Wireless technology proposal underlines need for less competition

PUBLISHED : Monday, 03 January, 2005, 12:00am
UPDATED : Monday, 03 January, 2005, 12:00am

If there's one thing Hong Kong's crowded telecommunications industry can surely do without this year, it's more competition.

Yet while last year ended with a flurry of merger speculation, this one begins with the promise of competition ratcheting up yet further as new high-speed wireless technologies take off.

Just before Christmas, the fraught subject of how to dispense the necessary spectrum was addressed in a consultation paper posted by the Office of the Telecommunications Authority (Ofta).

The potentially disruptive potential of WiMax and other emerging wireless technologies means the stakes are high.

The capacity for whole cities to be blanketed with super fast broadband has many predicting WiMax will be the catalyst that ends traditional distinction between fixed and mobile carriers.

Not only does the technology provide an alternative last mile solution, threatening broadband and cable incumbents alike, a progression to mobility also imperils third generation (3G) mobile carriers.

Or perhaps not.

It appears in the season of goodwill to all men, the regulator is readying to take the sting out of these combative new 'converging' technologies.

Ofta's preliminary position is that only fixed-line licence holders can bid for spectrum. Although the number of such licences is not limited, this distinction looks designed to keep new entrants and mobile operators out.

Mobile operators are not left completely empty-handed however, as at least their core business is protected as fixed wireless services will have 'no cell handoff capability'.

Intuitively, the term 'fixed wireless' sounds like an oxymoron. Contradictions also arise in practice. Would a WiMax powered personal digital assistant have to be disabled when used for a voice call outside the home?

For now at least, Hong Kong's 10 fixed-line operators are kept in one corner and six mobile operators in another.

Ofta does recognise that this segregation cannot last, as it includes the possibility that if fixed-line players want to untether their services, top-up spectrum fees will need to be paid.

The regulator is guaranteed plenty of submissions on a consultation paper that leaves many questions unanswered.

The risk is that by trying to direct the technology, its development is stifled, reducing consumer choice and leaving Hong Kong lagging further behind regional neighbours in advanced telecommunications services.

From a purely financial perspective, the regulator also leaves itself open to criticism in that government auction receipts will be lessened by setting limits on bidders and spectrum.

Moreover, seeking to separate fixed-line and mobile operators flies in the face of a growing trend of technology-driven convergence.

In South Korea for instance, both sets of operators are seeking such spectrum blocks that allows them to compete in one another's traditional turf.

Arguably, Ofta is trying to encourage investment in fixed line as Type II interconnection rights for fixed line carriers ends in 2008.

But this risks compromising commercial decisions on which business plan deserves funding - fixed or mobile carriers alike. Likewise, investors in new networks are likely to think twice if a technology's potential is dictated by the regulator.

It is perhaps understandable the policy has an unfinished look to it, with a wide-ranging consultation on spectrum due later this year.

As such, mobile operators are likely to realise the clock is still ticking down to when fixed-line operators come after their customers.

As things stand, the mobile operators appear more vulnerable when the convergence battle arrives.

If 3G operators are later allowed to deploy WiMax within existing spectrum - a policy under consideration in Singapore - things could be evened up somewhat.

Ultimately, whether Hong Kong's multiple fixed and mobile carriers are counted together or separately, the same conclusion is reached - there are too many.

Some form of consolidation looks increasingly inevitable this year and that is something Ofta's paper can delay only so long.