Frequency reallocation that will require trillion-won investments by carriers is imminent. The Ministry of Science and ICT will hold a public hearing in early Dec. and release detailed plans and a draft for reallocating 3G and LTE frequencies whose usage terms expire sequentially next year.
Frequencies are core infrastructure that carriers must invest in as a necessity for their business. The frequencies the ministry is moving to reallocate this time are those reaching reallocation points in June and Dec. next year, totaling 370 MHz: SK Telecom 155 MHz, KT 115 MHz, and LG Uplus 100 MHz.
An official at the Ministry of Science and ICT said, "We plan to announce the frequency reallocation plan around the first week of Dec. after holding a public hearing early next week to gather opinions."
◇ SK Telecom: "The same price should apply to the same frequencies" vs. LG Uplus: "Policy consistency must be maintained"
The ministry classifies the frequencies subject to reallocation into five groups (A–E), bundling together those with similar economic value. The biggest sticking point is the 2.6 GHz band in Group C, with SK Telecom holding 60 MHz and LG Uplus 40 MHz.
In the 2016 frequency auction, SK Telecom won 60 MHz (40 MHz for 950 billion won and 20 MHz for 327.7 billion won) in the 2.6 GHz band for a 10-year term at 1.2777 trillion won. By contrast, LG Uplus secured 40 MHz in the 2.6 GHz band for 478.8 billion won in a 2013 auction. It later received an additional 27.5% discount during the 2021 reallocation process.
LG Uplus received the discount due to the reallocation policy the government has implemented since 2020. At that time, the government set a reference value based on past auction prices and decided to apply a 27.5% discount to the frequency price if carriers built 120,000 5G (fifth-generation mobile network) base stations. LG Uplus met the criteria in 2021 and received the discount. As a result, the unit price gap between SK Telecom and LG Uplus widened to more than double. SK Telecom is using the same frequency road while paying nearly twice the toll. If the existing principle is maintained, the price gap between the two companies may recur in the reallocation.
SK Telecom argues that the same band should be reallocated at the same price, while LG Uplus calls for policy consistency. Regarding the 2.6 GHz band, SK Telecom says, "Even though it is the same band and the same group of frequencies, SK Telecom is paying more than double the allocation price of LG Uplus," and argues that "the current value of LTE frequencies, which are in decline, should be reflected." The logic is that it is no different from a landlord in a depressed real estate market, where jeonse prices have halved, forcing a renewal at the peak price from 10 years ago. However, LG Uplus counters, "The prices of the frequencies each carrier holds are economic values the companies themselves judged and bid on, comprehensively considering the market conditions at the time of the auction, bandwidth, and reallocation fees, and asking to change them only at the time of reallocation does not align with policy consistency and investment stability."
◇ Will claims of reduced LTE utility be reflected
Carriers are focused on what level the reallocation fees will be set at. The government typically calculates reallocation fees by comprehensively considering auction-winning prices in the past as a baseline, along with frequency characteristics, bandwidth, usage period, purpose, and demand outlook. Attention is on how much external conditions will be reflected in the fees. When the frequencies were previously allocated, the market was at the early stage of 5G adoption, transitioning from LTE to 5G. But it has now been more than six years since 5G commercialization. According to the Ministry of Science and ICT, LTE subscribers fell 60%, from 48.29 million in Dec. 2021 to 19.28 million as of Sept. Industry officials argue that reflecting the decrease in economic value over the frequency life cycle in the reallocation fees is reasonable.
◇ Will discounts be applied based on 5G build-out
Just as the previous government applied a 27.5% discount to frequency prices if 120,000 5G base stations were built, there is speculation that this time an "option for discounts" could be offered on the condition of building 5G SA (standalone) networks. In Korea, only KT has built a commercial 5G SA network so far. SK Telecom and LG Uplus operate their networks based on 5G NSA (non-standalone).
5G SA is a technology that uses only 5G exclusively for both base stations and the core network. Data transmission and reception, as well as authentication and control signal processing, all run on the 5G network. Its advantage is very short device-to-device information delivery—"ultra-low latency"—for fast response. NSA, by contrast, mixes 5G and LTE. While carriers chose NSA technology for revenue and quality reasons, experts advise that to secure global competitiveness in the transition beyond 5G to 6G (sixth-generation mobile network), they should accelerate the build-out of commercial 5G SA networks.
In a report released on the 6th of this month, "Key issues in advancing AI mobile network infrastructure," the Korea Information Society Development Institute (KISDI) said, "If the current 5G NSA approach becomes entrenched and infrastructure advancement is delayed, there is a high risk that delays in developing 5G-native services will lead to a decline in national AI competitiveness," adding, "Policies are needed to promote the advancement of 5G SA mobile network infrastructure and services and to foster infrastructure industries as strategic industries."
An official at the Ministry of Science and ICT said, "Because 5G SA is the gateway to 5G commercialization, we are considering various measures, including related discount options," adding, "While maintaining the basic methodology for calculating reallocation fees, the extent to which environmental changes are reflected will be extensively covered at the public hearing."