3G spectrum deprival may cost consumers, operators up to HK$15.5B

Consumers will bear the brunt of an estimated HK$15.5 billion in costs imposed by the government's plan to seize and reauction chunks of 3G spectrum now in use, according to a study commissioned by the city's leading mobile network operators.

It estimated data download speeds would deteriorate by an average of 27 per cent for 3G subscribers, worse than the 9 per cent degradation estimated by the regulator, the Office of the Communications Authority (Ofca).

"In the worst case, spectrum deprival could result in a 64 per cent increase in download times," Plum consultant Ken Pearson said yesterday.

The network congestion caused by that loss could set back mobile services in the city "by a few years", he said.

With the release of Plum's findings, the city's four incumbent 3G network operators appear to have taken a last stand against the spectrum reassignment plan before the government announces its decision next month.

SmarTone Telecommunications, CSL, Hutchison Telecommunications Hong Kong and PCCW's HKT have argued that the government must follow long-standing industry practice and automatically renew their 3G spectrum licences on the 2.1-gigahertz band.

The licences are due to expire in October 2016.

The government, however, has proposed a so-called hybrid option in which about a third of each operator's 3G spectrum allocation will be seized and auctioned off to promote more competition in the industry.

Plum's cost analysis of that plan's impact included HK$5.4 billion that subscribers would spend to upgrade to 4G services in light of the service degradation and buy new smartphones; operators' HK$708 million investment to bolster their 3G networks against disruption and HK$145 million to expand their 4G networks to accommodate new users; and Ofca's proposed "spectrum utilisation fees", which are likely to be borne by consumers in the long run.

Those fees included HK$77 million per megahertz for the 80MHz of spectrum expected to be retained by each network operator, as well as a reserve price of HK$77 million per MHz for the 40MHz of spectrum that the government plans to reauction.

China Mobile, the world's largest wireless network operator, has expressed interest in bidding for the reassigned spectrum. But Plum consultant Tony Lavender said whoever acquired the reassigned spectrum was likely to redeploy it for 4G services.

In a statement, the network operators said: "While the 3G operators have provided input to Ofca's consultancy study, they have not been allowed to view the final results or comment on the conclusions reached by the government's consultant."

They said they hoped the "impact assessment" made by Plum, an industry specialist that advises regulators around the world, would "allow for a more informed public discussion".