Countries differ on spectrum allocation approach

5G digital malaysia

SPECTRUM auction has been the most popular approach by governments across the world in dishing out radio airwaves.

In an earlier study by Telekom Nasional, of a total of 25 countries sampled globally that awarded the 700MHz band spectrum between 2008 and 2019,20 countries or 80% of local industry regulators in respective countries have opted for spectrum assignment through auction.

It is unsurprising that airwave auctions have been preferred by telecommunication regulators in most countries.

Not only is spectrum auction open market-based and transparent, it is also highly lucrative for governments’ coffers.

To put it into perspective, India raised a total of Rs778.15bil (RM43bil) in revenue as it concluded its two-day auction for 4G-related spectrum bands on March 2.

The United States (US), on the other hand, wrapped up its auction for mid-band spectrum in Jan 2021 and raised US$80.9bil (RM328bil) in revenue.

It is noteworthy that the amount raised by India and the US through their latest round of spectrum auctions have significantly surpassed analysts’ expectations.

While auctioning out radio airwaves allows governments to tap into a lucrative revenue stream out of the thin air, market observers have continuously raised concerns about its impact on telecommunication companies (telcos) and the end-users.

“Telcos, being profit-driven entities, would definitely price in the cost of spectrum in the final charges paid by end-users such as individuals and businesses.

“This would then affect the affordability and people’s expenditure on data services, ” an analyst says.

A report by GSMA Intelligence in Sept 2019 said that there is significant evidence to suggest a causal link between high spectrum prices, and certain other spectrum management decisions, and negative consumer outcomes.

The report, which covered the 2010-2017 period, pointed out that high spectrum costs in developed countries played a significant role in slowing the rollout of 4G networks and drove a long-term reduction in 4G network quality.

“In developing countries, spectrum prices were, on average, almost three times more expensive than in developed countries in relation to expected revenues. In these countries, high spectrum costs slowed down the rollout of both 3G and 4G networks and drove long-term reductions in overall network quality.

“In the countries studied with the highest spectrum prices, the average mobile operator’s 4G network would cover 7.5% more of the population if they had acquired spectrum at the median spectrum price, ” it said.

Meanwhile, in a separate analysis by NERA Economic Consulting on 325 spectrum band releases across 60 countries from 2000 to 2016, it was found that high spectrum fees are correlated with lower levels of investment in 4G and higher prices for mobile data.

Unlike open market auctions, spectrum assignments through tender or beauty contest have been rare. In the past decade, only a handful of countries such as Japan, British Virgin Islands, Peru and Chile have opted for a non-auction award mechanism.

Malaysia is another example.

The country has not done spectrum auctions before and has instead, awarded bandwidths at minimal charges. The reason is simple, the government intended to keep the charges for mobile data service at affordable levels for end-users.

However, there are concerns that the non-auction approach has benefited the shareholders of the telcos more, rather than the rakyat at large.

Citing the 4G spectrum, an industry observer says telcos in Malaysia have underutilised the awarded bands without adequately spending on infrastructure, despite enjoying strong double-digit margins.

In order to avoid previous flaws in implementation, the government has adopted a single-entity approach to rollout 5G, which puts the burden of developing and owning 5G infrastructure on the government’s shoulders, and not the private sector.

This will be done via a Finance Ministry wholly-owned special-purpose vehicle, Digital Nasional Bhd, with an estimated RM15bil investments over a 10-year period.

China, which has the world’s biggest mobile phone users, gave out its first 5G licences in June 2019 to four operators through direct award.

All the four licensees namely China Mobile, China Telecom, China Broadcasting Network Corp Ltd and China Unicom are state-owned.

The Chinese government’s 5G aspirations have been centrally planned, but rolled out on a commercial basis.

Shenzhen, a city in South China’s Guangdong Province, announced in Aug 2020 that it has completed its 5G network deployment, with the ability to offer the superfast wireless networking at full scale.

State-run Global Times daily also reported that the total number of 5G users in China had surpassed 88 million, accounting for more than 80% of the global 5G user base as of end-July 2020.

Within the Asean region, the Singapore government also did not hold an auction and instead, launched a call for proposal for 5G spectrum.

In justifying its decision to not to hold an auction, the city-state’s regulator, the Infocomm Media Development Authority (IMDA), said “the auction mechanism will not be able to bring about the desired policy outcomes in this first wave of spectrum assignment”.

A total of three submissions were received and eventually, two 5G licences were awarded in May 2020 for the 3.5GHz band.

The winners are Singtel and a joint venture set up by StarHub and M1. They were each allocated 100 MHz of spectrum in the 3.5 GHz band.

The two winners will deploy StandAlone 5G networks early January 2021 and will be required to provide coverage for at least 50% of Singapore by the end of 2022, scaling up to nationwide coverage by end-2025.

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