Thai 4G Auctions – Opting Out as a Bidding Strategy

Six companies have picked up bidding documents for the Thai 4G spectrum auctions: Advanced Wireless Network (AIS); DTAC TriNet and DTAC Broadband; True Move H Universal Communication and Hutchison Telecommunications (Thailand); and Jas Mobile Broadband.  With the endless changes and back and forth (we’ve already written about the uncertainty being created) the bidders must factor into their strategy the unreliability of the regulator.

If the regulator cannot be relied upon to provide a consistent and stable regulatory environment, what bidder strategies might mitigate that?  Uncertainty in business increases risk.  One way to reduce risk is to minimize exposure to the uncertainty.  In the case of spectrum licensing, how about avoiding, or at least minimizing, spectrum licensing fees by opting out of the auctions?  Is that even possible?  Well yes, actually.

The 4G spectrum being auctioned initially will carry only mobile data traffic, not voice.  In the future, it might carry VoLTE.  But for the next few years the only goal of this spectrum will be to handle the expected growth in mobile broadband.  But WiFi using unlicensed spectrum already does that. And all the bidders already offload mobile broadband to WiFi.  So this is not such a radical proposal.

Given the large auction reserve pricing, how about opting out of the auctions completely and use the license fees avoided to double down on WiFi.  So instead of paying a license fee to the NBTC, spend that same amount to upgrade and extend the WiFi network.  That much money will buy tremendous improvements in WiFi capacity and coverage.

Even more, remember that the fee paid to NBTC for licensed spectrum only buys exclusive access to the spectrum.  It does not pay for an LTE network; LTE equipment must be bought separately at added expense.  If the estimated vendor cost for LTE equipment, service, and capacity licenses were also spent on WiFi rather than LTE, a very robust and extensive unlicensed network would result.

By investing in WiFi rather than using licensed spectrum, bidders can almost completely eliminate the regulatory burden, a value-subtracting tax, imposed by in inconsistent regulator.

The above description has focused on the WiFi network.  In reality, this approach also would fund improvements to other network components such as fiber transport, Operations & Maintenance, interconnect and technical training.  All of this becomes possible if the focus is shifted from LTE.

Not only is this a smart move for the bidders.  But it is also pretty good for mobile subscribers because everyone with a smartphone can already use WIFi.  This approach gives them faster broadband while saving them the cost of a completely new LTE smartphone.

Last point.  A strategy that spent absolutely nothing on LTE is a bit unrealistic. For example, LTE more effectively provides macro outdoor coverage than WiFi can.  So the ratio of funds spent on network improvements clearly will not be 100% WiFi, 0% LTE.  But LTE service is already being offered in existing spectrum, it is not essential that it be expanded hugely.  So the spending ratio can be skewed sharply in favor of WiFi with a very positive outcome for both bidders and subscribers.