Critics slam 3G 'giveaway'

Thailand's long-overdue sale of third-generation (3G) mobile spectrum bandwidth has attracted a storm of criticism.

Published: 17/10/2012 at 12:00 AM

Academics and politicians alike slammed telecom regulators Tuesday for essentially gifting new licences to the private sector at taxpayer expense.

Tuesday's 3G auction by the National Broadcasting and Telecommunications Commission (NBTC) saw all three mobile operators awarded spectrum in an auction criticised as uncompetitive and underpriced. The sale fetched 41.625 billion baht overall, only 1.125 billion or 2.78% above the reserve price.

The three bidders, all representing units of mobile operators Advanced Info Service (AIS), Dtac and TrueMove, each won their maximum quota of 15MHz of spectrum in seven rounds of bidding that were completed in six hours. Only three of the nine slots auctioned attracted competition, with six slots, representing 5MHz each, selling at the minimum reserve price of 4.5 billion baht.

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Green Politics group leader Suriyasai Katasila, who last week sought a court injunction against the auction, blasted the results.

"It's the most ridiculous auction in the world," he said, adding that the operators will pay less for 3G than what they now pay the state each year through their current concessions.

"Six licences were given out free to the private sector, correct? And three licences saw bids only to create the illusion of competition," he said.

Mr Suriyasai said Green Politics would wait until the NBTC certifies the auction results, due within three days, before deciding its next move.

Settapong Malisuwan, chairman of NBTC's telecom committee, said the auction was not aimed at generating the highest bids, but rather to allocate bandwidth to the private sector to support the modernisation of the Thai telecommunications sector.

He acknowledged that the regulator would likely face heavy criticism in the days ahead.

"We expect and are ready for some harsh criticism," Col Settapong said.

Somkiat Tangkitvanich, president of the Thailand Development Research Institute, said the regulator holds clear responsibility for the low prices received.

The total loss for taxpayers is over 16.3 billion baht, based on price recommendations made by Chulalongkorn University economists hired by the NBTC to consider benchmark prices.

"I call on the NBTC to explain to the public how will it take responsibility for the damage. I also urge relevant agencies to investigate the matter further," Mr Somkiat said.

The revenue shortfall to the NBTC and the state is a boon for the three private operators, who essentially have received their 15-year licences for a pittance, he added.

"Each operator ends up paying less than one billion baht a year for the licenses, which is very cheap. It will not benefit consumers. It will only help the operators' bottom line," Mr Somkiat said.

"There were two disastrous mistakes in the auction design. First, allowing each bidder to bid for an equal amount of maximum bandwidth did not encourage competition. Second, setting the reserve price lower than the real value of the licences was highly damaging once competition was less than it should have been."

Paiboon Amornpinyokeat, a technology expert and partner with the P&P Law firm, said the auction price may be the cheapest in the world for a 3G licence over the past 15 years.

He said it was highly possible that the Administrative Court may review the petition filed by Mr Suriyasai and the Green Politics group challenging the auction as uncompetitive.

Mr Paiboon suggested that Mr Suriyasai refile his petition about potential misconduct, adding that the court has full authority to void the auction results if wrongdoing is found.

But any action against the NBTC auction should occur within the 90-day timeframe before the results are formally certified, and certainly before actual 3G services are rolled out to limit the impact on consumers.

"The NBTC needs to clarify why it decided to use a simultaneous ascending auction system, which clearly didn't stimulate price competition as the number of bidders equalled the number of licensees," Mr Paiboon said, adding that the regulator also should clarify why the reserve price was set below that recommended by experts commissioned by the NBTC itself.

He noted that in Europe, sealed bids were more common in cases where the number of competitors was low.

Prawit Leesathapornwongsa, a NBTC commissioner who had opposed the auction design, said the state ultimately was the loser in the auction and warned that competition laws may have been violated.

"The outcome was as bad as I had feared. I think the Green Politics group will probably move next to the National Anti-Corruption Commission," he said.

"The [NBTC] commissioners who voted in the majority for the auction must take responsibility."

Dr Prawit said the NBTC would most certainly exercise greater caution in the future when additional bandwidth is offered for sale.

Jesada Sivaraks, secretary of the NBTC vice-chairman, said the auction results would be used to set a benchmark for the upcoming auction of frequency in the 1800MHz band.

TrueMove now uses 12.5MHz of frequency in the band under its 2G concession set to expire in September 2013.

Dr Somkiat from the TDRI said the NBTC needs to adjust the structure of the auction, and suggested scrapping the current 49% foreign shareholding limit to encourage foreign operators to enter the telecom sector.

AIS, through subsidiary Advanced Data Network, paid the highest price at 14.625 billion baht, and was given first choice and selected the frequency band from 2140-2155MHz. Dtac and True both offered the same final bid at 13.5 billion baht, resulting in a random draw won by True, which selected the band from 2125-2140 MHz. Dtac was awarded the final band at 2110-2125 MHz.

