Taiwan last week wrapped up the first of its 5G spectrum auctions with bids totaling NT$138.08 billion (US$4.61 billion), making it the third-most expensive 5G spectrum in the world after Italy (US$5 billion) and Germany (US$4.7 billion).
The figure is more than four times the floor price of NT$30 billion set by the National Communications Commission and surpassed the NT$118.65 billion set in the 4G spectrum auctions in 2013.
The money is obviously a boon for the national coffers, but who else will benefit from the auctions?
The answer is: No one. At least not in the short term.
Fierce competition resulted in runaway bidding, as the nation’s five telecoms all wanted to have a piece of the 5G pie, due to its potential use in smart factories and homes, and autonomous vehicles. However, the telecoms’ executives have voiced concern that expensive 5G bandwidth outlays might have an adverse effect on 5G adoption.
“The government is being too clever this time,” Far EasTone Telecommunications chairman Douglas Hsu (徐旭東) told reporters.
Telecoms are facing the same question they did about six years ago when the government auctioned 4G bandwidth: How to recover their high spectrum and network deployment costs.
They face a heftier financial burden, as they are still struggling to eke out profits from 4G services, while dealing with hefty 4G license fees and equipment amortization costs.
Consequently, the biggest three telecoms are reeling from constant declines in revenue and net profit. Chunghwa Telecom, the nation’s biggest telecom, last year missed its financial forecast for the second year in a row due to price competition and constant declines in voice revenue.
It saw net profit shrink 13 percent year-on-year to NT$32.81 billion, missing its target of NT$34.11 billion to NT$35.68 billion.
Taiwanese would not benefit from 5G services if subscription rates begin at NT$2,000 per month.
In May 2018, people formed long lines outside telecom stores for NT$499 monthly data plans and have become accustomed to paying less for high data usage amid cutthroat competition.
Chunghwa Telecom has been mum about its pricing strategy.
“We will offer diverse rates to satisfy subscribers’ needs,” company president Harrison Kuo (郭水義) told a media briefing last week. “The pricing mechanism will be different from 4G.”
However, people might be reluctant to subscribe to the 5G service due to its limited “must-have” applications — for most, 4G service is satisfactory.
Most telecoms have said they are looking for a suitable and profitable business model for 5G services and that 5G technology might turn out to be more useful for corporations than the average consumer.
These factors are likely to stall the adoption of 5G technology and prolong the recovery period for telecoms.
Taiwan can learn from the US Federal Communications Commission, which set up a multibillion-dollar fund to assist in the introduction of 5G technology in rural areas. This reduced 5G network deployment costs for telecoms and accelerated the uptake of 5G technology in the US. Taiwan would do well to follow this example.
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