"Frequency Reallocation Fees Must Be Reasonably Set," Three Telecom Companies Submit Opinion Letter to Government

'War of Money' Frequency Reallocation Costs Under Scrutiny
Three Telecom Companies: 'Auction Prices Reflected... Excessive Burden'
Ministry of Science and ICT: "Frequency Resources Decided Considering Economic Value"
80% of Frequencies Except 5G in 2021 Must Be Reallocated

[Asia Economy Reporter Koo Chae-eun] SK Telecom, KT, and LG Uplus have submitted an official opinion letter to the Ministry of Science and ICT expressing concerns over the sharp increase in fees for the reassignment of 2G, 3G, and LTE frequencies. The letter calls for the deletion of the clause in the Radio Waves Act Enforcement Decree that links reassignment fees to past auction winning bids, arguing that this would reduce the excessive burden on operators.

Telecom Companies: "Clause Reflecting Auction Winning Bids Should Be Deleted"

According to the industry on the 31st, the three telecom companies recently submitted an opinion letter to the Ministry of Science and ICT regarding the calculation of frequency reassignment fees. All three expressed concerns about the ambiguity in the fee calculation method and the excessive burden of reassignment fees. In particular, they pointed out that the clause linking fees to past auction winning bids increases the burden on operators.

According to Article 14 of the current Radio Waves Act Enforcement Decree, the reassignment fee is principally calculated as 3% of a mixed amount of actual and expected revenue from the assigned frequency (calculation formula), but it also stipulates that the fee should be additionally determined by considering the reassignment fee for frequencies with the same or similar usage (past auction winning bids).

The problem is that when past auction winning bids are additionally reflected, the cost burden on operators increases by trillions of won. If only revenue is considered, the cost burden for the three companies is estimated to be in the 3 trillion won range, but linking it to auction winning bids could increase it up to 10 trillion won. The telecom companies argue that linking past auction winning bids when reassigning existing frequencies is excessive.

Ministry of Science and ICT Has Broad Discretion... Fee Calculation Method Is Key

An industry official said, "There are no regulations on the criteria for reflecting or not reflecting auction winning bids, making it difficult for operators to predict frequency reassignment costs," adding, "Since 5G is excluded from the reassignment fees, linking the fees to revenue is reasonable." There is also an argument that since the three telecom companies promised a 4 trillion won investment in 5G in the first half of the year, resources should be allocated to building new communication services. Another telecom official pointed out, "Since 5G has started, imposing excessive costs on reassignment fees to continue 3G and LTE services does not fit the environment of telecom generation transition."

The Ministry of Science and ICT holds a fundamental stance on this. A ministry official said, "We are reviewing the operators' opinion letters. We will decide on the calculation method comprehensively considering the economic value of frequency resources and the virtuous cycle of the ICT industry."

Meanwhile, according to the current Radio Waves Act, telecom companies can use specific frequency bands for a certain period through government auctions or allocations. When the fixed usage period expires, they extend it by bidding for or being reassigned the frequency resources by the government. Frequencies requiring reassignment before 2021 amount to a bandwidth of 320 MHz. Excluding the 5G bands, this accounts for about 80% of the bandwidth held by the three companies.