Operators hope for an investment-favourable environment as they wait to analyse details of auctioning mechanism
In the coming months, Ofta will face one of its most important regulatory challenges: fostering a favourable environment to ensure continuing investment in 3G technology and services.
Agnes Nardi, managing director of Hutchison Telecom, says service operators will be watching closely in the next few weeks as the regulatory agency clarifies a number of crucial issues that will have a direct impact on the roll-out of the new technology.
Among the most important in her view are details of the auction rules that are likely to affect the final price of the 3G licences.
On Friday, Ofta confirmed it would organise the auction around a bidding mechanism known as the 'fifth leaver rule'. Under this system, the auction will continue until four bidders remain. The last price, posted by the departing fifth bidder, will be used to set the licensing price for all four 3G licences.
Ms Nardi said Ofta's decision was a 'fair and effective licensing method', and called upon the agency to release details of the process as soon as possible.
She would not speculate on how many bidders would compete, saying the number would be affected by the pending information. 'We hope Ofta will release the Information Memorandum containing the auctioning materials as soon as possible, so that interested parties have time to analyse the details,' Ms Nardi said.
The rules will set the targets for such issues as coverage, minimum roll-out requirements, and a number of other issues that will affect the initial cost of rolling out a 3G network.
Legco is expected to pass 3G approval on July 11, followed by a two- week period for potential bidders to examine the rules and procedures. The actual auction is expected to go ahead in September or October.
Ms Nardi expressed concern about the government's royalty fee approach, saying the system would create uncertainty for operators.
'We have been saying all along that it's preferable to pay cash up front in one lump sum payment. It is simple, and this is the way it's been done in other countries,' Ms Nardi said. 'And the government will know exactly how much they have raised from the auction process. There's also more certainty from the operator's perspective in terms of the cost of obtaining the licence.'
She conceded, however, that the royalty fee approach has been basically accepted, and that network providers were prepared to live with the formula.
Ms Nardi credited Ofta with foresight in limiting the number of 3G licences to four, saying this would allow each network provider 15MHz paired spectra and increase service quality.
She applauded the authority's decision to award the licences on the basis of an auction, instead of the so-called 'beauty contest' or merit system.
Hutchison Telecom is the largest mobile telecom operator in Hong Kong, with a subscriber base of 1.7 million.
Over the years, Ofta has established a solid track record of setting the right regulatory framework to place Hong Kong on the cutting edge of the telecommunications revolution, Ms Nardi said.
These include the establishment of a framework that has fostered one of the world's most technologically advanced and cost-effective telecommunications networks.
'I think we have to give due credit to Ofta for what it has achieved,' Ms Nardi said. 'Ofta has encouraged different technologies and different standards to be developed in Hong Kong.
'We would like Ofta to continue to provide a good environment for Hong Kong's mobile and telecom industry as a whole, encouraging investment, service innovation and excellence, and with minimal regulatory intervention.'
She cautioned, however, that excessive price competition had eroded service quality.
'We may say that currently the mobile market is overly competitive to the extent that it is very unhealthy. It is price driven, rather than based on service.'
