Ringing tills

Now that the British Government has pocketed GBP22.47 billion (HK$276 billion) through an auction of radio spectrums for the third generation of mobile phone services, it would be foolish for the Hong Kong Government to insist on giving away such spectrums free.

No matter that Canning Fok Kin-ning, managing director of Hutchison Whampoa, one of five winning bidders for the UK licences, said an auction would push up operating costs. The company's willingness to pay GBP4.38 billion to buy a licence and spend a further GBP5 billion to build up a service is proof that the business is considered lucrative enough to be worth a big up-front investment.

An auction is the best way of ensuring a commodity goes to a bidder most likely to put it to the best use. This is the argument that local officials deploy to defend the practice of selling government land by auction. The price of land is high, they rightly argue, because demand for it is high, not because the bidding process drives up values.

So it defies logic for them to argue otherwise in respect of scarce radio spectrums.

Certainly, the high costs of obtaining a licence will be passed on to consumers. But irrespective of the way the licences are awarded, operators are likely to price their services according to how much customers are willing to pay, not how much they cost to provide.

Some successful bidders may turn out to regret the large sums they paid for their licences by failing to provide attractive services. They may go bankrupt. But that would be capitalism at work.