As Taiwan enters its second year of 5G services, now is not the right time for the regulator to push for price cuts in 5G services, as all telecoms are in an investment spree on 5G infrastructure and are exploring new applications to entice 4G users to upgrade. Adding to that, telecoms are shouldering a heavy financial burden after paying a combined NT$142.12 billion (US$5.07 billion) in 5G license fees, making Taiwan’s 5G bandwidth the most expensive in the world.
The National Communications Commission (NCC) on Thursday said that it has sent invitations to the nation’s major telecoms to discuss issues related to 5G, including the progress of their 5G network deployment efforts, 5G service popularity and the effect of tariffs, with an aim of boosting the nation’s 5G penetration rate.
The NCC’s move came after legislators, including Fu Kun-chi (傅崐萁) and Sra Kacaw (鄭天財), last week blamed expensive 5G tariffs for “slow adoption” of 5G services. The legislators said the NT$1,399 flat rate for unlimited data plans was expensive and thwarted the uptake of 5G services. They urged the regulator to take steps to lower tariffs, or offer first-month discounts, as most consumers are feeling the financial pinch due to COVID-19 pandemic restrictions and are unwilling to loosen their purse strings.
Taiwan has not lagged behind its neighbors in boosting 5G subscriptions. As of the end of August, 3.64 million mobile users had signed up for 5G services, accounting for 12.5 percent of overall mobile users, the latest statistics from the NCC show. The penetration rate has been much better than South Korea’s 8 percent during its first year of 5G services. Taiwan’s coverage had reached more than 80 percent of the population as of Aug. 31, indicating local telecoms have stepped up base station installations.
The NCC is responsible for safeguarding consumers’ interests, but it should not come at the expense of telecoms’ financial health and free market mechanisms. Any meddling could contravene competition law.
In June last year, Chunghwa Telecom Co introduced an unlimited 5G data plan at a flat rate of NT$1,399 per month. This was unlike most global telecoms, who were reluctant to offer unlimited Internet access for a fixed rate, given the expense of 5G investment, including license fees and equipment costs.
It is widely expected that local telecoms could take more than 10 years to recover 4G technology investments, meaning 4G is now a money-losing business, given that it launched in 2014. It could take much longer for 5G to become profitable, given the higher costs related to investment, license fees and related services.
Telecoms are pinning their hopes on higher-priced 5G services to stave off a multi-year revenue slide and to regain growth following declines in average revenue per user since 2015, along with intensive price competition. The positive impact emerged in a rebound in telecoms’ mobile service revenue in the second quarter of this year, thanks to 5G subscribers.
However, significant growth is not expected for 5G applications for a few years, Taiwan Mobile Co president Jamie Lin (林之晨) said. He expected “metaverse,” virtual reality and augmented reality applications to drive growth until 2024 or beyond.
Before then, any significant price reductions could stifle growth and hamper telecoms’ long-term development and investment on next-generation, or 6G, technologies, if they cannot reap profits from new technologies. Telecoms are cautious about pricing, and are avoiding any price competition that could stall take-up.
The NCC should follow free market mechanisms and allow the industry to grow organically.
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