The government's plan to seize and auction off chunks of 3G mobile spectrum will act as a new tax on the sector and significantly raise the cost of mobile telecommunications services, according to HKT, the largest telecommunications network operator in Hong Kong.
Alex Arena, the group managing director of HKT, which is owned by PCCW, said: "They [the government] said the prime objective [for the plan] was to get maximum value for the spectrum. But you will have to pay for the consequences, since it effectively imposes a tax on all consumers."
The city's four leading mobile network operators, HKT, SmarTone Telecommunications, CSL and Hutchison Telecommunications Hong Kong, have called on the government to follow international practice by renewing their 3G spectrum allocations in the 1.9 gigahertz to 2.2GHz band, which are due to expire in October 2016.
Arena said the government's plan would increase spectrum prices "up by 500 per cent from what we currently pay", which HKT estimated could add HK$20 to HK$30 to a mobile subscriber's monthly bill.
"We can't cook noodles without water and we can't provide telecoms services without spectrum," Arena said. He said the government should not pretend that what it is doing is for the consumers' benefit.
HKT calculated that each subscriber's monthly bill currently included a HK$19.50 total charge on various fees that the operator pays to the government, the MTR and the tunnel operators. This cost will increase as the government raises spectrum charges and the MTR and tunnel operators increase their fees.
In the initial industry consultation held by the Communications Authority last year, the government presented three options on what it might do with the expiring 3G spectrum licences: renew them at a reasonable fee; put the 3G spectrum up for public auction; or take a third of each of the operators' 3G spectrum allocation and auction these off.
The Secretary for Commerce and Economic Development, Gregory So Kam-leung, said in December that the third, so-called hybrid, option should be adopted.
The plans have been put out for public consultation, which closes on April 11. A decision is expected by October this year, which would give three years' notice to the four operators.
China Mobile, operator of the world's largest wireless network, with 720 million subscribers, has expressed support for the government's plan and indicated its intention to bid for the re-assigned 3G spectrum. It currently provides local 3G services by leasing network capacity from HKT and CSL.
The South China Morning Post reported on March 13 that the government's implementation of the hybrid approach may spur the four affected network operators to mount a legal challenge.
Arena said: "Hopefully, we can get to a sensible conclusion to this before we get anywhere near lawsuits."
He said that the government has enough lead time to implement a spectrum trading platform, which the industry favours since it would create an efficient secondary market for available spectrum. The United States, Britain and Australia have spectrum trading mechanisms in place. The setup would be similar to how the property sector has a secondary market for developers to buy land.
Hong Kong's four leading mobile network operators are likely to step up the rhetoric against the government's spectrum re-assignment plan at a Legislative Council meeting scheduled for this Wednesday.