"A spectrum auction for IMT-2000 will not take place, Information and Communication Minister Ahn Byung-yub said yesterday.
"Releasing the first draft proposal for IMT-2000 business policy, Ahn ruled out a spectrum auction and said the government will license service operators using the traditional method - a "beauty contest" where licensees are chosen based on the merits of their business proposals.
"The paper which will be presented during the first public hearing on IMT-2000 business next Tuesday proposed several alternatives as to the number of operators, operator selection method, technology standard and the price of the licenses.
"While the draft presented four different scenarios as to the number of operators, three seems to be the favored number. Should three incumbent mobile telecom companies be given licenses, it would result in about 1.2 trillion won savings in investment and minimize redundant investment. Other advantages of this scenario, the paper noted, is that the operators would reach the breakeven point in five years and with the bandwidth of 20MHz per operator, would be able to meet the growing demand for data traffic. However, Ahn said that the reduced competition may make operators slow to make investments in third generation mobile telecom services.
"Other alternatives included giving out licenses to three new operators, three existing operators and one new entrant and three consortiums led by existing operators.
"A new possibility, not mentioned by the ministry in its previous discussions, is that the operators who fail to get licenses may offer services similar to IMT-2000 using the existing spectrum.
"As for the operator selection method, the paper eliminated spectrum auction as a feasible possibility as it would take at least six months to prepare an auction model and adopting the requisite changes in the law would be difficult. A lottery was also ruled out, as there is a risk that less qualified operators may be chosen purely on luck, inviting strong public criticism. The final conclusion was that the beauty contest was the only viable option. But the paper did not contain any standards for such a contest. "We have not yet set up the criteria for the beauty contest," explained Ahn, adding that one will be in place by the end of the month.
"The paper recommended that the technology standard selection be put off as much as possible to gain maximum advantage in royalty negotiations. Of the two competing standards for IMT-2000, W-CDMA (wideband code division multiple access) and cdma2000, the country has a clear advantage in cdma2000, which evolves from the current CDMA technology. Yet, W-CDMA is expected to take 70-80 percent of the world IMT-2000 market, a major incentive for the country to adopt W-CDMA technology.