Thai operators facing tough choices on 3G plans

By Tony Brown

Along with giants China and India, Thailand is one of the few major mobile markets in the region that has yet to launch 3G services. But after years of gridlock in the licensing process, Thailand’s 3G market might finally be on the move, albeit at a potentially heavy price to operators.

The problem for local mobile operators is that the arrival of 3G services is taking a hazardous course, with operators being offered the possibility of a quicker-than-expected launch if they use already allocated spectrum.

Local operators have been waiting patiently for several years for the National Telecommunications Commission (NTC) to issue 3G licenses in the 1.9-2.1GHz spectrum bands, and the regulator had been expected to finally issue licenses in 4Q08, after overcoming numerous regulatory and legal hurdles.

But in recent weeks a new plan has emerged – with the clear support of newly appointed communications minister Man Patanotai – that would see the big three mobile operators, Advanced Info Service (AIS), Total Access Communications (DTAC) and True Move, launch 3G services in the 850MHz and 900MHz spectrum bands.

Second-ranked DTAC is planning to use some of its dormant 850MHz spectrum to launch trial 3G services, and, not to be outdone, market leader AIS is planning to use its 900MHz spectrum to launch its own trial 3G services.

Meanwhile, third-ranked operator True Move has eagerly accepted the not-altogether-altruistic offer from its concession holder, the Communications Authority of Thailand (CAT), to lease it spectrum in the 850MHz band in which to launch its own trial 3G services.

DTAC also receives its operating license from the CAT, and AIS receives its license from the Telephone Organization of Thailand.

The big advantage for the CAT and TOT if the operators launch 3G services using their existing spectrum is that they would remain key players in the local telecoms market.

If the NTC were to allocate 3G spectrum in the 1.9-2.1GHz band to the big three operators, the move would most likely freeze the CAT and TOT out of the mobile sector, with the three operators likely to migrate services completely to the 1.9-2.1GHz spectrum bands and break their links with the CAT and TOT.

In the often indistinguishable world of Thai commerce and politics, where the government’s influence can never be understated, the communications minister and several other key ministers are enthusiastically pushing the new 3G plan at the expense of the NTC’s long-delayed 1.9-2.1GHz-licensing process.

Local observers say that as a result, the NTC has taken heed of the political winds and is likely to try to pass the buck on 3G licensing to its successor, the National Telecommunications and Broadcasting Commission, to avoid a potentially messy political fight.

But with the NTBC not expected to come into being for at least a year, local market observers say licensing for 3G spectrum in the 1.9-2.1GHz band could be delayed until at least 2H09, and the launch of services could be delayed until 2H10, if it happens at all.

Some senior mobile executives from the big three operators have already publicly backed the new 850/900MHz plan, saying that it would enable them to introduce 3G services sooner than if they were to wait for the NTC/NTBC 3G-licensing process to play out.

But although the thought of launching 3G services after years of missing out on potentially lucrative mobile data and wireless-broadband revenues – particularly since fixed-line broadband has low penetration in Thailand – would be enticing, the operators might be missing the larger picture.

Despite the frustration of waiting for the spectrum to be allocated, the operators must remember that the 1.9-2.1GHz band is the de facto spectrum band for 3G deployments on a global basis and that the 850/900MHz bands are being used by comparatively few operators worldwide.

As a result, the economies of scale that operators would be able to benefit from are much greater in the 1.9-2.1GHz band than in the 850/900MHz bands, and that will be crucial in terms of handset pricing and the cost of network deployment.

Affordability is a major factor in low-income markets, such as Thailand, and if 850/900MHz handsets are even US$25 a unit more expensive than their counterparts on the 1.9-2.1GHz band, 3G take-up could take a huge hit.

Speaking off the record, some operator executives have speculated that their public support for the 850/900MHz 3G launch could actually spur the NTC to speed up the 1.9-2.1GHz-spectrum-allocation process.

That bet is a risky one, given the political weight that is already behind the 3G-launch process for the 850/900MHz bands. And if early indicators are correct, the NTC might actually be relieved if responsibility for the 3G-licensing process is taken off its hands.

If the operators do end up launching services in the 850/900MHz bands, there is a real possibility that the political will for the NTC/NTBC to continue with 3G licensing in the 1.9-2.1GHz band will disappear and that Thailand will end up launching 3G only in the 850/900MHz bands.

The big three operators, all of which have suffered to various degrees from the complex and anachronistic licensing and regulatory structure under which the CAT and TOT act as both license-granting bodies and industry players, should also question whether they really want to keep the CAT and TOT as part of the game.

One of the biggest advantages of launching 3G services in the 1.9-2.1GHz spectrum band via the NTC’s licensing process would be the chance it provides to cut the CAT and TOT out of the loop and have operators licensed and controlled by a single, independent regulator. Launching in the 850/900MHz bands means keeping the CAT and TOT in the game.

After such a long wait, the temptation of launching 3G services before year-end must be enormously appealing to mobile operators, but the likely risks of such a move also need to be taken into consideration before they take the plunge.

The NTC has taken an inordinately long time to get 3G licensing up and running – and there may be more frustrations ahead – but the technical and political advantages of launching in the 1.9-2.1GHz band would be worth it in the long run.