Taiwan Opens its 5G Auction

Hot Topic: Last week, the National Communications Commission (NCC) started the auctions for 5G spectrums with bids reaching NT$ 26,774 million on the first day.

5G, the next step of the evolution of telecommunications has had a major push forward in Taiwan as the National Communications Commission (NCC) began auctions for 5G spectrums, offering a total bandwidth of 2790 MHz. This kick off the 10 rounds of auctioning that is to take place over the next few weeks.

What is 5G?

5G, ‘fifth generation cellular wireless’, is a general term to describe the next generation of communication technologies which make up a network that will dwarf the capabilities of the generations before it. This hyperfast mobile internet is said to be 10-20 times faster than current data download speeds with wider coverage and more stable connections – transmissions being measured in gigabits per second rather than the peak rates of megabits that has been the case with 4G up until now.

These new customer experiences are based on seamless interconnectivity between devices. This will allow the development of the so-called ‘Internet of Things’ or ‘smart technology’ - which ranges from ‘smart glasses’ (featuring augmented reality) and ‘smart household appliances’ (for example a fridge that stores data on the various foods within to improve online shopping experiences), all the way to ‘smart power grids’ (enhanced efficiency of energy supply and demand) and ‘smart cities’ (managing traffic, transportation, utilities, waste, crime etc.). These new abilities are expected to provide interactivity of networks that will enhance business models, consumer markets and the impact of the government – providing an encompassing economic restructuring.

The way 5G signals work is through different bands of wavelength. Signals at high frequencies, and therefore smaller wavelengths, deliver data more quickly than at low frequencies. However, the drawback of this is that high frequencies can only cover short distances and are easily disrupted by walls, trees, and even particles in the air meaning their range is significantly lower. Therefore, companies use three different wavelength bands – low, mid and high – to adapt according to needs. These ‘spectrums’ are what is fought over between companies, each telecommunication firm vying for increased information capacity.

Taiwan’s Approach to 5G

Taiwan has one of the highest rates per capita for mobile data consumption in the world, with some estimates being almost double that of South Korea. This ensures it is well placed, and well incentivised, to develop its own brand of smart technology. Executive Yuan’s Tsai has highlighted that “the denseness of Taiwan’s optical network is an advantage it has over some countries”. On May 10, 2019, the Executive Yuan approved a plan for 5G technology in Taiwan. This four-year plan will see NT$20.47 billion (US$ 655 million) being invested after 2019 with the goal of transforming Taiwan into a global competitor, entrenching industrial innovation and facilitating the formation of cooperative platforms to create end-to-end industrial chains.

The executive plan includes five key pillars.

  • “Establish areas for testing vertical applications” which will see deep collaboration between public and private entities to test a combination of applications as well as relaxing regulations to properly examine the scope.
  • “Engineer an environment conducive to innovative 5G” which will pull various different sectors to support new businesses and to harness the different market enterprises models.
  • “Perfect core 5G technologies and cybersecurity” which will require core techniques in applying technology integration and testing 5G capabilities, as well as a unified national policy for cybersecurity and protective mechanisms to secure domestic products, infrastructure, and operational cybersecurity.
  • “Plan for the release of 5G spectrum that will best serve overall interests” which will have a detailed spectrum policy which will plan out market trends and international developments with an ‘auction’ taking place to allow for frequencies to be sold
  • “Adjust laws and regulations to create an environment beneficial to the development of 5G” which has already been done through the legislature passing a law on May 29, 2019, which has dramatically lowered the barriers to market entry and allow for flexibility for cooperation across industries promoting the joint construction of 5G infrastructure.

With regards to the licenses being distributed, the lifetime of them will exist for significantly more time than was afforded to 4G in order to incentivise infrastructure development within the new networks with the 20MHz and 1800MHz bands expiring at the end of 2030 and the 3.5GHz and 28GHz band being extended to 2040.

The 5G Auction

In countries around the world, publicly owned airwaves are being licensed out to telecommunications companies to be able to transmit signals over the specific bands of wavelength needed to conduct 5G. This approach is in order to allocate scarce resources by allocating them to the parties that value them the most whilst giving governments a lucrative revenue stream. In June of this year, official amendments were made to the Taiwan Regulations for Administration of Mobile Broadband Businesses to accelerate the process of the release of 5G licences in order to catch up with other advanced countries, reducing the time limit for applications from 45 days to 30. The National Communications Commission (NCC) then initiated the 5G spectrum auction on the 10th of December, which will only end when all bidders decline to submit any more bids.

