• Sat
  • Dec 20, 2014
  • Updated: 12:58pm
Jake's View
PUBLISHED : Tuesday, 12 March, 2013, 12:00am
UPDATED : Tuesday, 12 March, 2013, 4:34am

Keep telecoms firms on long-term deals

Allowing new player in the mobile-network market will not bring more competition but service disruptions and higher charges


Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.

Our public officials like to crow that Hong Kong's telecommunications are the most competitive in the world, and they can indeed congratulate themselves on the transition from a stodgy, consumer-gouging monopoly 30 years ago.

But whether the accolade will continue to be deserved is now in question.

Things look suspiciously as though the authorities are willing to tolerate higher tariffs and lower service standards in order to please interests across the border.

The circumstances involve the expiry in 2016 of licences for the 3G mobile services that now carry the bulk of Hong Kong's mobile-phone traffic.

A decision on the structure of these licences post-2016 must be made by October. The four existing operators will otherwise have little incentive to continue investing in networks that they may shortly lose.

Three options have been proposed. The first is to grant existing operators first refusal on their licences post-2016, which effectively means straight-through continuity for them. The second would put all the licences up for a new auction to all bidders. But the third option is the important one here, as it is favoured by the Communications Authority. It is to take about a third of the spectrum away from the existing operators and auction it to an unspecified newcomer.

There is actually no difficulty in specifying the newcomer. It will be China Mobile, which has already announced its interest and already offers 3G services by leasing time from the existing operators. It cannot get its own direct access, as the 3G spectrum is saturated.

Superficially, it seems an acceptable proposal, but there are several things wrong with it.

In the first place, it will not bring more competition. The four existing operators already compete fiercely. If anything, there are too many suppliers in this market.

It will also cause service disruptions as the existing operators find themselves having to serve their full clientele on networks that have suffered a cutback in spectrum.

This will particularly be true in the first three years as the new operator builds out its network without yet being able to offer full services on it. Mobile services on the MTR will be most affected.

Finally it will bring general tariff increases. A third of the infrastructure investment in the existing networks will have been made redundant but must yet be paid for.

It makes no sense and reminds me of the time a few years back when the government commissioned a study on whether the big oil companies were cheating us on petrol prices.

Although no evidence was found, the study's purpose was shortly made obvious when the government evicted existing operators of filling stations and turned them over to PetroChina and Sinopec. It wasn't done to benefit consumers.

The objective was to please Beijing.

I suspect much the same thing here. China Mobile wants in. It doesn't want to lease time or go to the expense of buying out an existing operator.

It wants in the easy way, and this way is to have a Mr Big in Beijing twist the arm of our Communications Authority.

The better way of doing things post-2016 is already apparent from practice elsewhere in the world. It is to let existing operators keep their licences on long-term agreements, with variable pricing to be decided by shorter-term negotiations.

In Britain, for instance, operators have been given perpetual licences. It doesn't give them absolute freedom, and it doesn't perpetually fix a price. It simply says that, unless circumstances change drastically, the regulatory authority will have no reason to revoke the licence and grant it to someone else.

And how much money should the public purse get from a mobile operator for such a licence?

Simple. It is whatever royalty (fee, lease payment, call it what you will) causes a licence to be valued at only one dollar in the marketplace by anyone bidding to buy out that licence.

This would tell you that the operator considers it only just feasible to remain in business and the public has extracted every cent it can get.

But I expect our existing mobile operators to shun this idea as much as they do the prospect of having to share the spectrum with China Mobile.



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This article is now closed to comments

Who own these telecoms companies? SHK, Hutch, PCCW & New World..... they profit handsomely from Mainlanders coming to HK to shop by raising rent to the sky, or by building ridiculus priced home to lured those gullible fools from the North & locals to buy from them..... you dont see them complaining about Mainland money when they are receiving it. Now they are the first line to be whining and crying that there will be "too" much competition..... what a joke.... if so why would PCCW rent its bandwidth to CM? Or why should they if it is overloading already and they can barely take care of their current demand? The fact is they want to earn money with gurantee of no further competition or risk.
Whatever argument this piece have is an exact clone of the 4 operators (so jake when have you become a spokesman for those operators?) and these are just recycled arguments from those who does not wish to see more competition and wants to maintain their profit margin. If they couldn't they should go right? No? why? Their parent company got a s.h.i.t load of property laundered money to back them up eventually.
John Adams
Jake : I don't use 3G or an Iphone or anything like that
But I did recently buy a new Nokia which I could use in USA, where all my previous mobile phones ( antique Nokias) did not work
The new Nokia cost me only HK$600 ( not Iphone- scale HK$6,000) and came with a color display and all sorts ot "I-phone- like" add-ons
So I happily took my new whatever-G phone to USA for a 3 - day business trip and used it to call my wife a few times, maximum 2- 3 minutes, plus a few SMS messages
Then I got a PCCW bill for HK$1,000 with an itemized roaming call time bill of about 10 lines !
Our company uses 009 : whatever service provider that is ( New World Telecom?) and we have a monthly phone bill which runs into tens of pages , hundreds of calls world wide / thousands of minutes, but we only pay about HK$2,000/ month
The biggest rip-off in the world is the roaming thing. When I'm in USA whatever service provider PCCW links up with there ( AOL?) charges about US$10 / minute. And vice versa when a USA - AOL customer comes to HK and roams.
Both PCCW and AOL ( or whatever ) laugh all the way to the bank because the actual cost to either of them for my roaming call is US$0.000001 / minute
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