Hong Kong might be paralyzed by a political crisis, but its unpopular government is pushing ahead with a contentious 3.5GHz spectrum auction.

The regulator, Ofca, opened the auction process last Friday, offering to sell 200MHz of what is intended to be the backbone of the city's 5G services.

But the spectrum is already occupied by satellite services, and Ofca has confirmed it will declare an exclusion zone in the Tai Po district in the city's northeast.

It will not allow 5G signals in the 3.5GHz band in the area, which hosts most of the city's satellite earth stations. Around 740,000 people live in Tai Po, approximately 10% of the city's population.

Local satellite company Asiasat says the wide coverage and low frequency of the 3.5GHz makes it "the only realistic satellite band where FSS services can be provided with high availability," especially in regions with high rainfall.

The spectrum, also known as C-band, is used for services such as DTH broadcast, VSAT and point-to-multipoint across the region.

Asiasat says a single basestation in the 3.4-4.2GHz range could potentially block all the satellite reception in the band across nearly all of Hong Kong.

Ofca's decision is a rebuff to local mobile operators that have argued the exclusion zone is unworkable.

Anna Yip, CEO of SmarTone, says the 3.5GHz band will be used as backbone spectrum to provide coverage. The 26GHz and 28GHz bands are no substitute for it, she says.

"As we speak now there's no solution," she told a recent press conference. "We are still waiting for them to move the satellite companies to [remote satellite site] Stanley or somewhere where there is no population."

The decision follows a review of the exclusion plan by an industry committee.

Ofca auction rules stipulate that operators will need to submit a report demonstrating their networks comply with the exclusion zone.

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In addition to the 3.5GHz band, the regulator is also selling off 80MHz in the 4.9GHz band and 100MHz in the 3.3GHz band in its October auctions.

It's part of a spectrum allocation process that has drawn industry criticism over the lack of urgency and the relatively high cost.

Ofca earlier this year auctioned 3700MHz of spectrum in the 26GHz and 28GHz bands, but Charles Mok, who represents the IT sector in the city legislature, said he was concerned operators would be going late to market compared with regional neighbors South Korea and Japan as well as mainland China.

Mok said operators needed two years or so after acquiring spectrum to design and deploy networks.

"The delay in the 3.5GHz auction does not just impact 5G network deployment, but also smart city [plans]," he warned.

In response to complaints from the two largest mobile operators, Hutchison and HKT, about the high upfront spectrum charges levied for 4G spectrum, Ofca has offered a new fee structure.

In a statement Friday, Hutchison said that the reserve price per megahertz of HK$2-4 million ($257,000-515,000) was "relatively reasonable," but warned the final price was subject to other factors.

It said it hoped auction prices "will not be too high, so that the industry can develop more innovative services with sufficient resources to promote Hong Kong's development into a smart city."

— Robert Clark, contributing editor, special to Light Reading