The digital divide at regional level and its determinants

The results of Paper I show that the digital divide in Thailand exists at the regional level. Market liberalization in the ASEAN countries has created greater potential for ICT access through a promotion of sector expansion as a whole by raising the number of new entrants and giving them an opportunity to move into new markets for incumbents and new entries. Market liberalization and the establishment of the NRA also encourage foreign investment. In this case, consumers have an opportunity to benefit more from new telecommunications services after liberalization. At the same time, however, market liberalization can widen the digital divide due to the difference in the institutional structure, and economic and technological development between countries. Empirical evidence confirms this argument as shown below.

The problem of unequal access to telecommunications services among ASEAN member countries exists. The leading country for all services is Singapore. Apart from Singapore, there are countries leading in specific services, which also have a higher penetration rate than the ASEAN average. For example, Vietnam, Brunei and Malaysia are leading countries in terms of the fixed telephone and Internet penetration rate. In the mobile phone service, Thailand, Malaysia, Brunei and the Philippines have a higher mobile phone penetration rate than the ASEAN average at the end of 2007. On the contrary, Myanmar, Cambodia and the Lao People’s Democratic Republic (Laos) have the lowest penetration rates for all services compared with other ASEAN countries.

The factors that are identified as being important are income (GDP per capita), establishment of an NRA, market competition and urbanization. These factors are in line with a number of previous studies (e.g. Wong, 2002; Fink & Kenny, 2003; Chin, 2005; Mariscal, 2005; Noh & Yoo, 2008; Yartey, 2008). Specifically, the Thai telecommunications market had partial competition in 2007 even after the establishment of the NTC. The mobile telephony and Internet market has gradually been liberalized while the market of fixed line service is monopolized by the SOEs. This may be one of the obstacles to the ICTs penetration rate in Thailand followed by some ASEAN countries.

Paper II provides the empirical findings, specifically for the mobile telephony market. This market was intensified after the Thai Telecommunication Act (2006) became effective. This Act raises the limit on foreign holdings in telecommunications companies to 49% from 25%. In 2008, AIS and DTAC were owned to more than 49% by Temasek Holding (Singapore) and Norway’s Telenor respectively, as direct and indirect shareholders. This is similar to other countries in the region, e.g. Indonesia, Malaysia and Singapore. As a result of introducing competition and setting up the NRA, mobile penetration is increasing. This implies that the consumer benefits from various pricing schemes, nationwide network coverage and better quality of services offered by mobile operators. These results are consistent with previous studies (e.g. Wong, 2002; Roycroft & Anantho, 2003;

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Spectrum licensing (Paper IV)

The credibility and effectiveness of a regulatory framework and its ability to encourage private investment and support efficiency in the production and use of services vary with a country’s political and social institutions (Levy & Spiller, 1996). The performance of mobile telecommunications will then depend on the transparency of the regulations and how neutral the regulator can be. For example, the regulator should prepare the market conditions by introducing laws and regulations in order to facilitate new entrants and ensure a level playing field. The new entrants can then enter the market with fewer constraints. Licensing is one of the most important mechanisms that establish a competitive framework and support effective distribution in the telecommunications market.

Although the Thai mobile market has gradually been liberalized, the issue of the spectrum licensing process has not been achieved compared with other countries in the region. An interesting aspect that has received considerable attention in this thesis is 3G or Universal Mobile Telecommunications System (UMTS) licences. It is an effort by the ITU to create global standards for wireless communications. This service will have greater impact on the revenue stream of mobile operators and provide an opportunity for rural dwellers to connect to the Internet. Hence, spectrum licensing can be seen as part of the policies to improve the number of ICTs inclusion in the country and not just to increase competition in the mobile market.

Four well-known methods have been used for spectrum assignment: first-come-first-served, lottery, beauty contest and auction (Hazlett, 1998). An auction allocates frequency to those operators that value the spectrum most highly and who are expected to make the most economically efficient use of the spectrum. However, the high bid prices of 3G auctions in the UK and Germany were major factors in explaining the loss in market value of the firms or the so-called winner’s curse, since the licences were a burden for firm growth in the long run. The licensees may resell their licences in the secondary market or not activate the licences. Those firms who acquire the licences may have financial constraints post award or they may not roll out the infrastructure and start their operation as they have committed themselves to doing, since they do not have enough funding for their investment. Moreover, a higher licence fee may result in a lower number of firms sustained by the market. The market structure will then become much more concentrated with incumbents, and the market growth will be lower and could, in turn, delay innovation.

Many countries in Asia allocated the 3G spectrum to telecommunications service providers during 2000-2006. The assignment approach can be categorized into two main methods: auction and beauty contest. Hong Kong was the first country to implement the 3G auction in September 2001, and it has been followed by many countries in subsequent years. The results of this thesis show that the 3G licences in Asian countries face a very short term of the winner’s curse. This also suggests that the NRAs in Asian countries are aware of the high reserve price from the Europeans’ experience. They then reduced the reserve prices and relaxed the licence condition, which finally led to the short period of the curse. Thailand can also learn from this finding, though there has been a delay in issuing new 3G licences. The main goal of 3G assignment cannot only be considered as a method for raising revenue for the government but also for using the spectrum with optimum efficiency. However, NRAs need to monitor the inefficiency loss from their reserve prices in the long run to improve their reserve prices for the future auction and promote the development of the industry in order to protect the interests of the consumers.