The task of restoring investor confidence | Bangkok Post: tech

OPEN Thought

Thailand has a unique history when it comes to the telecommunications sector.

In the noughties, we had a plan to corporatise the state-owned enterprises, but that planned stalled in 2002 because the power that was had a vested interest in not seeing an independent regulator and thought that he could manipulate the market by keeping them as fully owned organs of state.

The plan to let them evolve and move forward did not go ahead.

Elsewhere in the world, former government departments became corporatised, privatised and less and less government-owned. Only the universal service obligation assets remain government-owned, and in many cases are nowhere near government-owned.

Thailand is unique in its stage of development and high education of the elite, yet these enterprises are stuck way back in the dark ages of 15 to 20 years ago.

The question for the country's leaders is, do I put the national flag on an organisation that is getting smaller and smaller? Or do I put the national flag on the industry as a whole?

I'm the government. I'm the regulator and facilitator. I'm a visionary. Less importantly, I am a direct owner.

What has gone wrong?

Short focused interest. There is no overarching political view for fundamental reform. Reforms are not easy and there will always be industrial problems and disagreements, but even where vested interests played a large role, for example in Indonesia, they still managed to get through to a point where their interests gave way to allow the industry to grow and thrive.

What is the right kind of industry shape?

At the top layer, the category 1 licences, there are many resellers, with fewer category 2 and fewer still category 3. You have an inverted trapezoid, but that cannot work unless the regulator can enforce cost-plus pricing. If that cannot be enforced, we end up with triplicate and quadruplicate ownership, such as we have in the mobile space and it becomes terribly inefficient.

Thailand has an inefficient industry. The only reason price is low is that we only have voice and SMS, and limited data. In the corporate sector, service remains poor and expensive.

Thailand has a challenge in restoring investor confidence. Almost uniquely, we now have a government where the party kind-of leading the coalition, where the Prime Minister, Finance Minister and ICT Minister are from the same party. We have a Finance Minister who is committed to reform.

It is possible now, if there is political will, for reform to take place.

Reform. The first step is taking away the obvious conflict. Concession conversion is the first step towards redirecting the state owned enterprise. Ultimately, whether we like it or not, SOEs need a new strategy so they can survive on their own, for example playing a role in national broadband in the fixed line area.

No standalone 3G business has made a profit. It simply does not make sense. An SOE getting into 3G without a 2G network means they will lose money.

When we look at the 3G Information Memorandum and add-ons, it is clear it is an unworkable mess. You have different regulatory regimes, separate 2G and 3G networks, different infrastructure in different areas.

For the foreign investor, this year there is supposed to be 51 percent ownership allowed, more under AFTA. There are some national and security issues on level 3, and sometimes a minimum 45 or 50 percent is kept local. But at level 1, the TDRI has argued that it should allow 100 percent foreign ownership.

Level 2 and 3 are limited by the Telecommunications Business Act, level 1 retail is under the Foreign Business Act that should allow more than 49 percent foreign ownership.

The NTC says it is up to the Ministry of Commerce, Commerce says they have no objections but again, there is no reform towards this.

In many countries, foreign ownership rules are waived for new entrants. Australia's Telstra has restrictions, but Optus, the new entrant, does not. Indonesia and PT Telkom has some foreign ownership restrictions, but Indosat does not.

Beyond 3G, what of the plans for 2.3 GHz and 2.6 GHz? Where is the national spectrum plan? The national plan should be drawn up independently, not by the NTC, and with clear plans for refarming of spectrum currently used by the military.

The idea of the merged regulator is an anachronism. First we had fixed-mobile convergence, then we talked of ICE - Internet, Communications and Entertainment. The National Broadcasting and Telecommunications Commission was thought up in an era when you had telecommunications and broadcasting. That is was a merged regulator is, frozen in time. Since then, we have TV on the web.

Besides, regulators have a job to do in getting competition right before doing anything else.

This week's column echoes the words of an American who has made Thailand his home but cannot speak on the record.