The Thai telecommunications regulator, the National Broadcasting and Telecommunications Commission (NBTC), plans to sell spectrum in the 900 MHz and 1800 MHz bands in 2018. This is spectrum already used by Total Access Communication Public Company Limited, commonly known as dtac, to provide 2G and 4G services under a concession from CAT Telecom. The concession expires in 2018. However, dtac has no right of renewal and must compete in the auction if it wants to win back some or all of the spectrum.

NBTC’s initial award design includes two proposals that may not support an efficient award process:

• Withhold some spectrum from the award in case there is low participation in the auction (the so-called “N-1 rule”); and
  
• Adopt exceptionally high prices from a similar auction in 2015 as reserve prices.

These rules appear designed to maximize revenues from the auction. However, the unintended consequences may be lower auction revenue, unsold spectrum, an inefficient market outcome, and mobile operators burdened with financial obligations that depress incentives to invest and compete in providing next-generation mobile broadband.

NERA Economic Consulting was retained by dtac to write a report highlighting research results on the proposed spectrum auction. In its report, “Spectrum Auction Risks Leaving Thailand Stranded in a Mobile Data Slow Lane,” NERA found that enforcing NBTC’s proposed rules could potentially leave Thailand stranded in a mobile data slow lane, constraining the scope of future economic growth and put the government’s vision for Thailand 4.0, the country’s economic advancement model, at risk. The ultimate losers would be Thai taxpayers, subscribers, and businesses.

Thailand has not released any new spectrum for 4G and is lagging far behind Western economies and many other Asian economies in releasing spectrum necessary to meet the growth in consumer demand for mobile broadband. NERA posited that the unintended consequence of the N-1 rule is that it may widen this gap further as it will likely lead to at least 10% of existing spectrum capacity being withheld from the market.

NERA’s report recommends abandoning the N-1 rule and setting reasonable reserve prices. This is ultimately to the benefit of Thai subscribers and the economy as a whole. For future auctions, the NBTC should consider offering spectrum in smaller units that bidders can aggregate on a contiguous basis. This approach, which is used by many regulators worldwide, gives operators maximum flexibility to target different amounts of spectrum and allows for competition for incremental spectrum even in low participation scenarios.