2.1-gigahertz 3G spectrum auction likely to be a buyer's market

However, if the spectrum reserve price is raised from Bt4.5 billion per slot to deal with the possibility of low bidding competition, the National Broadcasting and Telecommunications Commission (NBTC) might be blamed for causing the bid winners to pass the high cost from the high price to consumers, he said.

Whatever the auction outcome is, it would face heavy criticism, as people hold starkly different views on what should be the best auction terms and conditions. 

The auction’s terms and conditions have drawn the criticism of many parties, providing an opportunity for the three bidders to snap up the spectrum slots amid low competition. If that happens, the country will gain less proceeds from the auction than it should have.

Settapong Malisuwan, chairman of the NBTC’s telecom committee, has argued many times that the reserve price of Bt4.5 billion is appropriate, as a higher price will scare away potential bid participants. The watchdog has given utmost priority not to bidding competition but to market competition in the licensing era.

The NBTC bidder-pre-qualification panel will select the qualified bidders today and submit the list to the NBTC telecom committee tomorrow, when the names will be made public. The three applicants are Advanced Wireless Network of Advanced Info Service, DTAC Network of Total Access Communication and Real Future of True Corp. All three are expected to pass the pre-qualification process. 

An industry observer said there might be a chance that all three bidders would end up paying the minimum price. 

All the bidders are required to start quoting Bt4.5 billion for a desired numbered slot in the first round. After each following round, they will be informed of the quotes for all of the selected slots and the temporary winners of the selected slots. Their real names will not be revealed during the bidding.

Since they can bid for a maximum three slots and if none of them happens to select the same three slots in the first round, then each of them will be declared a temporary winner. When the NBTC calls for quotes in the following round and there is no higher bid, the auction will enter the final phase. If again, there is no higher bid, the bidding will end and each bidder will pay only Bt4.5 billion per slot. 

In another scenario, the three bidders might happen to select the same three slots in the first round when one will be named a temporary winner. Then the other two can select the six remaining slots in the following round and can quote Bt4.5 billion a slot. If these two happen to select the same three slots again, one will be named a temporary winner. Then the non-winner might choose to select the last three slots in the following round and become the temporary winner. Then all three will end up paying only the same Bt4.5 billion per slot. 

Pacharasut said that if this is the case, it does not mean the auction design is not effective. It’s just usual to see low competition where there is no excess demand. 

“But there are many 3G and 4G spectrum auctions worldwide that end by seeing the bidders paying the starting prices, such as in Singapore and Hong Kong or Portugal. In some cases, there are three bidders pitching for four spectrum licences,” he added.

Earlier Settapong said he believed the bidders would try to quote the highest price to get the right to be the first to select slots. But the bidders might not care about the spectrum ranges they will get. Once an AIS executive said AIS is technically capable of providing an effective 3G service regardless of the spectrum range. 

The auction has two phases – bidding by all for specific slots and then selecting spectrum ranges by the highest bidder. In case of identical bids, they will draw lots to be the first to select the spectrum ranges.

The NBTC has hired Power Auctions to implement the auction rules in software and support its management of the 3G auction. It is a major international provider of expert auction services and web-based auction software for high-stakes auctions, including auction design, implementation services, software and auction bidding advice in the electricity, natural gas, resources and telecom industries.

Sam Dinkin, senior auction consultant of Power Auctions, said the company has experience and success in high-stakes auctions. For over a decade, it has managed the successful design and execution of more than 100 auctions worldwide. He personally has helped governments and corporations on five continents with auctions worth over US$100 billion. 

To ensure a success, in most auctions, he would stress the theoretical challenges of auction design or the technical challenges of high fidelity software.

“For Thailand, the most important thing appears to be the resolve by the nation to get the auction started,” he said.

He was excited with this auction and the whole Power Auctions team was touched by how fired up Thais are about the dream of 3G.

“We have never had a country be this enthusiastic about an auction. 3G fever has infected our team,” he added.