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Discussion 1 : 18/10/2012 at 06:30 PM: Why doesn’t the Green Politics group do what the name says: Green politics! Reforestation, emission cuts and more parks (green lungs) in urban areas; that would help, and maybe other group could work out to get 4G so we could proudly say we belong to the developed part of the world.
Discussion 2 : 17/10/2012 at 03:26 PM: Keep in mind that whatever the auction price is, it will be priced in to what the consumer have to pay. So at the end this is just another tax for the consumer. Also the telcos have not been able to offer real 3G for the last 10 or more years (Germany auctioned the frequencies in 2000). Thats 10 years lost revenue and tax. It would make sense to do the same process tomorrow with 4G (LTE) licenses. 10 years again of lost tax revenue and innovation will is a bigger damage than cheap frequency giveaways that will be paid for by the consumer.
Discussion 3 : 17/10/2012 at 02:10 PM: D12: A very insightful, albeit depressing perspective. Opening the telecom market to real competition would be a boon to the consumers, but is extremely unlikely to happen under the current regime. After all we know to whom we owe the 49% share limit in the first place, don't we?
Discussion 4 : 17/10/2012 at 12:49 PM: should go straight to 4G instead
Discussion 5 : 17/10/2012 at 12:17 PM: D18 : Thank you. Nice that at least one person is awake. 17 commentators missed the point completely and if I hadn't woken up so late,I would have added to that number. From the look on the faces of these CEO's,I'd say we have been cheated. The critics are correct in slamming this "auction" as a giveaway. Thailand once again lost,while big corporations with political connections won. Nothing new here.
Discussion 6 : 17/10/2012 at 12:09 PM: I'm still happy with 2G, does everything I need.
Discussion 7 : 17/10/2012 at 11:39 AM: Bangkok Post, may I forward a question ?. Will this now improve your service ?, because presently it is sometimes a long and frustrating ordeal to get connected to your web site.
Discussion 8 : 17/10/2012 at 10:08 AM: D 13 and others are saying things like: "How is 27 billion baht free for old technology...". They fail to understand, seemingly, that the auction is NOT for the technology, it's for the BANDWIDTH. Worldwide, the electromagnetic (radio) spectrum is defined as belonging to the people, only administered by local national governments, theoretically for the benefit of ALL. When private enterprise seeks to use part of that spectrum, they are supposed to pay for that use. They are also supposed to use the frequencies they inhabit for the benefit of the true owners - the people. Well, that's the idea, anyway.
Discussion 9 : 17/10/2012 at 09:24 AM: Eric14: don't exhale too much with that sigh of relief. I still can't get any of the phone operators to provide me with an Internet connection to my house after years of trying and I live in a village near a major city... Then we were on a boat about 5km from land a few weeks ago when my son exclaimed 'look Dad, 3G on your phone, we can't even get that at home'.... And this lot claim they'll be providing 3G to 80% of us within 2015 !!??.....pass the O2 please !
Discussion 10 : 17/10/2012 at 08:10 AM: It could be said that they have caught up with the dinosaurs.
Discussion 11 : 17/10/2012 at 08:04 AM: D4 agreed! You get top dollar for an auction or sale by selling at prime time, this auction is about 5 years overdue, they've let TOT steal a march in the 3G industry, they screwed up the whole process so that it's still subject to legal challenge, 3G itself now has a very limited shelf life, and furthermore, the bidders (as pre-existing telecoms companies) can rightfully cite four years of opportunity cost due to delays, so that's the ICT Ministry's incompetence, this govt and the last.
Discussion 12 : 17/10/2012 at 08:03 AM: As a member of the business community, I have held my breathe for just toooo long for the realization of 3G. Whew! Finally here albeit still behind the technlogy curve. The euphoria easily outweigh the complaints. Save the complaints for the 4 G which will arrive real soon now that we have the 3 G technology.
Discussion 13 : 17/10/2012 at 07:21 AM: Quote Green Politics group leader Suriyasai Katasila, who last week sought a court injunction against the auction, blasted the results. Only three of the nine slots auctioned attracted competition, with six slots, representing 5MHz each, selling at the minimum reserve price of 4.5 billion baht. "Six licences were given out free to the private sector, correct? And three licences saw bids only to create the illusion of competition," he said. I suspect that he failed maths at school. So 6 licences were given out "free" for 27 billion baht. How is 27 billion baht free for old technology which has been superseded in half the world already? And that half of the world is already working on the next generation.
