OPEN Thought

It will be a disaster if the 3G bid goes ahead now without amendments. Operators have a choice either to boycott the auction, or to sign a document they have no intention of abiding by - in other words, doing things the Thai way. The problem stems from three clauses added at the last moment, after the last hearing and appearing in the final draft for the auction information memorandum (IM) calling for the return of frequency; for no core network and for no roaming from 2G to 3G.

Key is the clause calling for return of frequency. According to the 3G bid IM, before 3G operations can commence, 2G frequency in that area must be banded back to the concessionaires (ToT or CAT). It was explained by the NTC that there will be no disruption in 2G operations as CAT and ToT are required to give out frequency for the operators to use anyway, just not to hoard.

There are two problems with this scenario.

The IM says one thing, and while the explanation from the NTC is much more reasonable it is not in black and white on paper. What if CAT and ToT do not hand the frequency back? CAT and ToT are both concession holders and also competitors, lest we forget. CAT has its own CDMA network and ToT both a GSM 1900 network and a (pretty dire) 3G 2100 network. What if they decide to hand back only part of it and use some to launch something else, say 3G on 900 MHz or LTE on 1800?

What if the same thing that happened to the 3G in-band migration network upgrades happen again? Both AIS and Dtac have identical clauses in their contracts with ToT and CAT. In 2007, Dtac asked for a "network upgrade" of its old 850 MHz 1G network to 3G on the same frequency. Three years later, CAT's Section 22 committee, named after the clause in the contract, has not yet made a decision as to whether or not to allow the upgrade. AIS asked to do the same for its 900 MHz 2G and ToT said yes.

What if handing back the 1800 frequency takes another three or more years if it gets stuck in the Section 22 committee again?

That leads into the other problem. Why is the NTC suddenly reversing years of progress in deregulation and international commitments in suddenly giving more de facto regulatory power to CAT and ToT?

This is probably in contravention of Thailand's GATS/WTO commitments and in violation of the 2007 constitution calling for an independent telecommunications sector. Yes, the NTC may think it's calling the shots, but if CAT can delay a decision on 3G for three years, it is the de facto regulator. Handing back even more frequency only strengthens the position of these two state-owned enterprises and turns back the clock on the deregulation.

Another point added to the 3G IM stated that the 3G operators were not to build their own core network but were to lease them from the incumbents, namely CAT and ToT, again putting even more power into the hands of the state and away from the market.

The rationale behind this seems to be national security. Core infrastructure needs to be owned by Thais and not foreigners. The only problem is that the Thais wanted to charge so much for it in the 2G era that the foreigners had to build out their own networks anyway. Come 3G, to force the networks to be available to everyone in the name of national security, the evil foreigners bidding for 3G this time cannot build out their own networks and must use the ones made by the patriotic Bhumibutra, sorry, state owned enterprises instead. That could be a good idea, but where this has happened in other countries, core networks are often tightly regulated to be at cost plus rates so as not to distort the market.

Or is that the plan? There seems to be a trend that equates a strong state with strong state enterprises. But did we not decide with the fall of the Soviet Union that a socialist, command economy was not as good as a free market?

Finance Minister Korn Chartikavanij has been quoted as being in favour of concession conversion - turning the concession agreements into licences before the 3G bid, so that the rules on infrastructure re-use can be hammered out with clarity before the bid. But the finance minister is not the finance ministry, and there are many powerful factions in the ministry who call for a strong state sector and for the state owned enterprises to be a major revenue earner for the exchequer. Whether his latest push to concession conversion goes through or not remains to be seen.

No "roaming from 2G onto 3G" clause was also added, but the clause exempted ToT from the requirement. Someone out there wants a level playing field for the industry, but obviously think that ToT and CAT need special help to be level with their concessionaires.

I asked NTC commissioner Dr Natee via Twitter why the NTC had added these three clauses in the IM without public consultation and ended up surprising everyone. His answer, as usual, sidestepped the question: "We want to proceed for the sake of Thai people," he replied.

Natee has been very active on Twitter lately, but in a way that I for one find worrying and playing to nationalistic pride. From inviting people to pray that the operators take part in the bid and move 3G forward to re-tweeting messages cursing the enemies of the country who do not want to see Thailand move forward. Yes, it's candid and it feels personal and it is working. In a short time he has turned himself into the people's hero, the one who is doing all he can to bring 3.9G (whatever it is) to Thailand, the people's hero fighting against... against what exactly?

If 3G does not happen, it is not because of some evil foreign conspiracy against the country by the Shingaporeans and Telenorwegians, but it is because someone decided to insert three clauses in a 3G bid that aims to reform the industry. Reform can be good. Reform should happen. But reform should be done as part of a proper reform plan, not stealthily inserted into a 3G bid document as a prerequisite for bidding.

At this juncture, assuming the bid goes ahead and is not aborted or with the three new clauses dropped, Thailand's telecom sector has two choices. Either to not give up their remaining concessions and boycott the bid, or to sign the agreement with no intention of abiding by the rules and sorting out the problem at a later date, probably when nobody's looking.

The "Thai Way" of doing things might appeal to some, but in today's global economy, investments have to be justified and how many investors would want to make a high-risk deal if they can get a decent return in another country with a more transparent, less protective regime?