3G TELECOMMUNICATION LICENCES

Mr Chng Hee Kok asked the Minister for Communications and Information Technology if the Government will consider the award of 3G telecommunication licences based on "beauty contest" instead of auction.

The Minister for Communications and Information Technology (Mr Yeo Cheow Tong): Sir, the Government has carefully considered the pros and cons of the auction approach vis-a-vis a beauty contest for the award of 3G licences. Our conclusion was that the award of 3G licences through an auction is the most objective, efficient and transparent means of allocating the limited spectrum available. An auction will allocate the spectrum to the operators who value it most, and this in turn would spur them to use this limited resource as efficiently as possible.

While several countries have chosen a beauty contest for selecting 3G operators, our assessment is that making a judgement amongst bidders for emerging technologies such as 3G is entirely subjective. As it is still uncertain what would be the key 3G services, it would be very difficult for the regulator to define the service and technical criteria for evaluating proposals in a beauty contest.

In the formulation of our 3G licensing framework, IDA has considered industry feedback and studied the 3G licensing approach taken by other countries, from both the operators' and regulators' perspectives. Operators will naturally prefer a beauty contest mechanism with minimal fees because obtaining the spectrum cheaply will mean an immediate windfall profit for them. However, the Government has a responsibility to obtain fair value for a scarce resource.

The Government's main objective is to ensure a transparent and fair allocation mechanism, and not simply to generate revenue. Notwithstanding the large sums that have been collected in some earlier European 3G auctions, we expect that the participating telecom companies will have learnt from the earlier 3G auctions, and bid rationally in our auction.

Mr Chng Hee Kok (East Coast): Sir, firstly, in that case, will the Minister not impose a reserve price on the licences in the case of auction?

Secondly, as he has mentioned, since the first auction in Europe, the world of 3G has changed significantly and now there is a general rethink among telcos whether they should proceed on 3G if it is too expensive. That being the case, would this retard the development of 3G in Singapore? Will the auction process still proceed if there are fewer interested licensees than the number of licences available?

Lastly, Sir, would this development fund for the development of wireless systems still proceed if the monies collected from the 3G licences are not enough to support the fund?

Mr Yeo Cheow Tong: Sir, Mr Chng has asked whether we would set a reserve price. Sir, indeed we have set reserve prices. The reserve price per licence has been set at $150 million per licence.

Secondly, Mr Chng asked whether the experience elsewhere has retarded the development of 3G, and whether it will retard the development of 3G in Singapore. Sir, despite the high prices paid elsewhere, we believe that 3G is going to go on and that those telcos which have bidded in the European countries will be proceeding to roll out the system and they are now currently sourcing for funds to proceed with that. In terms of the development of 3G in Singapore, we believe that what has happened elsewhere should not have any impact in Singapore, because we are also going to be proceeding with the roll-out of 3G and, in fact, we will be putting in place programmes to help the development of 3G applications in Singapore through the "Wired for Wireless Programme".

Mr Chng also asked whether we would proceed with the auction if there are fewer bidders than licences available. Sir, we are going to be offering four licences for auction and, if there are less than four bidders, we would still proceed to issue the licences to the interested parties and award the remaining licence or licences later when the demand is there.

Fourthly, whether the "Wired for Wireless Programme" will continue if the response for the auction is not as originally expected, Sir, the "Wired for Wireless Programme" will continue. The amount of money available for this programme will of course depend on how much we manage to raise in the auction.

Mr Speaker: Dr Toh.

Mr Chng Hee Kok: Two questions, Mr Speaker, Sir.

Mr Speaker: Order, Mr Chng. Dr Toh has the floor.

Assoc. Prof. Toh See Kiat: Thank you, Mr Speaker. The Government has decided to do an auction programme but the auction has been postponed. Does this postponement of the auction, plus the tentative nature now of the auction guidelines, indicate that the IDA and the Government itself are not sure that the auction is the best way to go forward?

Secondly, does the postponement not create some kind of market uncertainty and cause the market to lose confidence in the ability of the Government to project the future?

Mr Yeo Cheow Tong: Sir, in answer to Dr Toh's first question whether the postponement indicates that IDA is not sure and that this indicates a tentative nature, Sir, let me explain first why IDA has had to delay the auction. Following the announcement of the 3G licences last year, IDA sent a team of officials to interested parties in Europe, USA and Asia. Arising from this trip, the team was asked by several interested telcos, firstly, that they would like to know a little bit more about the auction rules and, secondly, they would want to have the opportunity to comment on the auction rules before they are firmed up. As a result, the release of the auction rules, which has been scheduled for the middle of January, has been delayed. Instead of the firmed-up auction rules, it will now be auction rules meant for consultation with the interested parties. We expect that the interested telcos would take some time to study the auction rules before they give us their comments. And once we receive their comments, IDA would also need some time to study them before deciding whether or not to amend the auction rules.

As such, IDA has factored in a 2-month period for this additional process which was originally not expected. As a result, instead of going for the auction in February, IDA expects to go for the auction in April. So the delay is not because of the tentative nature of the process but because we have had requests from interested companies to be involved in the consultation.

Thirdly, Prof. Toh has asked whether this would not create uncertainty. Sir, IDA is in close touch with the telcos that have expressed interest and, therefore, there is no uncertainty at all, because they are fully aware of the time line and they are fully aware why the schedule has been changed from February to April. 1.59 pm

Mr Speaker: Mr Chng, we are approaching the end of Question time.

[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 19-27 and 29 on the Order Paper are reproduced in the section, "Oral Answers To Questions Not Reached" (Cols. 1369-1386). Question No. 28 has been postponed to the next available sitting of Parliament.]