The auction has opened with the total amount of released spectrum being 2,790megahertz (MHz) split across 270MHz in the 3.5 gigahertz (GHz) frequency band, 2,500MHz in the 28GHz band, and 20MHz in the 1,800MHz band. Each of these bands has been divided into bidding units which have each been given a floor price which, in total, has amounted to NT$30 billion, which is lower than the 3G (NT$33.6 billion) and the 4G (NT$35.9 billion) auctions before it.

The first day saw Chunghua Telecom, Taiwan Mobile, Taiwan Star Cellular, Asia Pacific Telecom, and Far EasTone Telecommunications, mature technology companies, bid for the number of blocks they wish to obtain in accordance with the number of blocks that they had already won thereby maximising spectrum use. The NCC has introduced many different steps to ensure that the process is as competitive and fair as possible. For example, in order to keep monopolisation restrained, the NCC has implemented a maximum of 800MHz in the 28GHz band. Bidding will also be done in stages to allow for revisions, comprehensive prorations and eventual release of the spectrum.

Challenges to 5G

There will be challenges that will be faced once 5G is a commodified good; however, some difficulties already exist. Much of these issues have occurred due to the rapid pace in which the Taiwanese Government has pushed the development of 5G. This has been accelerated by the fear of being left behind as it was during the development of 4G at the start of the decade.

One challenge that is being observed right now is the backlash from the telecom industry who believes that they have been pressured into adopting the new technology too quickly, despite the high costs such as the purchasing of the spectrum and buying the necessary hardware and software. Taiwan Mobile President Jamie Lin has stated: “the general consensus is that it’s a bit rushed”. This lack of time is compounded by the fact that Telecom industries know that 5G equipment is not compatible with the current day consumer devices. This means that, unless a solution to this incompatibility is developed, there will most likely be a short-term economic loss to these companies as they have to invest in an area which consumers, or industries for that matter, are not ready for.

Another difficult issue is that the technology requires more investment than previous generations. With the extremely limited range of the spectrums, especially for those with the highest data frequencies, a much greater influx of base stations is needed – roughly three or four times the amount of those in the 4G era. The Government, knowing this, have regulated to ensure that the winner of each frequency slot in the 3.5GHz band will have to install a minimum of 1000 5G base stations within 5 years in order to cover at least 50% of Taiwan’s population – ensuring that the benefits of this technology are the consumers. However, this requires a colossal amount of funding with Lin stating that “US$150,000-$300,000 per 5G base station as opposed to US$50,000-$100,000 per 4G station … in addition the networks will consume three times more power and will require three times more base stations for the area covered”. These are heavy costs, even to Telecom companies, and so giving time for the companies to steadily increase the number of stations available, and thus more easily absorb the costs, may have been beneficial.

Lastly, there is an issue of security. Whilst covered in the five main policy pillars, the development of cybersecurity needs to have the time to be properly configured, with a US Department of Homeland Security stating that if mechanisms are not etched into the very existence of 5G infrastructures, security will be “like attempting to plug holes in an infinite wheel of Swiss cheese”. Again, the issue of being too eager to see Taiwanese companies compete globally may come at the expense of airtight security plans. However, the Government do seem to be monitoring this particular area so it may be that this issue has been given appropriate thought. For example, one of the directives under the Executive Yuan’s 5G Action plan is to build a unified national policy on cybersecurity with one initial measure requiring successful bidders to submit a security plan when they apply for operating permits.

Overall, this 5G auction highlights the Governments and industries desire for Taiwan to be at the forefront of innovation in the 5G technological evolutions, using its already mature sector to its advantage, and helping to expand the technology of the next decade.

Executive Yuan  - Taiwan's 5G Action Plan

Taiwan Business Topics - Taiwan Moves Forward Fast on 5G

Taipei Times – Telecoms vie for a coveted band as 5G auction starts

Taipei Times – NCC announces 5G spectrum auction floor prices