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2.1-gigahertz 3G spectrum auction likely to be a buyer's market

Usanee Mongkolporn,

Sirivish Toomgum

The Nation

Pacharasut Sujarittanonta

BANGKOK: -- In what seems to be a match between supply and demand, the auction of nine 2.1GHz spectrum slots on October 16 is expected to turn into a buyer's market.

Pacharasut Sujarittanonta, the auction design consultant, said last week that this could be the case since there are three bidders and nine spectrum slots available and each company can secure up to three slots.

However, if the spectrum reserve price is raised from Bt4.5 billion per slot to deal with the possibility of low bidding competition, the National Broadcasting and Telecommunications Commission (NBTC) might be blamed for causing the bid winners to pass the high cost from the high price to consumers, he said.

Whatever the auction outcome is, it would face heavy criticism, as people hold starkly different views on what should be the best auction terms and conditions.

The auction's terms and conditions have drawn the criticism of many parties, providing an opportunity for the three bidders to snap up the spectrum slots amid low competition. If that happens, the country will gain less proceeds from the auction than it should have.

Settapong Malisuwan, chairman of the NBTC's telecom committee, has argued many times that the reserve price of Bt4.5 billion is appropriate, as a higher price will scare away potential bid participants. The watchdog has given utmost priority not to bidding competition but to market competition in the licensing era.

The NBTC bidder-pre-qualification panel will select the qualified bidders today and submit the list to the NBTC telecom committee tomorrow, when the names will be made public. The three applicants are Advanced Wireless Network of Advanced Info Service, DTAC Network of Total Access Communication and Real Future of True Corp. All three are expected to pass the pre-qualification process.

An industry observer said there might be a chance that all three bidders would end up paying the minimum price.

All the bidders are required to start quoting Bt4.5 billion for a desired numbered slot in the first round. After each following round, they will be informed of the quotes for all of the selected slots and the temporary winners of the selected slots. Their real names will not be revealed during the bidding.

Since they can bid for a maximum three slots and if none of them happens to select the same three slots in the first round, then each of them will be declared a temporary winner. When the NBTC calls for quotes in the following round and there is no higher bid, the auction will enter the final phase. If again, there is no higher bid, the bidding will end and each bidder will pay only Bt4.5 billion per slot.

In another scenario, the three bidders might happen to select the same three slots in the first round when one will be named a temporary winner. Then the other two can select the six remaining slots in the following round and can quote Bt4.5 billion a slot. If these two happen to select the same three slots again, one will be named a temporary winner. Then the non-winner might choose to select the last three slots in the following round and become the temporary winner. Then all three will end up paying only the same Bt4.5 billion per slot.

Pacharasut said that if this is the case, it does not mean the auction design is not effective. It's just usual to see low competition where there is no excess demand.

"But there are many 3G and 4G spectrum auctions worldwide that end by seeing the bidders paying the starting prices, such as in Singapore and Hong Kong or Portugal. In some cases, there are three bidders pitching for four spectrum licences," he added.

Earlier Settapong said he believed the bidders would try to quote the highest price to get the right to be the first to select slots. But the bidders might not care about the spectrum ranges they will get. Once an AIS executive said AIS is technically capable of providing an effective 3G service regardless of the spectrum range.

The auction has two phases - bidding by all for specific slots and then selecting spectrum ranges by the highest bidder. In case of identical bids, they will draw lots to be the first to select the spectrum ranges.

The NBTC has hired Power Auctions to implement the auction rules in software and support its management of the 3G auction. It is a major international provider of expert auction services and web-based auction software for high-stakes auctions, including auction design, implementation services, software and auction bidding advice in the electricity, natural gas, resources and telecom industries.

Sam Dinkin, senior auction consultant of Power Auctions, said the company has experience and success in high-stakes auctions. For over a decade, it has managed the successful design and execution of more than 100 auctions worldwide. He personally has helped governments and corporations on five continents with auctions worth over US$100 billion.

To ensure a success, in most auctions, he would stress the theoretical challenges of auction design or the technical challenges of high fidelity software.

"For Thailand, the most important thing appears to be the resolve by the nation to get the auction started," he said.

He was excited with this auction and the whole Power Auctions team was touched by how fired up Thais are about the dream of 3G.

"We have never had a country be this enthusiastic about an auction. 3G fever has infected our team," he added.

