Later this year Thailand plans to auction radio spectrum for 4G services. The Thai government, led by the National Broadcasting and Telecoms Commission (NBTC), will auction licenses in 900 MHz and 1800 MHz later this year. The Auctions 1800 MHz spectrum are scheduled for November 11th; the 900 MHz auction a month later, though the exact date remains in doubt. 2 licenses will be auctioned for 12.5 MHz each in 1800MHz spectrum, and 2 licenses of 10 MHz each in 900 MHz spectrum.
The NBTC and the Thai press have been drip-feeding auction updates for months, and it has often been difficult to understand clearly what is the current situation. The best source of background information on the auctions is a Slideshare presentation from Yozzo Co., Ltd (http://www.slideshare.net/yozzo1/the-4g-lte-auction-in-thailand) which describes auction details. We are grateful to Yozzo for the excellent summary and for the occasional updates Yozzo posts.
We thought it would be interesting to consider the bidding strategies of the companies who have said they will participate. Announced auction bidders include the 3 incumbent mobile operators, AIS, DTAC and TRUE; Internet Service Provider Jasmine International, Thai Government Post Telecom TOT and Thoresen Thai Agencies round out the list of bidders. CAT recently dropped out of bidding saying the auction rules disadvantaged them. Little information from Jasmine and Thoresen has been released since announcing earlier this year their intention to bid.
Jasmine International (JAS) is a Thai conglomerate offering a variety of services. Perhaps most notable is their Internet Service Provider business. JAS’ website says the ISP business has hundreds of thousands of customers and a nationwide fiber backbone. What follows is only my speculation of a possible bidding strategy for JAS.
But first, here is a little context. The combined 900 MHz and 1800 MHz auctions will release a total of 4 licenses. AIS, Dtac and TRUE are quite likely to receive one license each. This is almost guaranteed as these companies have the deepest pockets and can pay the most to win a license. They are unlikely to be outbid by an outsider. Plus, the incumbents have the most to lose from failing to secure more RF spectrum. So they are the most strongly motivated bidders. There is also a good chance that the 4th license will be acquired by one of these 3. AIS has already said they expect to seek 2 licenses. In this context JAS may have little chance of acquiring a license in the auctions.
Even were JAS to win a license, any license, how much would it help them? Would it allow them to build and launch a nationwide 4G network? If it is JAS’ ambition to become a mobile operator a single spectrum license, of either 10 MHz or even 12.5 MHz, will not be sufficient to allow both voice and data services to be offered. It is simply not enough RF spectrum to build a cost-effective mobile network. Such a small slice of spectrum would require far too many sites to be built to carry sufficient capacity at adequate download speeds. In short, JAS cannot hope to become a legitimate 4th operator by winning a license in the auctions.
So, if JAS is unlikely to win a license, can their telecom ambitions still be realized? Sure, JAS still has a role to play. Simply bidding in the auctions should drive up the price paid by a competitor for that license. That’s a sound bidding strategy all by itself. Increasing your competitor’s costs at no or little cost to yourself is smart business. And by NOT winning a license JAS saves twice. JAS keeps the cost of the license itself, and avoids the cost of a nationwide mobile network.
But wait, you say. How has JAS improved their position if they have not won a license? Let’s work through that question. How can JAS hope to become a major player without winning a license? We’ve already established that with a single spectrum license, JAS will not be able to become a competitor. Winning a license is only enough spectrum to allow either voice or data, but not both.
JAS might reasonably use the costs avoided to invest in the fiber backbone. Expand the existing fiber network to extend coverage and improve robustness and resilience. Quality is increasingly becoming a competitive advantage, and customers prefer a higher quality network. So continuing to investing in fiber is a smart play. The way to monetize that investment is to use that awesome fiber network to carry wireless data traffic.
But without a spectrum license the way to pick up that traffic is by using unlicensed spectrum. In other words, use WiFi. Use the fiber backbone to backhaul a network of commercial, carrier-grade WiFi Hotspots.
Indoor WiFi is already nearly ubiquitous in the cities. However, most WiFi these days is residential or “coffee shop” WiFi. Poor quality connections, intermittent service, slow speeds. These problems exist largely because most WiFi networks have been built for coverage, not capacity.
A carrier-grade WiFi network, one built for capacity, addresses all these issues. In addition, modern WiFi is rapidly gaining feature parity with LTE. Features such as Hotspot 2.0, Passpoint, MIMO, VoWIFI are all defined by the same IEEE 802.11 group that has managed WiFi standards for years. WiFi delivers most of the function of LTE, without many of the costs such as spectrum licensing, patent royalties and subscriber and usage-based capacity licensing.
Outdoors, or indoors where WiFi is not yet available, roaming agreements with one or more of the mobile operators could provide fill-in coverage. In other words, this is national roaming. In general, the network paradigm should be for WiFi to provide indoor, micro-cell coverage, while the 4G LTE network provides outdoor, macro coverage.
In addition, WiFi carries voice traffic far more easily than LTE. VoLTE has shown itself to be much more fiddly than VoWIFI, and requires a fairly sophisticated network to implement and team to maintain. JAS’ WiFi network can carry voice wherever it exists. VoWIFI gives JAS a complete voice and data mobile network without even purchasing a license. Critics may complain that this approach is all too “best effort”, that the unreliable nature of WiFi makes this untenable. But in a country having Average Revenue Per User (ARPU) of around THB200, a WiFi-based service may be thought good enough. It certainly will be more affordable.
Another advantage of this approach is that 100% of the existing 3G devices support WiFi. 100% of the devices sold in Thailand in the last 2 years support WiFi. Probably 80% of devices sold every day in Thailand support WiFi, whereas maybe only 20% of support LTE. Hence, the subscriber cost of upgrading to a WiFi-based mobile network is effectively zero. This poses a far lower barrier to uptake than LTE devices. JAS subscribers will not have to buy the latest expensive mobile device to get the fastest network download speeds. Only LTE subscribers will have to buy such an expensive device.
This is not a revolutionary proposal. In North America Republic Wireless has been using a “WiFi First” business model for years. This model allows a serious challenge for Verizon and AT&T and lends motivation to operator interest in the LTE-Unlicensed effort.
So wrapping up, here is a strategy for JAS:
- Participate in the auctions to raise the price paid by the other operators. Do not win a license.
- Use the license fee and 4G equipment costs avoided to invest in the fiber backbone and the WiFi network. Expand and improve the fiber backbone to use as data transport and backhaul, and upgrade WiFi hotspots to be carrier grade and ubiquitous.
- Negotiate voice roaming agreements with one or more of the other mobile operators to carry JAS voice traffic.
- Negotiate a data roaming agreements with any or all the mobile operators for JAS to offload data from the other operators’ LTE networks.
There are other, more interesting, angles to a potential JAS strategy, including penetration, monetization and growth. We have no indication if this is anywhere close to the strategy JAS actually plans to follow. But in a price-sensitive market like Thailand, any strategy should have as its objective establishing a new entrant as the least-cost provider of mobile services.