A major war for 320MHz width, which is subjected to reallocation for 2G, 3G, and LTE and is expected to expire in 2021, is set to begin amongst mobile carriers.
As Ministry of Science and ICT (MSIT) is preparing to run a task force to finalize on plans for allocation, level of tension amongst three major South Korean mobile carriers has been heightened.
Mobile carriers are making every possible preparation in order to lower the cost of reallocation and lessen financial burden for their investments in 5G. At the same time, they are going to have fierce competitions against each other in order to secure the most favorable frequency for their businesses.
It is expected that frequency reallocation will be a trending issue throughout the year as it will accompany discussions about improving systems that will affect the country’s competitive edge during a hyper-connected era.
◊Mobile carriers look to lower pricing of frequency allocation
SK Telecom, KT, and LG Uplus all agree that MSIT needs to be reasonable when calculating the cost of frequency reallocation and that MSIT should not apply bid prices from past auctions when reallocating frequencies.
According to enforcement decree of the Radio Wave Act, cost of reallocated frequency is based on “3% (calculation formula) of combination of actual and estimated sales for allocated frequency” and considers “cost of allocated frequency that was used for same or similar purpose”.
South Korean Government considers estimated sales while calculating the 3%. When values are added to future services such as IoT and B2B (Business to Business) services, pricing of allocation will increase sharply due to 3% calculation formula.
Mobile carriers are concerned that pricing of frequency reallocation can increase sharply if the government applies bid prices from past auctions on top of 3% of sales.
During frequency reallocation in 2016 when the government applied bid prices from past auctions for the first time, the cost of reallocation of 40MHz width in the 2.1GHz band was set at $477 million (568.5 billion KRW). Mobile carriers are concerned that the cost of reallocation will increase sharply to $6.71 billion (8 trillion KRW) considering the fact that 320MHz width is expected to be reallocated this year.
While numbers of 2G, 3G, and LTE services users are decreasing, it is a logical contradiction to apply prices from heated auctions in the past.
“If the government applies bid prices from past auctions when 3% of sales itself is already high, pricing of frequency reallocation will rapidly increase which will then put financial burden on us when we are investing in future networks and increase telecommunications costs.” said a representative for a mobile carrier. “Therefore, the clause that talks about applying bid costs from past auctions needs to be removed.”
MSIT is going to launch a task force and decide on pricing and duration of frequency reallocation. “There are some excessive sides to mobile carriers’ arguments.” said a representative for MSIT. “We can only say that we are going to maintain our principle of protecting users, continuing services, and retrieving appropriate costs of frequencies when we are reallocating frequencies.”
◊Mobile carriers to have intense battle of wits regarding frequency reallocation
Although mobile carriers agree on how pricing of frequency reallocation needs to be, they are expecting to have intense battle of wits regarding reallocated frequencies.
30MHz width, which is the frequency for 2G expected to be reallocated, is something that mobile carriers hesitant to give up even though it is of little interest. Although the band lacks usefulness to be reallocated by paying additional cost, mobile carriers are hesitant to give it up to their competitors.
SK Telecom is ending its 2G service that uses 10MHz width in the 800MHz band at the end of this year while LG Uplus is looking to end its 2G service that uses 20MHz width in the 1.8GHz band at the end of this year. On the surface, it does not seem logical for them to apply for reallocation of frequencies for 2G. If they do not apply for reallocation, South Korean Government will collect 30MHz width from then and look to use it for different purposes.
However, it is difficult for them to easily handover 30MHz width back to South Korean Government. For LG Uplus, 20MHz width is not very useful from the fact that it does not include nearby LTE band.
However, if it returns 20MHz width back to the government, KT or SK Telecom that uses 1.8GHz band as one of its key band can possession of the width and expand the frequency band of its current broadband. As a result, LG Uplus will be careful when making a decision as giving up 20MHz band can strengthen the competitive edge of its competitors.
Although SK Telecom’s 800MHz band is shorter than LG Uplus’ 1.8GHz band, it is in a similar situation as that of LG Uplus. Although SK Telecom can expand 800MHz band by connecting 800MHz band with its current LTE frequencies, there is not much usefulness to it. However, it cannot be at ease with returning 10MHz width back to the government as LG Uplus can attempt to expand its 800MHz LTE band.
There is a possibility that some will ask for the frequencies of SK Telecom and LG Uplus to be used for public purposes if they return their frequencies that are subjected to be reallocated after careful deliberations.
There is a high chance that rest of 290MHz width for 3G and LTE will be reallocated for same purposes. Allocation period of 20MHz width in the 2.1GHz band for the 3G frequency and 270MHz width for the LTE frequency will be terminated in 2021. Mobile carriers currently have 7.5 million members for their 3G services and 50 million members for their LTE services. They are able to provide stable services only if they maintain the current frequency bands.
◊South Korean Government also looking into frequency re-farming
Many experts believe that the upcoming biggest frequency reallocation needs to be an opportunity for “frequency re-farming” that will be useful during a hyper-connected era.
Rather than just extending durations of frequencies by receiving allocation costs from mobile carriers, experts believe that the government needs to consider effectiveness from a national level.
“South Korean Government needs to consider the upcoming frequency reallocation as an opportunity to effectively use national resources.” said one professor. “It will be quite possible if the government actively mediates the reallocation process and it will be also good for mobile carriers.” However, many also believe that re-farming lacks reality considering present conditions of operation of mobile carriers’ base stations and investments.
In addition, many also believe that the government should look for ways to improve their systems through thorough evaluation and inspection of the frequency reallocation process.
“It has become difficult for us to maintain current reallocation paradigm as widths of frequency bands will be much wider during a 5G period.” said a representative for a mobile carrier. “There needs to be a new system that considers reasonable investment cost and is based on opinions from mobile carriers and their users.”
Staff Reporter Park, Jisung | jisung@etnews.com