-- The Nation 2012-10-08

[asiawatcher]

What a convoluted system. Multi bids for the right to supply and then bogus names revealed along with the bid pricing to entice higher bidding? What sort of 'auction' is this?

[canopus1969]

What a convoluted system. Multi bids for the right to supply and then bogus names revealed along with the bid pricing to entice higher bidding? What sort of 'auction' is this?

Thai !

[Sateev]

As always here, public interest is a very distant second to squeezing money out of the process. And of course, the auction has to be gimmicky...

[WyattEarp]

What I think would be interesting to know is how will those 27 billion baht be redistributed?

[Keesters]

Just get on with it. It is over 2 years since I bought my 2.1Ghz 3G phone and I'm still waiting to use it.......

[Pib]

I agree...just get this dam_n bidding done and over with so the winning companies can begin some standardized 2100MHz 3G services across the country!

[McMagus]

At first I thought...just get on with it, but today I read that a telecommunications expert has lodged a complaint with the Administrative Court to stop the auction because a) There is no contractual guarantee that successful companies are required to service rural areas unlike in western countries. There is no 'cap' set on charges to consumers and c) No indication or requirement of the NBTC to return profits to the ministry His complaints sound reasonable and seem to come from a position of fairness and justice for consumers. It's just that this whole farce has gone on long enough, Thailand is becoming a laughing stock and someone at the top should have had the brains to see emerging issues and fix them. Looks to me as though the big 3 will just divide up the cake and rip everyone off. But thats OK, with emerging markets moving towards 4G Thailand may get there by 2025.

[Dr Robert]

given the potentially lucrative nature of a successful bid and the power of influence it will yield, you wold think the process would be squeaky clean. this seems to be show the deal is done, the players are secured and now its a case of minimising costs and paying the promised tea money...too cynical?

[bkk_mike]

Why don't they just say the spectrum has to be used for LTE - and bypass 3G altogether?

As for the auction not having specified timelines for rollout to rural areas - what was the whole point of setting up the NBTC to run the 3G auction if they can't do the basics?

[brianP]

I guess i might have to wait awhile for fibreoptics, under ground utilities? Still waiting for a land line.

[lomatopo]

There are really only three viable candidates: DTAC, AIS and CP Group (True). If foreign companies were allowed to operate here, either directly or in partnerships - more so than Telenor (DTAC) and AIS (SingTEL/Temasek Holdings aka the Singapore Government) - then there would be more competition, and presumably higher auction prices.

As it is I think everyone expects the three candidates to get three tranches at the minimum, and the NBTC set the minimum accordingly. In theory everyone should be happy, and the allocation of spectrum can continue. Any other scenario might lead to judicial challenges taking years, further delaying the roll-out.

Not sure what to say about rural areas, demand is probably quite small so that may have to be subsidized?

I think the winners have to pay additional monies as a percentage of revenues, on an on-going basis over the term of the contract. Some of the existing concessionaires pay 20 - 30% for existing BTO concessions.

In general I think mobile services and mobile broadband services here are attractively and competitively priced.

For LTE the NBTC needs to make more spectrum available, which they will presumably will do in the next two years.

Edited October 8, 2012 by lomatopo

[indyuk]

What a convoluted system. Multi bids for the right to supply and then bogus names revealed along with the bid pricing to entice higher bidding? What sort of 'auction' is this?

If the government are claiming 'non existent' contenders in an international biding they will need authentic 'No Bids' to avoid the risk of facing very visible and expensive litigation.

Personally I'm sick of Thai communications systems these days. Nothing is dependable not even the internet. TOT are accepting new clients on a 7mip cable that has been overloaded for years. All of the expansion has been accommodated yet not one new server or new cable has been installed since 2008.

Where is the capacity coming from for the 3G contractors and which budget was the money stolen from?

[vijer]

The whole bidding process is meant to make the process of distributing the bandwidth fair and to promote competition.

Here in Thailand where they claim to be the hub of all things and the leader in all things in Asia they have to figure out how to line their pockets in the process. So where you can find 3G in Singapore, Hong Kong, Japan, China, Korea, Taiwan, etc. you cannot find it here because they are too busy being corrupt.

Hell make the distribution of the bandwidth a lottery, that is extremely fair, then tax the use of the 3G spectrum. Then those that want 3G can pay for it. I don't use it or need it or want it. But yes get on with it.