Hong Kong should use regional benchmarks to price mobile spectrum

The Hong Kong government should use regional benchmarks to establish pricing for spectrum for mobile communications services ahead of their expiry in 2020 and 2021 while freeing up more spectrum for innovation purposes and allowing spectrum trading, telecommunications giant HKT has said.

A report by consultancy firm Network Strategies, commissioned by HKT, found the proposed reference auctions by the Communications Authority to set pricing for reassigning chunks of spectrum, which is the radio frequency bands over which wireless network services are provided, were “very high” when compared to auctions overseas and should instead be set using regional benchmarks.

Alex Arena, executive director and group managing director of HKT, the city’s largest operator of fixed-line and mobile networks, said Hong Kong’s position as the leader for telecommunications was at risk if the government did not reassess its pricing structure for spectrum and increase the amount of spectrum available to meet growing demand.

“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 industry is not broken. The whole issue here is [the Office of the Communications Authority] and its consultation paper is focused on one thing and one thing only, that’s maximising money.”

The Communications Authority and the Commerce and Economic Development Bureau launched a public consultation in February on what the government should do when the licences of the city’s incumbent mobile network operators in the 900-megahertz and 1800MHz bands expire. The regulator is expected to launch a second consultation on the issue with a final decision to come in November next year.

In a joint statement, they said the spectrum utilisation fees for the 3G reassignment contracts accounted for 3 to 4 per cent of a mobile network operator’s operating expenditure and operators were free to set their own pricing.

It added that the government was conducting a consultation on spectrum trading.

“[The Office of the Communications Authority] will continue to participate actively in the meetings of the International Telecommunication Union to discuss issues relating to spectrum planning and monitor developments in other jurisdictions with a view to allocating spectrum available for mobile communications uses to meet demand,” the statement said.

The chunks of spectrum set to expire between November 2020 and September 2021 account for 40 per cent of spectrum currently available.

The Network Strategies report said it was important to prioritise the needs of consumers and business over revenue generation for the government.

“With efficient spectrum pricing and sufficient spectrum allocation, incumbent operators may minimise costs to produce retail services efficiently, continue to invest and develop innovative services and products, all of which promote social efficiency,” said Suella Hansen, director and founder of Network Strategies.

Demand for mobile data in Hong Kong is growing faster than the global average, said Henry Wong, HKT’s head of strategic wireless technology and core technology, adding that more capacity was needed for new applications such as smart cities technology.

Mobile operator SmarTone Telecommunications Holdings told the South China Morning Post that it would also like to see more spectrum be made available in the city to meet growing data demand.

Kip Meek, founder of Communications Chambers, said Hong Kong should follow the lead made by countries including Britain to open up more spectrum for consumers.

“At this moment, when there is another wave of excitement around what the technology can deliver, it seems really peculiar for someone based in London to have no discussion of what is obviously in shortage here, which is spectrum,” Kip said.