Jake's View

The head of HKT is saying something very different from his time as a civil servant... and the Communications Authority shouldn’t listen

‘Yes, auction that spectrum and ignore the squealing from HKT’

PUBLISHED : Wednesday, 30 November, 2016, 3:59pm
UPDATED : Wednesday, 30 November, 2016, 11:10pm

“Prices for consumers are very, very low in Hong Kong, yet we pay the highest spectral prices in the world. This is not an industry problem. The whole issue here is [the Office of the Communications Authority] and its consultation paper is focused on ... maximising money.”

HKT boss Alex Arena , Business, November 29

For a long period back in the mid-1980’s Hongkong Telephone, as it was then called, had a stock market value much higher than that of The Bank. Strange but true.

The reason was that while briefly under control of the Noble House, a Scottish trading firm that got its start in drug trafficking, HKT managed to secure an absolute monopoly on overseas telecoms traffic until 2006. How it happened I could never fathom, just one those colonial mysteries, I suppose. You know.

But as 1997 and the handover of sovereignty to China approached, clearly this would not do. HKT was still in British hands at that time, held by Cable and Wireless.

One of the people the government then chose to bring about the necessary changes was a certain Alex Arena, who did a superb job of helping turn an inexplicable monopoly into one of the world’s most competitive telecoms environments.

Keeping that price low will not, in fact, benefit the consumers. The networks will always charge as much as the market can bear, whatever they paid to have access to that market

And now, as HKT’s managing director, he takes a stand against competition. Don’t you just love irony?

I readily confess that I’m a digital dinosaur. My mobile is an old fashioned Nokia with a built-in alarm clock, which is the only difference from the one I had 20 years ago. I’m so behind in these things that yesterday I had to go to the shop to get my sim card put back in that phone. My rule: If it ain’t got an on/off switch it ain’t me. I can about handle a light bulb.

But we are not talking about digital technology here. We are talking about money. Mobile phone networks do not own the electromagnetic spectrum over which they operate. They lease it from the government and the leases on 40 per cent of that spectrum come up in just over three years time.

How shall we then proceed? Shall we just renew the licences with a fee established by the Communications Authority (CA)? Should we allow newcomers to apply with a right of refusal by the present operators? Or should we award these licences through auction?

The CA’s choice has been the third of these options unless the present operators can come up with a good reason why this won’t work. They have not done so.

They say that they have, of course, particularly HKT, which has the most at stake, but, in my opinion, they continue to evade the real issue.

The spectrum is as much a public asset as the public land that we regularly lease to private users by auction. The government has a responsibility to release it so as best to meet the public’s needs but, with that purpose served, its object must be to get us the best possible price for it. As in property, so in the spectrum.

Keeping that price low will not, in fact, benefit the consumers. The networks will always charge as much as the market can bear, whatever they paid to have access to that market. A low licence price will just result in a big boost to the operators’ profits.

I accept that they have a case for asking the government to release more spectrum held in reserve but this does not say it has to be cheap.

And when all the available spectrum is allocated the time will certainly have come to charge the limit for its use. The operators themselves will undoubtedly do so, setting their tariffs ever higher to obtain the maximum return from a limited resource for which there is more demand then there is capacity. It is their responsibility to their shareholders to do it.

And it is our government’s responsibility to the Hong Kong public to do the same with price it charges for use of the spectrum rather than letting the operators roll in the loot.

So here is my message to the CA: Yes, auction that spectrum and ignore the squealing from HKT. The 1980s are history. This industry is no longer a licence to print money.