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 
 
BANGKOK 00001171  002 OF 003 
 
 
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. 
 
BANGKOK 00001171  003 OF 003 
 
 
 
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