Why mobile operators oppose Hong Kong's 5G policy

June 20, 2018 13:51
Adopting 5G technology will benefit the entire society, not just the four mobile operators. Photo: AFP/Reuters

Hong Kong has one of the world most competitive telecommunications markets with the highest penetration and cheapest service fees, thanks to the government's free-market policy.

In line with such a policy, the government is keen on holding auctions to assign spectrum to mobile operators, a method that also ensures massive revenue for the public coffers.

The government has just completed a consultation on its proposal to assign the 3.5GHz band spectrum for the introduction of 5G mobile service use in Hong Kong in 2019.

The spectrum will also be assigned through auction, as has been the policy since the early 2000s when 3G technology was introduced in Hong Kong. The government is expected to raise at least a billion Hong Kong dollars from the exercise.

Mobile operators used to welcomed the holding of an auction to assign spectrum, seeing it as the fairest way to gain access to the business. The method also enables new players and investors to enter the market.

But this time around, three of four mobile operators in the city – HKT, Hutchison Telecom and China Mobile Hong Kong – have all expressed reservations about using auction to allocate 5G spectrum.

These players surely have sufficient capital to pay for the spectrum, but they are now urging the government to lower the auction fee and are even willing to do away with an auction to avoid spending so much for spectrum even before they start operating the business.

The reason for their new attitude towards auctions is that they see no way for them to turn their 5G investment into revenue.

China Mobile Hong Kong notes that the amount of money one has to invest to operate a mobile network in the territory is quite high, while the business case for a 5G network remains uncertain.

Given this consideration, the state-owned company thinks it is doubtful whether new players would like to enter the market and compete for a spectrum in the 3.5GHz band.

So instead of holding an auction, the Communications Authority, the city’s media and telecommunications regulator, should consider assigning the 3.5GHz spectrum to incumbent operators.

This will encourage the fast deployment of 5G technology, which in turn will support smart city development in Hong Kong.

Hutchison Telecom also supports the idea, suggesting that incumbent operators be given priority in assigning the 5G spectrum.

For its part, HKT said the government should consider assigning the 3.5GHZ band equally among the four existing players, preferably in blocks of 50MHz.

This would be a perfectly acceptable course of action and ensure that the needs of the market are fully met since an auction cannot guarantee that the operators would be able to secure a minimum of 50MHz each.

SmarTone said it had no particular comments on the matter.

The government, however, insists that Hong Kong remains a leader in 5G development, even though other markets like the United Kingdom, China and South Korea have already assigned or auctioned 5G spectrum to operators and preparing for the commercial launch of 5G service as early as next year.

Last week, Chief Executive Carrie Lam Cheng Yuet-ngor said the Hong Kong's 5G development is in line with efforts by other advanced economies to make the service available to the public by 2019 or 2020, noting that the SAR government has already assigned the high-frequency band (26-28GHz) for 5G use next year.

The Hong Kong leader also blasted at "vested interests" who are pushing for a faster rollout of 5G service, saying that the public should pay attention to the real reasons behind their call.

In short, Lam has viewed the mobile sector's clamor for a faster 5G rollout negatively, despite the fact that some of the leaders of the industry have supported her in the chief executive election last year.

The high-frequency band that she is talking about is only good for short-range high-speed data usage like Wi-Fi service, but not for wide extensive coverage that a 3.5GHz band provides.

The fact remains that 5G technology will benefit the entire society, not just the four mobile operators. Besides, it will support a key platform of her administration, that of transforming Hong Kong into a smart city.

If we fail to secure extensive 5G coverage, Hong Kong would become a joke of a communications hub.

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EJ Insight writer