Discussion 14 : 17/10/2012 at 06:56 AM: Most of the people who are complaining currently would have complained anyway regardless of the final bid price. Had all three operators paid Bt60bn for the three licenses, someone would have come out and say that "it's just one year's worth of concession payment - they should have paid 15 years X Bt40bn per year = 600bn"! We need to keep in mind that the opinion of these people do not reflect the opinions of the majority of the Thais, who are fed up with the whole 3G drama which has been around for nearly a decade and is a major source of national embarassment. The average phone user couldn't careless if the NBTC raised Bt40bn or Bt200bn at the auction. Most Thais - with the exception of perhaps a deluded few - knows that most of that auction money would probably be squandered on some useless / wasteful projects and siphoned off by the usual corruption process. Despite all the innane comments we're hearing in the news by various 'experts', the silent majority have no illusion about what's happening to their tax money. Many of the activist groups who are taking legal actions against the NBTC are closely linked to the labor unions of the telecom state enterprises who stand to lose from these spectrum auctions. Had this auction been held under the Democrat government, the TOT and CAT would have come out and sued the NBTC directly. As it stands, both state enterprises are under gag order from the Puea Thai regime not to interfere with the auction. As a result, we get to see all these complaints from the groups who are in essence acting as proxy for the state enterprises employee. Others who may not be linked to the Labor unions, are simply doing it to grab the headlines. In hindsight, the only thing that the NBTC has failed to do correctly was to make the rules more lenient towards foreign operators. The controversial Foreign dominance rules - sponsored by the you-know-who local operator - killed off any chance that we might see a genuine 4th operator in Thailand - and subsequently genuine price competition in the mobile phone service space for the next 15 years. If anything, the consumer rights group should be all over the NBTC about this. Sadly, these same people are the ones who are inciting anti-foreign sentiments and probably support foreign dominance rules in the first place. It must be such a confusing time for these so called activists...
Discussion 15 : 17/10/2012 at 06:40 AM: How truly small-minded + pathetic these critics are ... do they not realise how much face Thailand has lost over this whole issue? Yes, it's been reported even here in NZ ... it and makes Thailand look like a backward 3rd world country ... 3G? Most of the rest of the world has had it for years and whilst Thailand is starting to introduce it now [that's if these self-important naysayers don't hold it up further by their negative legal petitions] other countries are already getting ready to upgrade to 4G !!! Poor Thailand ... what a great pity there are so many doom-merchants who are able to grab media attention to themselves.
Discussion 16 : 17/10/2012 at 06:37 AM: Well..at least there is progress...that they are able to get money for this old technology is a bit of an accomplishment in itself. D8 : renaisance as usual you are assuming and inventing problems where none are, have you ever tried to rely on facts instead of hearsay or would it complicate life too much ?
Discussion 17 : 17/10/2012 at 06:05 AM: One should bear in mind that in Thailand the results of an auction like this are decided before the auction begins. Usually what you see happen is like a rehearsed play. The sale prices are most likely the result of a pre-auction meeting of all the participants with the usual encouragement for the people organizing the auction.
Discussion 18 : 17/10/2012 at 05:42 AM: "Dr Somkiat from the TDRI said the NBTC needs to adjust the structure of the auction, and suggested scrapping the current 49% foreign shareholding limit to encourage foreign operators to enter the telecom sector." I agree! Competition across the board is the key to lower (consumer) prices & better service. 4 G anyone?!?
Discussion 19 : 17/10/2012 at 05:37 AM: Too little. Too late. And nothing but complaints from those who didn't get enough of the pie. Truly pathetic.
Discussion 20 : 17/10/2012 at 05:30 AM: All costs will eventually lands on the consumers.
Discussion 21 : 17/10/2012 at 04:41 AM: What are we complaining about. Low auction bids mean low prices for Consumers! No good giving too much to Government where so much is just siphoned off. This is a real victory for the People who hopefully will now be able to afford the new prices away from the snatches of greedy politicians.
Discussion 22 : 17/10/2012 at 03:57 AM: Why would any company pay top dollar for near obsolete technology. 3G is currently being superceded by 4G which many countries will be adopting next year, after already having had 3G for the last 5 years. The critics sound like used car salesmen trying to tell you that a 10 year old car with 800,000 Kms on the odometer is like new and expect a high price from the customer. Wake up people, 3G is old technology and you missed the chance to get a good price and not be left behind by the rest of the world (again).
Discussion 23 : 17/10/2012 at 03:17 AM: Will this auction go into the guiness book of records as the worlds longest? 6 hours to sell 15 lots!!! C'mon lol
Discussion 24 : 17/10/2012 at 02:49 AM: Yes in Europe their were auctions for 3 g but the price was too high the phone companies thought they could ask what they wanted for their services so they bid high. But the consumers were slow to take up the 3 g and sales were slow. The price here semms ok yes they seem cheap as is said but many companies have learned that you just cant ask the customer to pay what you ask they wont do it. I hope the 3g is 3g if its anything like the rest of the internet in Thailand it not be worth the extra money we will see,time will tell.
Discussion 25 : 17/10/2012 at 02:23 AM: People, do not complain. The nonexcistance of 3G did cost Thailand dearly already. A alledged loss of 16.3 billion Baht is only peanuts compared to the combined losses of all the other Goverment dream sceames. As one of the last countries in the world, Thailand has finally joined the 3G family. At least I hope so., or are there some law suits brewing already?????

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