In a rare show of unity, each of Taiwan's national cellphone carriers yesterday reiterated their opposition to the government's plan to auction off third-generation (3G) mobile phone licenses.
Representatives from Chunghwa Telecom (中華電信), Taiwan Cellular Corp (台灣大哥大), Far EasTone (遠傳電訊) and KG Telecom (和信電訊), who all operate GSM systems islandwide, agreed that it would be subscribers who would end up losing out from expensive 3G license fees.
"If operators spend too much money on 3G license fees then they would have to delay the infrastructure expansion," said Steve Wang, Taiwan Cellular's vice president for business development. Wang told delegates at the GSM Taiwan Summit in Taipei that any effect of license fees would depend on how they were collected.
"Deferred payment would be good because we could use our cash to expand infrastructure [and pay the fee later]," Wang said.
KG Telecom's senior director of Internet solutions Timo Tenhovuori agreed, saying it will be subscribers who will have to foot the bill for higher license fees. "In the end it will be paid for by users," he said.
The favored option for Taiwan Cellular, according to Wang, is a "beauty contest" approach whereby applicants are awarded licenses based on their ability and expertise.
Stephanie Bariault from Far EasTone agreed; "a beauty contest is important because it does evaluate the technical capability and competency of the bidder."
This preference is not surprising given that such a system would likely work in favor of existing operators because they are in a better position to prove their ability. With Taiwan experiencing one of the fastest rates of cellphone growth in the world, it would be difficult to argue that any of the incumbent players are unable to run a cellphone system. Figures cited yesterday put Taiwan's mobile phone penetration at around 57 percent, ranking it amongst the highest in the world.
The government has yet to decide on a method for allocating licenses to operate on 3G frequencies, but the Ministry of Transportation and Communications has indicated its intention to use an auction process.
The decision process has been delayed another quarter and is now expected in the second half of next year.
An auction process would see licenses go to the highest bidders and would give outside players a chance to break into Taiwan's lucrative cellphone market. The government is hoping such an approach would also net more money in license fees, citing examples in Europe where license have added significantly to government coffers.
Bariault urged the government to look beyond the balance sheet and take into account subscribers.
The auction process "may in the end be detrimental for the consumer. It's important for the legislature to consider all aspects and not just the income that the government can make from this as well," said Bariault.
The concern over license fees may, however, have less to do with consumer concern than it does with keeping investors happy.
"We have learnt a lot from the licenses that have been issued. Markets have reacted pretty quickly to the operators that have had to pay significant prices for the licenses," Bariault noted. She also pointed out the while Far EasTone, like each of its competitors, would definitely be seeking a license, there would be a limit to how much the company would pay.
"We have seen, in other countries, that operators drop out if the price goes too high," she said. "We still have to make a business decision in the end."
None of the companies was willing to put a figure on how much they would expect the licenses to sell for, however Shih Mu-piao, managing director for Chunghwa's Mobile Communications department suggested a range of NT$10 billion to NT$50 billion was likely.
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