembered it.

Two years ago, the administrative court halted the 3G auction. Mainstream media reported that the court said the regulator at the time, the national telecommunications commission, did not have the authority to conduct the auction. That was actually a fudge that was put out there only to help the regulator save face.

What the court said was simply that the frequency allocation act stipulated that the regulator could hold an auction only after a number of prerequisites had been met, key among them to have a frequency map ratified and published in the royal gazette. The NTC had not issued a spectrum map, and thus an injunction was granted halting the auction.

What was interesting was that after the ruling, the regulator played the part of difficult child by stating it could not issue import licences for equipment and even phones, as it might not have the authority to do so. All of it was a huge PR stunt to divert attention away from its own failings and, judging by the collective memory of most of the people around me today, it worked.

Today, the same thing is happening. There are just three accusations that have been accepted by the court and none of them involve the one point that the regulator is shouting loudest about. The regulator and the three telcos have gone to great lengths to prove that there was no collusion. None of the three accusations in the lawsuit accepted by the administrative court so far involve collusion so of course they regulator will be cleared of collusion in the court of public opinion.

There is another complaint initiated by the ministry of finance, currently with the counter corruption commission, that accuses the NBTC of designing a fixed auction. But again, that one does not say that the bidders colluded in the bid.

The lawsuit by the ombudsman is a nightmare of a document to digest, but after many hours of reading through it, the document boils down to three separate points, each with a differing level of confidence attached to it.

The first is the scope of authority of the 11-member NBTC versus its 5-member telecom sub-board.

The allegation (made from the senate) is that the five-member board did not have the authority to ratify the auction (which it did). Rather, that authority is bestowed on the full eleven-member NBTC board by the constitution and that full board was never convened. The key argument is the NBTC cannot delegate its constitutional responsibility to what is effectively a third party even if it wants to.

The defence from the regulator is that the full board empowered the sub-board to conduct the auction and issue the licences.

However, here the wording of the ombudsman becomes almost apologetic. It details how the NBTC, as an independent organisation, cannot be summoned for questioning by the office of the ombudsman. However, the basis for the lawsuit lies in the ombudsman act itself. A clause says that if there is a problem with gathering information, then the ombudsman is to forward its findings and comments to the court and have the court take the matter forward for further investigation using its powers.

In other words, the ombudsman is telling the court that it has nothing to add, but here is the complaint from the senate, and that it is up to the court to deal with it. Hardly a lawsuit to send people scurrying into the cracks in the ground, but, like it or not, it has been accepted.

The other two points in the lawsuit both center on the non-auction, and here the ombudsman is much more assertive in its allegations.

The court document goes into detail about how article 47 of the constitution and articles 41 and 45 of the frequency allocation act empowers the regulator to allocate frequency in a way that is, among a long list of objectives, free, fair and competitive.

However, the auction as it turned out (with three bidders, 45 MHz up for auction and a 15 MHz spectrum cap), was not one for spectrum allocation, but simply for picking spectrum slots first. If, as it turned out, there was no wish to pick spectrum slots over another, then there is no competition. The auction would thus not be compliant with the law that calls for it to be be free, fair and competitive.

The lawsuit then goes on to the reserve price. If there was competition, then there would be no need for a reserve price or even a lower reserve price as it would result in a high, competitive bid. The fact that there is no competition is itself again a failure of the regulator under its duties to promote a free, fair and competitive market under the constitution.

Here is must be stressed the lawsuit did not say the reserve price was too low, rather it said that had the auction been designed properly, a low reserve price or no reserve price at all would have resulted in more activity and a fair price being reached.

The document also goes into detail on how the NBTC and NBTC secretariat has at its disposal extensive resources to study and model the market and could have been have been able to predict the auction situation. That only three bidders would be bidding without real competition was a prediction that many had made months before the auction happened).

The ombudsman’s lawsuit then summarises that the NBTC and NBTC secretariat broke those articles (47 of the constitution, 45 and 41 of the frequency allocation act) and asked the court to annul the auction notification.

It also asks the court to hold an emergency hearing and issue an injunction until a verdict is reached.

So what happens next?

There is no rush. Many were holding their breath for an injunction today, but the NBTC’s own internal investigation into collusion (not that anyone accused them of such) has just asked for a two-month extension before reporting its findings. That would put the date back to early January before the NBTC issues licences, which is in-line with the frequency allocation act’s own rule that licences have to be issued within 90 days of the auction being ratified.

The telecoms sub-board ratified the auction results on 18 October so that would mean a January 16 deadline.

If the ombudsman’s lawsuit is upheld, it would probably mean that the auction notification is annulled and quite probably a new regulator will have to be selected to hold the auction, a process that could take years.

Of course, the court may just say that the regulator acted within its powers of discretion and not cancel the auction, in which we can expect licences to be issued soon afterwards.

In the meantime, the media war in the court of public opinion rages on - and it is one that that is fraught with fear, uncertainty and doubt. The 3G price cap is one case in point, and quite how the bidders will react to a price cap just after a bid is questionable.

Meanwhile the people want 3G. A recent article in a high-brow daily newspaper Matichon told them that slow speeds today are because it runs on 850 MHz, whereas real 3G on 2100 MHz will be be 42 Mbps. Yes, yes and unicorns dance on rainbows too.

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