Spectrum licence renewal in Asia: a long road ahead
More than one hundred Asian licenses set to expire over next decade
Over the next decade, 112 spectrum licenses will come up for renewal across nine countries in Asia. These licenses represent a total of 2,326 MHz of spectrum, spanning across eight different frequency bands (450 MHz, 470 MHz, 800 MHz, 850 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz), with 79% of the total amount of spectrum related to capacity bands (frequencies above 1 GHz).
The nine countries researched are Bangladesh, Cambodia, Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Thailand and Vietnam. The spectrum licenses in these markets have an average lifespan of 12 and a half years. All of the licences with a validity period of 20 years or longer were issued before 2006, while most of those issued after 2006 have a validity date of ten years or less.
When a mobile spectrum licence is nearing its term, governments and regulators consider several approaches. Some licencing authorities choose to renew the licence by extending its validity for the incumbent, while others choose to re-assign all of the spectrum or take a hybrid approach of renewing part of the spectrum and re-assigning the rest. The re-assignment process can be completed in one of two ways: an administrative approach in which the operator to be licenced is chosen based on a number of criteria, or a market-based method such as an auction. Different approaches are being used depending upon the intent of the spectrum management authority and each has advantages and disadvantages.
While in the past countries such as Pakistan and Bangladesh have adopted an administrative solution to the renewals, others like Singapore chose the market-based approach. In July 2007, the Pakistan Telecommunication Authority (PTA) renewed Mobilinks’ spectrum licence for a further 15 years. The renewal fee paid by the operator was based on the outcome price of a previous 2G auction for new licences held in April 2004. In January 2011, the Bangladesh Telecommunication Regulatory Commission (BTRC) started the consultation process for licence renewal of four mobile operators (Banglalink, Citycell, Grameenphone and Robi) for which licences were due to expire in November 2011. The process ended in August 2012 when licences were extended for 15 years and renewal fees were based on the respective market shares of each operator.
In contrast, the licence renewal process in Singapore in 2008 was determined by auction. In the Information Memorandum published at the time, Singapore's Info-communications Development Authority (IDA) explained that “an auction will be [a] more efficient, objective and transparent approach for allocating scarce resources because it relies on market forces to allocate scarce resources to those who value them most.” However, following the public consultation process, IDA took into account the feedback and concerns raised by respondents with regards to issues like potential disruption of services and possible increased costs to operators, which would ultimately be passed on to consumers. IDA therefore decided to give existing spectrum holders “right of first refusal” for their specific block positions.
While in some markets the process of licence renewal can be straightforward, in others can prove to be a difficult challenge for licencing authorities. While countries such as Hong Kong are well immersed in the renewal process, other countries such as Thailand - where a concession regime is being used and the transition to a licencing regime is gradually taking place - are in the process of reforming their regulatory frameworks.
The time of licence renewal is often seen by governments and regulators as an opportunity to rethink current policies and spectrum planning in order to facilitate healthy development of mobile services. However, they are faced with many challenges in establishing their main objectives, be it attracting investment, promoting competition, reappraising the market or generating revenue.
Over the next five years, 43 spectrum licences held by 30 operators will expire across seven of the nine countries: Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Thailand and Vietnam. The combined number of connections estimated for this group of operators as of Q1 2014 stands at 627 million and is expected to grow by almost 200 million (net additions) by the end of 2020. License renewals will play a critical role in enabling this growth potential and, equally, in driving the adoption of mobile broadband technologies.
The level of mobile broadband adoption varies considerably among these seven markets. The vast majority of total connections are already running on mobile broadband networks across South Korea, Hong Kong and Singapore, while half of the Malaysian connections market is expected to have migrated to mobile broadband networks by the second half of this year. In contrast, mobile broadband connections represent just under 30% of total connections, on average, across Indonesia, Thailand and Vietnam in Q1 2014, a share that is expected to grow to 69% by 2020.
Licence renewal is a critical step in ensuring continuity of investment, notably in mobile broadband technologies, and in minimising any potential impact in delivery of services to consumers. While there is no ‘right answer’ for governments and regulators regarding the licence renewal process, each market has to be considered independently and it is important that industry stakeholders are properly consulted throughout the decision process.
The approach to renewal should be agreed well in advance prior to licence expiry and governments should establish and maintain a level playing field. In the case where a government chooses to reappraise the market structure it should not discriminate in favour of, or against, new market entrants.
Asian spectrum licence renewals over the next decade (selected countries)
Source: GSMA Intelligence