Upcoming 5G Frequency Auction to Remove Winner's Curse

5G service frequencies are expected to be auctioned off for the middle of the three trillion won level. This is because as the government decided to put a weight on equal distribution, one mobile carrier can win up to100MHz of the 280MHz bandwidth of 3.5GHz, a nationwide 5G frequency. The three Korean mobile carriers had mixed feelings about the decision. But as a consequence, the decision increased a possibility that the mobile carriers will be able to actively make investment in 5G early after eluding the winner's curse that can take place due to an exorbitant price.

The Ministry of Science and ICT will announce a 5G frequency allocation plan and hold an auction on the 15th of next month."The government drew up the auction plan in a way that the government will bear the biggest burden for the early commercialization of the 5G mobile telecommunication," said Ryu Je-myung, director ofthe Office of Radio Wave Policies at the Ministry of Science and ICT. “"The government will provide a maximum frequency bandwidth that can be allocated to build the world's most innovative infrastructure at a time.” Since a frequency is like a road on which data moves, data transmission is possible at a much higher speed when the frequency band is wide. That's why mobile operators make desperate efforts to win good frequencies in frequency auctions.

The allocated frequencies are a total of 2,680MHz including 2,680 MHz bandwidth in the 3.5GHz band and 2,400 MHz bandwidth in the 28 GHz band. The Ministry of Information and ICT is planning to conclude the 5G frequency auction next month and start the world's first commercial 5G service in March of next year. The lowest bidding price is3,276.0 billion won including 2,654.4 billion won for frequencies in the 3.5 GHz band and 621.6 billion won for those in the 28 GHz band.

Frequency allocation limitsfor each operator, a key issue in this frequency auction, was set at 100 MHz bandwidth in the 3.5 GHz band and 1,000 MHz bandwidth in the 28 GHz band. The Ministry of Science and ICT decided to use 100MHz, which give relatively fair bandwidth to mobile carriersafter brooding over choosing among100MHz, 110MHz and 120MHz as the largest bandwidth in the 3.5GHz band. As a result, the distribution bandwidth of 3.5GHz amongthe three mobile carriers -- SK Telecom, KT, and LG U+ will be 100MHz:100MHz:80MHz or 100MHz:90MHz:90MHz.

The successful bid price is likely to fall more significantly than originally expected. If the maximum allocated bandwidth is set at 120MHz, the subcontractor can only be allocated 40MHz, which could increase the auction price.

The commercialization of 5G is likely to lower service charges. As the government gave up about 2 trillion won in additional tax revenues, the government is expected to encourage early investment in the commercialization of 5G and put pressure on the mobile carriers to lower 5G service charges.

The mobile carriers showed different reactions. A representative of SK Telecom, which demanded more than 120MHz bandwidth expressed a regret, saying that the decision restricted the efficient use of limited frequency resources without fully considering benefits for customers. "The government should quickly map out a plan to supply additional frequencies to prevent afrequency shortage from taking place. On the other hand, "The decision was made to correct the unlevel playing ground caused by SK Telecom's monopoly of 800MHz and promote fair competition," KT and LG U+ said.“We welcome the decision as even if it is limited to 100MHz bandwidth, there will be differences among total frequency sizes of the mobile service operators and the auction will be conducted without any problems.”