Hong Kong's telecommunications sector is headed for a shake-up that could test the patience of consumers and local network operators, after the government's decision to reassign the existing 3G mobile spectrum.
Industry regulator the Communications Authority yesterday said the government would auction off a third of the 3G spectrum currently held by each of the city's four incumbent 3G mobile network operators in the fourth quarter next year.
But the government will also offer the operators - SmarTone Telecommunications, CSL, Hutchison Telecommunications' Three Hong Kong and PCCW's HKT - right of first refusal to be reassigned two-thirds of the spectrum they now hold. Their licences are due to expire in October 2016, when each operator will make HK$151 million in royalty payments.
Ambrose Ho Pui-him, chairman of the authority, said this "hybrid" approach would "encourage competition and allow new investment to enter the local market. It is more likely to promote innovative services from new 3G spectrum assignees and the incumbents".
China Mobile, the world's largest wireless network operator, has expressed an interest in bidding.
The four operators expressed their disappointment late yesterday, as they raised the spectre of service degradation when chunks of their spectrum are removed from service in October 2016. SmarTone said the government forecast up to one-third reduction in mobile download speeds in busy areas.
"The government is doing the public a disservice by opting for a solution that degrades service quality to all mobile users and, due to the high spectrum fees, essentially creates a new and regressive tax on consumers," Alex Arena, the group managing director at HKT, said.
Hutchison Telecom accused the government and in particular, the Communications Authority, of total disregard for the public's interest.
"The unreasonable arrangements … suggest they have simply gone their own way and ignored public views, as well as the voice of the telecoms industry. It also seems that they have adopted a pre-determined stance," Hutchison Telecom said.
An industry source said the operators' lawyers and advisers would review the decision before considering their options, which may include litigation.
Additional reporting by Emily Tsang