Telecom 3 Giants Tense Over Additional 5G Frequency Allocation...Fairness Controversy

Frequency Price 135.5 Billion KRW + Value Increase Factors (α)
SKT·KT "Frequency Usable Only by Specific Operators"
LGU+ "No Competitive Impact... Overvaluation Difficult"

The Ministry of Science and ICT held a public forum on the afternoon of the 4th at The-K Hotel in Yangjae-dong, Seoul, where it disclosed the allocation plan for the 3.5 GHz band 20 MHz bandwidth (3.40?3.42 GHz) 5G frequency requested by LG Uplus for additional allocation. Photo by Cha Min-young.

[Asia Economy Reporter Cha Min-young] As the government has firmly stated that it will proceed with the auction for additional allocation of some 5G frequency bands as scheduled in February, the three major mobile carriers are engaged in a tense dispute. The additional allocation is the result of accepting a request from LG Uplus, while competitors SK Telecom and KT are opposing it, arguing that "the frequency band that only a single operator can use will cause fairness distortion issues."

According to the industry on the 5th, the Ministry of Science and ICT held a public forum on the afternoon of the 4th at The-K Hotel in Yangjae-dong, Seoul, and disclosed the allocation plan for the 3.5 GHz band 20 MHz bandwidth (3.40?3.42 GHz) 5G frequency requested by LG Uplus for additional allocation. Previously, the government had operated a research group 15 times since last year, gathering expert opinions to prepare a draft government proposal.

The minimum competitive price for this auction will be calculated by considering the past 5G frequency allocation fees and reflecting factors that increase the frequency value. The Ministry of Science and ICT explained that the 7-year usage value of the 20 MHz bandwidth frequency subject to this auction, calculated by applying an increase factor to the 1st stage auction winning bid of the 280 MHz bandwidth frequency in 2018 (usage period 10 years, 3.0683 trillion KRW), is approximately 135.5 billion KRW. Park Tae-wan, head of the Frequency Policy Division at the Ministry of Science and ICT, said, "Experts agree that it is necessary to reflect value increase factors as market uncertainties have been resolved and frequency utilization has increased," adding, "The auction will proceed as scheduled in February this year."

This auction will proceed with a hybrid method: a simultaneous ascending auction raising prices up to 50 rounds, where other operators except the previous round winner call additional amounts to determine the next round winner, and if the bidding reaches 50 rounds, a sealed highest bid auction will be conducted. If no bidder appears before the 50th round of the simultaneous ascending auction, the final round winner will win the frequency.

As allocation conditions, 100% achievement of building 150,000 5G base stations by the end of 2025 was presented. This includes existing 3.42?3.7 GHz frequency base stations and base stations jointly built by the three telecom companies. Additionally, the frequency usage plan must reflect measures to enhance the stability and reliability of the mobile communication network. The frequency usage period is set to end on November 30, 2028, the same as the end of the usage period for the already allocated existing 5G frequencies. The Ministry of Science and ICT plans to finalize the frequency allocation plan within this month, announce it next month, and then proceed with application reception and the auction.

Competition companies are strongly opposing this additional allocation. The frequency band allocated this time, with a bandwidth of 20 MHz (3.40?3.42 GHz), is adjacent to the existing LG Uplus usage band. Because of this, if LG Uplus wins the frequency in this auction, it can easily provide services by bundling it with the existing band, but SK Telecom and KT, which use separated bands, will have to incur considerable additional costs to use the new band even if they win the bid. Despite the government's proposal that "other telecom companies can also utilize frequency aggregation technology," the response is that "this is theoretical and does not provide an incentive to participate in the auction."

Competitors are strongly opposing it on the grounds of 'special treatment.' Communication quality is the result of multiplying frequency bandwidth and base station performance. Since LG Uplus can have an advantage in communication quality, it is expected to immediately affect competition. In fact, the three mobile carriers continuously increase their investment in 5G base stations and other facilities (CAPEX) every year to gain an advantage in speed values in the 5G communication quality evaluation conducted by the government.

Lee Sang-heon, SK Telecom's Policy Innovation Officer, said, "Because it involves the uniqueness of supplying frequency exclusively to a specific operator, fairness issues must be clarified and appropriate measures are needed," adding, "When and how much frequency is supplied is an important issue. Since this frequency can only be used by a single operator, it can cause considerable distortion and problems in terms of fair competition."

Kim Kwang-dong, KT's Policy Cooperation Officer, also said, "This allocation is not free from controversy over special treatment," explaining, "LG Uplus can use it without investment, so it can create a significant 5G speed gap without related investment. We have also considered participating in the allocation for competitive response, but it is a rather exhausting issue even at the national level."

Kim Yoon-ho, LG Uplus's Fair Competition Officer, argued, "Only when network quality is high can frequency efficiency be high, and consumers can experience better 5G services," adding, "If LG Uplus receives additional allocation this time, it is only now becoming equal to 100, so it does not affect competition." However, regarding the value increase factor, he expressed concerns, saying, "Excessive allocation fees reduce the investment capacity of operators and affect the fees for the next reallocation and new allocation."

This content was produced with the assistance of AI translation services.