Hong Kong regulator denies 3G re-auction will cause disruption

Hong Kong authorities have denied that plans to re-auction some of the 3G frequencies currently in use will cause disruption and lead to higher prices for the country’s 3G users.

Frequencies in the 2.1GHz band are due to expire in October 2016, but under a so-called “hybrid approach” regulators plan to re-auction just a third of these frequencies, which – it insists – represents just 7–10% of the overall spectrum held by the incumbent operators.

Hong Kong authorities have denied that plans to re-auction some of the 3G frequencies currently in use will cause disruption and lead to higher prices for the country’s 3G users.

Frequencies in the 2.1GHz band are due to expire in October 2016, but under a so-called “hybrid approach” regulators plan to re-auction just a third of these frequencies, which – it insists – represents just 7–10% of the overall spectrum held by the incumbent operators.

Nevertheless, the re-auction proposals have met with an angry reaction from 3G operators CSL, HKT, Hutchison and SmarTone, which claim they will lead to service disruption and higher prices for customers.

Responding to those concerns, the Communications Authority (CA) says that incumbents are free to participate in the process and will have “two years after the auction in the second half of 2014 to adjust their network and business plans to address any changes to their holdings of 3G spectrum so that satisfactory customer services will be ensured”.

The CA also takes issue with the argument that a re-auction will lead to higher spectrum utilization fees and, ultimately, higher charges for consumers.

“The spectrum utilization fee paid by the incumbent 3G operators for the re-auctioned spectrum is estimated to account for only about 0.5% of their total annual operating cost,” it said. “Mobile service charges are determined primarily by demand and supply in the market as a result of competition, not the fee paid for the spectrum by the mobile network operators.”

Addressing concerns over service quality, the CA also notes that 3G operators have ample quantities of 4G spectrum they could use to prevent any service degradation.

“There is an imminent and continuous need now for mobile network operators to upgrade their networks and improve their service quality at the congested hotspots as soon as possible,” said a CA spokesperson. “The CA notes that the 200MHz of 4G spectrum released to the market since 2009 have yet to be deployed in busy locations such as the MTR [Mass Transit Railway].”

“Mobile network operators should make efficient use of their 4G spectrum and deploy them in these locations in order to provide satisfactory service to their customers,” the spokesman added.