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Cablegate: Thai Telecom Providers Look Forward to 3g, Wimax Licenses,

VZCZCXRO9807
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #1171/01 1021126
ZNR UUUUU ZZH
R 111126Z APR 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 2676
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 03 BANGKOK 001171

SIPDIS

SIPDIS

STATE FOR EB/CIP, EAP/MLS
STATE PASS USTR FOR JMCHALE
USDOC FOR 4430/EAP/MAC/OKSA

E.O. 12958:N/A
TAGS: ECON ETRD ECPS TH

SUBJECT: THAI TELECOM PROVIDERS LOOK FORWARD TO 3G, WIMAX LICENSES,
LIBERATION FROM CONCESSIONS

1. Summary: After years of delays, Thailand's National
Telecommunications Commission is moving ahead with drafting
procedures to issue licenses to telecom providers to roll out 3G and
Broadband Wireless Access (BWA) services. A number of companies are
already testing Wimax wireless broadband services in anticipation of
the licenses. The principal mobile telecom providers are
considering plans to build 3G telecom networks on their existing
frequencies, but would prefer to acquire licenses on the 2.1 GHz
frequency. Operating on 2.1 GHz would provide better quality
service, but more importantly would serve to wean the telcos away
from costly concessionary deals with state-owned telecom companies
on the current networks. The SOEs may be faced with a potentially
massive loss of revenue which would force them to drastically change
their business model. Suggested talking points for the upcoming
APEC telecom ministerial are in para 13. End Summary.

U.S. industry looking forward to next gen licenses
--------------------------------------------- -----

2. Licenses for third generation (3G) telecommunications services
and broadband wireless access, particularly WiMax, may be on the way
after long delays. The National Telecommunications Commission,
Thailand's independent telecom regulator, is moving ahead with
drafting licensing frameworks for 3G and WiMax and expects to begin
issuing them in the latter part of the year. In addition, the
Ministry of Information, Communication and Technology (MICT) gave
the green light in March to private mobile providers to upgrade
existing networks with 3G technology.

3. 3G licenses had been delayed for years due to the lack of a
proper regulatory authority. The Frequency Allocation Act of 2000
required the establishment of a National Telecommunications
Commission (NTC) and a National Broadcast Commission (NBC) to manage
the broadcasting and telecom spectrum and develop regulations
regarding their use. The NTC was established in 2004, but political
infighting prevented the timely establishment of the NBC. As 3G
technology includes both telecom and broadcast capabilities, the NTC
declined to issue licenses until it could coordinate with the NBC,
putting on ice private sector plans to develop the new technology.
A new Constitution in 2007 called for a National Broadcasting and
Telecommunication Commission (NBTC) to be established that would
regulate both broadcast and telecom, but until it comes into being
the NTC continues to regulate the telecom industry. In August 2006
the Council of State, Thailand's legal advisory body, ruled that the
NTC had the authority to act on new 3G licenses. However, the NTC
moved forward tentatively, particularly after a military coup the
following month, and only recently began making progress on drafting
a licensing framework.

4. U.S. industry is eagerly awaiting commercial opportunities in
Thailand's next generation telecom and broadband market. Although
no U.S. telecom providers participate in the Thai mobile market or
have shown an active interest in doing so, a number of U.S. telecom
equipment providers stand to benefit. U.S.-based Cisco and Motorola
are major providers of telecom equipment to existing mobile
providers in Thailand and would compete for contracts to supply
switches, routers and other equipment to build out new 3G networks.
Motorola works closely with companies likely to begin WiMax
networks, and would provide equipment, network services and
after-sales support. Qualcomm is looking forward to Thailand's 50
million cell phone holders buying new 3G-capable phones that use
their chipsets, plus earning royalties on the sale of telecom
equipment that they have licensed to third party manufacturers.

WiMax trials underway, but no licenses yet
------------------------------------------

5. The NTC has issued permits for twelve operators to conduct
trials for WiMax services, but is still working on procedures for
actual licenses. NTC Secretary General Suranan Wongvithayakamjorn
told Econoff that the regulator expected to receive reports on the
results of the trials from the companies by June and would submit
the results to the NTC's Commissioners. After a public hearing
period the NTC would formulate procedures for issuing WiMax licenses
and would invite proposals from companies. Suranan expected to be
able to issue licenses by the fourth quarter of 2008.

6. Industry views WiMax as an opportunity to expand into broadband
services without being burdened by a joint venture with the
state-owned telecom TOT, which owns most of the fixed line network
in Thailand. The market potential for broadband is substantial. Of
approximately 15 million internet users in Thailand, only about one
million use broadband. With WiMax services companies hope to expand
broadband access to areas of the country where fixed line
penetration is low but internet demand is high, including the
suburbs of Bangkok and provincial cities like Phuket. Motorola

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estimates that the companies it works with could roll out WiMax
networks within three months after receiving a license.

