Thailand's torturous road to 4G

15 Jun 2015

Will the 4G auction happen in Thailand this year? To hazard a guess, yes, but only after the trolls have been paid off first and that payoff will happen because the junta cannot afford to lose face after a dismal economic performance since coming to power.

The 4G auction refarming 900, 1800 and perhaps 2600 and even 2300 pencilled in for November and December this year, will most likely happen, but in order for it to happen certain vested interests would need to be appeased first.

With less than half a year to go before the auction, it is still unclear what exactly is up for auction. There should be two 10MHz paired slots on 900, but 1800 is still being negotiated.

As things stand, there are two non-contiguous slots of 12.5MHz (which would mean a waste of the 2.5MHz slice on each slot) and a further unused 25MHz chunk that CAT seems to think it owns. The regulator seems to think that defragmenting 1800 can wait for later, after the 15-year licences for 12.5 MHz have been issued.

What really is happening is that the powers that be would rather waste 5MHz of valuable 1800-MHz spectrum rather than allow Dtac to do the sensible thing and move its spectrum around to unlock another 5 or even 30 MHz.

Yes, 30. Dtac wants to shuffle its 25 MHz down to defragment the band and give up its other 25 MHz if it would be allowed to run LTE on its current 25 MHz concession that expires in 2018. Obviously, that is something the elite do not want to happen lest Dtac, gasp, actually has enough spectrum to run a proper network and provide a good service that people might actually like.

Only last Friday, CAT telecom told the NBTC it wanted to add 5MHz of Dtac’s recalled upper 25MHz block to the 1800 auction, but on its terms and without the defragmentation and without allowing Dtac to run LTE. Oh, the joys of partnering with Thai bureaucrats.

And 2600? As things stand, only MCOT, formerly the Mass Communications Organization of Thailand, is willing to give up its spectrum early and the amount available 120 MHz of unpaired spectrum (to quote a throwaway number by True CEO Supachai Chearavanont) would not fit into band 7 FDD/LTE 2600-MHz, rather it would only be useful for Chinese-style band 41 TDD LTE.

Well, not unless they can reclaim further spectrum currently held by the Public Relations Department and our old friend CAT Telecom, which could turn it into the much more standard band 7.

And therein lies the rub. CAT. But let me back up a bit and let us recall for a moment how CAT derailed the previous 3G auction at the 11th hour.

Back in 2010, the two state telcos had everything to lose if they let 3G happen. They were on 30% revenue share on their 2G concessions easily worth $3 billion a year. Allowing 3G to happen, even without ending the concessions, would mean their revenue would be decimated. Never mind that the revenue should have been given to the country to use on hospitals and schools, the mindset was that concession revenue belonged to CAT and TOT and they would do everything they could to protect it, and that they did.

CAT and TOT carpet bombed the courts, for lack of a better analogy, with lawsuits to try and stop the auction. Surprisingly it was one lawsuit by CAT that hit the bullseye and led to the administrative court calling an end to the auction that the auction could not proceed without a spectrum master plan.

Nobody really had thought about it prior to the auction and a plan could not be drawn up as it required both the telecoms and broadcasting regulators to agree, and by that time the broadcasting regulator still had not been established. So the auction was cancelled and CAT and TOT continued to swim in cash.

Fast forward to today and the same dynamics are still in play. Everyone seems to remember that the new NBTC act now calls for revenue share to be sent directly to the ministry of finance, but that is not exactly true. If one reads the actual law, the 30% revenue share is indeed to be sent to the exchequer, but minus a few items.

Costs associated with managing the concession can be deducted, as are anything ordered by the Ministry of Finance and any USO obligations. No wonder CAT has reshuffled much of its deadwood, sorry, I mean senior management, to positions managing the Dtac concession.

This can be seen in how CAT Telecom is trying utmost to make Dtac’s life difficult. Dtac’s concession ends in 2018 and it also has a 3G licence of its own. Recently, CAT won a court order forbidding Dtac from installing licenced (2.1 GHz) equipment on concessionary (1800 and 850) towers. Who benefits? Why, CAT of course. Who suffers? Dtac, and the people of Thailand, but nobody really cares about the people.

Away from CAT, the other party that has an interest in seeing the auction delayed as much as possible is the indigenous telco that currently has 25 MHz of spectrum thanks to accidentally rolling out a nationwide 850-MHz network without a licence that was later ruled unintentional and thus should not be punished.

Oh, and did I mention that True’s 850-MHz network is sort of run by CAT Telecom? CAT is the MNO and True is the MVNO, but CAT outsourced the network back to True and took a 20% cut of the capacity in what is a defacto backdoor concession.

But while the regulator views it as an unintentional accident, the national counter corruption commission has indicted the ICT Minister responsible for the True-CAT deal on charges of corruption. but I digress.

It does not take a rocket scientist to see that someone with 25MHz (long-term) would not want its 15MHz competitors to get more spectrum, at least not until it increases its market share.

So back to my point. Will the 4G auction happen? Yes, but not before the elite are rewarded for keeping out of the way and here I can only offer an educated guess.

The problem with an auction and a spectrum cap without knowing how 2600 will end up (valuable band 7 or niche band 41) is like going into a restaurant on a calorie controlled diet and having to order all three courses in one go without getting to taste the starter (900) and main course (1800) before dessert (2600). Only he who knows whether 2600 will be yummy (band 7) or yucky (band 41) will be able to play (eat) the starter and main course correctly.

So if AIS and Dtac go all in for 900/1800 (assuming we even know how much 1800 will be auctioned by the time the auction happens) and True gets not much, chances are the elite will suddenly get CAT to cooperate and return 2600 to turn the ugly duckling 41 into beautiful swan 7 by which time AIS and Dtac will be too full from the main course that they cannot eat dessert which will go on the cheap to whoever is left (plus a token third bidder to make it seem kosher). Plus then perhaps CAT will suddenly release the other 25 MHz of 1800 for bidding sometime early 2016.

If, on the other hand, AIS and Dtac hold back and True gets the lion’s share of 900 and 1800, then CAT only needs to continue to dig its heels in, keep the rest of 1800 in limbo and leave only low-value band 41 2600 for the evil Telenorwegians and Shingaporeans to squabble over in the next round.

In either scenario, CAT will need to be rewarded, probably with lots of cheap 2600 alongside True or perhaps even the 25 MHz of 1800 it wants, to stop it from throwing a tantrum. The military have already taken over key CAT board positions so they are in direct control of the state telco. Under the current law, all spectrum has to be allocated through auction.

Under the proposed new NBTC act, the digital economy commission can allocate spectrum for the greater good first and leave commercial spectrum for the NBTC to manage. Who is to say that the DE commission will not suddenly decide that CAT needs spectrum for do good deeds?

Elsewhere TOT will probably get 2300 (band 40) to do something and probably some cash too, but these days TOT is a spent force, hemorrhaging money and begging for scraps, and is easy to placate.

So that, ladies and gentlemen, is my guess on what will happen. Time will tell how close I am to the mark.

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