NBTC needs to fix communication breakdown

NBTC needs to fix communication breakdown

Recently I watched the popular stand-up comedy show by Udom "Nose" Taepanich. Khun Nose said: "We, the Thai people, often think we are better off than our neighbours. However, people in Lao PDR have already been using 4G services for a long time. On the other hand, in Thailand, we may have to wait until our next lifetime before such services arrive."

The delay in the process in Thailand's telecommunications development is not a joke. The Institute of Management Development (IMD) in 2012 found that, overall, Thailand came third in Asean (after Singapore and Malaysia) in all of the quality indicators for services _ namely, public transport, air transport, financial services, energy and telecommunications. Thailand came fourth only in telecommunications services after the Philippines, which has lower levels of economic development compared to Thailand.

In my view, the slow progress of Thailand's telecommunications services can be attributed to several factors including the amendment of laws governing spectrum allocation, the dispute over the legal power of the telecoms commission to auction spectrum in the absence of its broadcast counterpart and the legal dispute related to the auction of the 2.1GHz frequency for 3G services.

These hurdles reflect the fact that the telecommunications industry involves substantial commercial interests such that any regulatory move is subject to intense scrutiny by all parties whether they have interests in the matter or not. The 3G auction last year was a significant move forward although the auction, in my opinion, was more like a hand-out of the 3G licences as there was no real competition between the three contenders.

Earlier this year, Thais had a glimmer of hope for having 4G services which will provide download speeds up to 100 Mbps _ five times faster than 3G services. This is because the cellular phone concession issued to True Corporation and, currently used for 2G services on the 1,800MHz spectrum, was due to expire last Sunday.

This hope was dashed, however, when the National Broadcasting and Telecommunications Commission (NBTC) decided to extend the current 2G service for one more year, citing the need to migrate existing customers. It appears odd that the NBTC had not made arrangements for mass migration any earlier, given that the termination of the contract was a long-known fact.

The NBTC's decision appears also to be in stark contradiction to the Spectrum Allocation Master Plan _ in place since April last year _ which stipulates that spectrums used under a concession must be returned to the NBTC upon expiration of the contract to be auctioned off as prescribed by the law governing frequency allocation. Numerous well-known academics in legal circles have criticised the decision as likely to be unlawful. CAT Telecom, the state-owned operator which is the concessionaire, accused the NBTC of catering to the interests of the private concessionaire and threatened to bring the case to the Administrative Court.

The sub-committee preparing the 1,800MHz auction, of which the author is also a member, has proposed, since January, that the NBTC should urgently inform customers about the expiration of the concession so that they may make their own migration decisions. However, the NBTC failed to do so until very recently when it advertised in newspapers, a mere few months away from the actual expiry date. As customers were not promptly informed, many entered into contractual obligations which extend well beyond the expiration date of the concession. Pre-paid customers continue to purchase credit that may not be used up by the concession termination date. It is thus not surprising that a termination of the service this month would have been chaotic. The NBTC needs to explain why it did not make moves to prevent the problem when it had full knowledge of the contract expiration.

It is interesting to note that both concessionaires _ True Corporation and Digital Phone Co _ did not seem to perceive the termination of the concession as a problem. True had notified the NBTC of its willingness to migrate its 17 million customers in preparation for vacating the spectrum slot, but the NBTC did not issue clear instructions on how to proceed at the time.

The delay of the 1,800MHz spectrum will certainly impose costs on the Thai economy, which could be substantial. According to an academic paper, the forgone consumer surplus associated with a delay in the auctioning of the 3G spectrum in Britain was estimated to be five to seven times the value of the spectrum.

If we use the price of the recently auctioned 3G spectrum at 4.5 billion baht per 5MHz as a reference price (it is assumed that the value of the 4G spectrum is not lower than that of 3G given that True decided to develop 4G services on the 3G spectrum), the 1,800MHz spectrum auction (totalling 25MHz) would be worth approximately 22.5 billion baht. Multiply this by five to seven times and it will result in the estimated consumer surplus loss of approximately 112-158 billion baht per year.

The above figure is only a rough estimate of the potential loss from the delayed auction. The actual figure will need to be estimated based on local variables. I believe that any decision has both costs and benefits. The NBTC needs to explain to the public why it was not able to migrate customers in time and whether it had taken into consideration the downside of its decision.

In my view, the NBTC had given dubious reasons as to why it had not taken steps to mass migrate customers and prepare for the auction. These include, not having sufficient time due to the preparation for the 3G auction that took place last year, not having the legal authority to inform the public about the expiration of the contract, and holding an auction prior to the contract termination.

In my opinion, the NBTC, with roughly 1,000 staff and a generous budget, has no excuse not to prepare, in a timely manner, to auction off the 1,800MHz spectrum as required by law and the Spectrum Allocation Master Plan.

The NBTC is an "independent regulatory body" created by the constitution. It is independent from executive powers and has its own budget and human resources management. However, its independence is not properly balanced by accountability. For example, it does not conduct thorough impact assessments of its major decisions where potential costs and benefits are estimated. It does not disclose many documents to the public, including the Report of the Subcommittee Preparing for the 1,800MHz Spectrum Auction submitted in January this year. If we want to ensure that the Thai telecom sector moves forward, we all should demand greater transparency and accountability for the NBTC's decisions.


Deunden Nikomborirak, PhD is research director, economic governance, with the Thailand Development Research Institute.

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