Announcing the 3G Licensing Framework

Mr Yeo Cheow Tong, Minister for Communications & Information Technology Statement - Press Conference for 3G Licensing Framework

Mr Yeo Cheow Tong, Minister for Communications & Information Technology
Statement - Press Conference for 3G Licensing Framework
Singapore, 20 October 2000

1. I am pleased to be here today to announce that the Government has decided on the licensing framework for third-generation (3G) mobile services. We will be one of the first countries in Asia to begin the process of making 3G a reality. I am sure this is an announcement many of you have been waiting for.

2. Our goal is to develop a vibrant and competitive infocomm sector in Singapore, one in which end-users can enjoy the benefits of advanced infrastructure, innovative services and rich content. This is our key consideration in evaluating the various methodologies for licensing 3G operators.

Method of Awarding 3G Licences

3. In drawing up the licensing framework, we have carefully considered the industry views, including those expressed in IDA's earlier consultation exercise. We have also closely studied the experiences of other countries in the allocation of 3G spectrum, including UK, Germany, Finland and Netherlands. They have used various methodologies, ranging from a spectrum auction, to a "beauty contest" based on a set of pre-determined criteria, and to different hybrid approaches.

4. The Government has decided to award 3G licences via an auction mechanism, taking into account our objectives to develop the infocomm sector and the specific characteristics of our market. Let me now touch on the key considerations that went into the auction decision.

5. First, the 3G spectrum is a scarce resource and an auction based on market forces would be the most efficient, objective and transparent approach for allocating the spectrum to those who value it most. Through their bids, potential 3G operators will demonstrate how much they are willing to pay, and how confident they are about successfully commercialising 3G services and applications.

6. Second, an auction is a transparent process that will allow both local and international bidders to compete fairly on the equal terms. This will attract world-class global telcos who can contribute to the development of our infocomm industry.

7. Third, 3G is still an immature "new generation" market where the services, players and technologies are still evolving. Unlike the basic public telecoms sector, it remains unclear whether traditional quantitative yardsticks, such as network coverage, are relevant to the 3G business model. Some of the evaluation criteria, such as the extent of network rollout, are also not applicable for a city-state of our size. It is thus difficult to establish a set of appropriate evaluation criteria for a "beauty-contest" to pre-judge which operator is expected to be more efficient and effective in its 3G network rollout and service offerings. Given the pace of business and technology innovation in the infocomm sector, it is also difficult, if not impossible, to tell which of the babies being presented today will grow up into the 3G beauty queens of tomorrow. The Government believes that an auction, supported by a licensing framework that facilitates spectrum resale, would be far more likely to optimise the scarce spectrum resources by the leading telcos in our 3G market.

Impact on Pricing for End-users and Consumers

8. One of our prime considerations is whether the initial up-front auction fee for successful bidders will translate into high end-user pricing for 3G access, which is a key determinant of success. The answer is "no", since the 3G market will have a competitive multi-operator environment. There will also be the availability of substitute products such as the 2.5G General Packet Radio Services, or GPRS, to check the pricing of 3G services.

9. In the telecoms business, market forces, rather than sunk costs, determine prices. So, even if operators were awarded 3G licenses at a nominal fee through a beauty contest, this does not necessarily guarantee low consumer prices because telcos will ultimately charge what the market is prepared to bear. Fundamentally, the Government does not change the underlying value of a scarce and valuable resource by pricing 3G at an artificially low rate to the telcos. It simply means a hidden subsidy for operators on an entirely subjective basis. This is clearly not in our strategic interest.

Number of Licences and Reserve Price

10. In total, we will auction four 3G licences. Technically, the Universal Mobile Telecommunications System Forum has recommended that the 2x15 MHz + 5Mhz of spectrum is the optimal amount to support high-bandwidth and full multimedia capability. This translates to four licences. It also coincides with the industry inputs, external expert advice, and our own internal assessment on the number of 3G operators our market can support. By offering more than four licences, we may crowd the marketplace, making it unattractive for new entrants to deploy 3G networks. This could dampen the interest from key industry players.

11. We will also set a conservative reserve price for the auction at S$150 million per licence. This will be the starting price level for auction bids. It signals our intention to use market forces as an allocation mechanism for a scarce resource and not as a revenue-raising exercise. We are confident that this will be received positively by the industry and will attract the participation of world-class telcos. The measure of success of this 3G licensing exercise will be our ability to attract innovative applications from both local and international telcos into the Singapore market.

Conclusion

12. I would like to conclude by reiterating our goal - which is, to develop a vibrant and competitive infocomm sector in Singapore. We are well on our way to this goal, as Singaporeans are now becoming more mobile and demanding instantaneous access to a rich store of information and services. For example, our mobile penetration rate has exceeded 66% in September and is now more than the fixed-line phone subscribers.

13. Amidst these positive developments, it is important that we do not lose sight of the emerging technologies and other market trends. The introduction of 3G into Singapore is one of many steps the Government is taking to continue to position ourselves as a world class infocomm hub. 3G is a technology platform that has the potential to bring about the much-talked about industry convergence between infocomm, broadcasting and media. The auctioning of 3G licences within an open and transparent framework will attract the participation of world-class telcos. An auction will also incentivise successful bidders to rapidly deploy 3G network infrastructure and services. The Government is committed to developing the mobile communications industry. We will do this by providing developmental grants and incentives to wireless infrastructure developers, access service providers and content creators. I will announce more details about this at a later date.

14. Ying-I will now highlight the key points of the 3G licensing framework and cover some technical details.