MOBILE NETWORKS
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Regulation

HKT warns of higher industry fees amid government plans to raise mobile spectrum costs

PUBLISHED : Thursday, 22 December, 2016, 7:30am
UPDATED : Thursday, 22 December, 2016, 7:30am

HKT, the largest wireless and fixed-line network operator in Hong Kong, has warned that the “admin fee” charged by the telecommunications industry to each consumer would rise significantly by 2021, as the government continues to drive up the cost and limit the availability of mobile spectrum in the city.

Alexander Arena, the HKT group managing director, said in a press conference on Wednesday that the government’s focus on raising billions of dollars from higher mobile spectrum fees only threatens to further diminish the competitiveness of Hong Kong.

Based on the proposed reserve prices in its consultation paper published in February, the government could raise at least HK$10.8 billion from its planned auction of the 900-megahertz and 1800MHz spectrum used by mobile network operators in 2020.

“If the government is using [higher spectrum costs] as a way of taxing the telecommunications industry, then we will simply pass this tax on to the consumer,” Arena said. “We’re not happy about that.”

HKT estimated that the admin fee, which is billed alongside a user’s service charge, would increase to more than HK$30 a month by 2021, up from the current HK$18. That could amount to nearly HK$400 in admin fees a year paid by each mobile subscriber in Hong Kong, on top of their regular service charges.

If the government is using [higher spectrum costs] as a way of taxing the industry, then we will simply pass this tax on to the consumer. We’re not happy about that
Alexander Arena, managing director, HKT

The admin fee was first levied by mobile network service providers at HK$10 per customer each month in 2001. Since then, it has increased twice: to HK$12 in 2006 and HK$18 in 2014.

Arena said the admin fee was implemented by the telecommunications industry to deal with “certain costs that we cannot control, which are imposed by monopolies”.

Those comprise the so-called spectrum utilisation fee paid to the government; annual license fees collected by the Office of the Communications Authority (Ofca); fees to access, install and maintain networks throughout the MTR Corp’s rail network; and similar fees to operate their networks in the various road tunnels in Hong Kong.

In a joint statement last Friday, the Commerce and Economic Development Bureau (CEDB) and Ofca claimed the spectrum utilisation fee “only accounts for a small proportion” - about 3 to 4 per cent on average - of a mobile service provider’s overall operating expenditure.

Arena disputed that claim, pointing out that spectrum fees made up HKT’s second-largest expense - about 14 per cent - behind rental costs for around 3,000 mobile base stations that it operates.

“We’re a public company, so that number is based on our audited accounts,” Arena said. “We have no idea where the government came up with its three to four per cent estimate.”

In response, the CEDB and Ofca said on Wednesday that it was “groundless and misleading to attribute any increase of service charges by the operators to the possible adjustment of the spectrum utilisation fee”.

The government plans to initiate another public consultation next year on its proposed auction of chunks of mobile spectrum in the 900 megahertz and 1800MHz bands used by mobile operators, whose licenses will expire between November 2020 and September 2021, according to Ofca.

Arena said the fix needed by the industry is for the government to allocate more spectrum based on the industry’s requirements to keep costs down, while further building the infrastructure to meet future developments like 5G services.

The government has no new mobile spectrum available for release in its plan for 2016 to 2018.