7. Numerous companies have shown interest in rolling out Wimax
services, but narrow frequencies means not all will be able to
acquire licenses. Wimax typically operates on the 2.3, 2.5 and 3.5
GHz frequencies, but in Thailand those frequencies are mostly
already in use by the military, broadcasters or other operators.
Shin Satellite is testing whether Wimax on the 3.5 GHz frequency
would affect its satellite services. Without a restructuring of the
frequency spectrum the opportunities for obtaining a license could
be limited.

3G licensing procedures still under consideration
--------------------------------------------- ----

8. The lack of a broadcast regulator held up consideration of 3G
licenses for years, but the 2006 ruling by the Council of State that
the NTC had sufficient authority to issue licenses has cleared the
way. NTC Secretary General Suranan said the NTC had contracted in
March with a consultant to recommend on terms and conditions for
issuing licenses. The NTC will develop criteria based on the
recommendations and hope to begin issuing licenses within the year.

9. Suranan said that three blocks are open on the 2.1 GHz range for
3G use and the NTC is considering whether to issue a license for
each of the three blocks or only one. Deciding the terms and
conditions will be the NTC's biggest challenge. The NTC is
considering whether to auction licenses to the highest bidders, or
conduct a "beauty contest" whereby companies would submit their 3G
proposals and the best proposal would win the license. Transparency
will be an issue and accusations are almost certain to fly if one
company is seen to be favored over others. The three major mobile
providers, AIS, DTAC and True, who together control nearly the
entire mobile market are interested and are expected to apply for
licenses. Suranan acknowledged that new players in the market may
be squeezed out by the big three and expected there would be debate
on this topic at public hearings.

3G market small, but beside the point
-------------------------------------

10. Telecom analysts see the market for 3G services in Thailand as
relatively small, but one analyst noted to Econoff that the size of
the market would be less interesting to mobile providers than the
prospect of operating new networks independent of state-owned telcos
TOT and CAT. Thailand's major mobile providers labor under
Build-Transfer-Operate (BTO) arrangements, where the state-owned
companies own the networks and the private telcos operate them under
a concession. Companies pay between 20 and 25 percent of their
revenues directly to the SOEs, plus monthly access charges for use
of the networks. The concessions end between 2013 and 2016.

11. With a 3G license on the 2.1 GHz range, mobile providers would
be able to operate a new network on a superior frequency for telecom
services, and at the same time migrate their subscribers from
current 2G networks to a new 3G network, slowly reducing the costly
revenue sharing and access fees they pay to the TOT and CAT. Fees
for a 3G license and a Universal Service Obligation fee would total
only 6.5 percent of revenues, a sharp reduction in costs for the
mobile providers. Building an entire new network rather than
building on top of the current 2G network would be costly and time
consuming for the companies. However, the prospect that the SOEs
could lose their main sources of revenue could be used as a
negotiating tool to end the current concessions and convert them to
rental contracts for the equipment the state-owned telcos still own.
Over time even these contracts would fade as equipment is upgraded.
In the meantime, AIS and DTAC have announced intentions to upgrade
current networks in select markets to 3G on the 900 GHz and 850 GHz
frequencies they currently use. One telecom analyst speculated that
expenditures would not be great as the companies gauge market
demand.

12. Thailand has made efforts over recent years to privatize the
state-owned telcos, but without success. TOT and CAT Telecom were
corporatized in 2003 but the RTG was unable to fully privatize the
two companies as committed to in the WTO. Both remain inefficient
(but politically well-connected) bureaucracies which depend heavily
on the revenue sharing and other fees they collect from private
companies, rather than their own business areas. The prospect of
losing their hold on the private providers may finally force a
change in the SOEs' business strategy. NTC's Suranan said TOT and
CAT are beginning to realize they can no longer operate as
monopolies and must compete with private telcos. He was optimistic
that they would have time to restructure as the private companies
rolled out 3G networks over the next two years.

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Talking points for Telmin 7
---------------------------

13. In anticipation of the upcoming APEC Ministerial for
Telecommunications and Information in Bangkok on April 23-25, post
recommends the following talking points for use in bilateral
meetings with RTG telecom officials and regulators.

-- Encourage MICT and NTC to move forward quickly on issuance of 3G
licenses in the 2.1 GHz band. Drafting of licensing procedures
should be open and transparent.

-- Support development of licensing framework for Broadband Wireless
Access technologies. Wireless broadband networks will open internet
access to a broader spectrum of Thai society.

-- Note that Thailand's competitors in the region have already made
broad advances in rolling out new 3G and wireless broadband
technologies which are helping draw investment. Expedited issuance
of licenses in these areas will drive investment in modern
telecommunications networks in Thailand and provide better services
for industry and Thai consumers.

JOHN

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