Fight for the scarce resource - "THE SPECTRUM"

Entry of Foriegn players in offering 3G mobile services
As per reports in economic times - A committee of Department of Telecom is said to have given its clearance on entry of foreign players in offering 3G mobile services and allocation of spectrum through auction. The group is said to have so far finalised two things -- that 3G is not an extension of 2G, implying that there is price to be paid through auction for spectrum to start 3G services, and entry of foreign players. Other issues including allocation of spectrum to public sector undertakings and pricing criteria are also being worked out.

At a time when voice revenues are falling, high-end value added services through 3G hold big potential for telcos to arrest the top line fall. The report indicated that the final policy is not likely to come out before July as lots of nitty-gritties have to be worked out along the broad framework of 3G, including allocation, auction methodology, benchmark price, number of players, PSUs (BSNL and MTNL) entitlements as per their existing rights. The sources said being PSUs, BSNL and MTNL will be given preference as unless supported they would not be able to compete and offer 3G services on their own. The PSUs will have pay some price for the spectrum to remain in the allocation benchmark, they said. Entry of foreign players will bring in competition and quality which would bring down the cost and make 3G services popular.

Meanwhile Tata Teleservices is opposing entry of foreign players in offering 3G services. Tata Teleservices feels this would lead to scarcity of spectrum and hamper the growth of existing operators and has demanded a level-playing field vis-a-vis foreign players.

Mandatory network sharing for roaming
Meanwhile, The Department of Telecom (DoT) plans to make it mandatory for all operators to open their networks to roaming customers from other service providers after the introduction of third generation (3G) telecom services in India. If implemented, private cellular operators will be largest beneficiaries as they will be roam on the extensive networks of state-owned BSNL. This proposal will also enable 3G subscribers to roam on the existing 2G networks. The move has been recommended by the internal committee of DoT, which is studying telecom regulator’s Trai recommendations on the allotment and pricing of 3G spectrum. The logic behind the DoT proposal is that “besides existing GSM and CDMA players, non-telecom companies and even non-Indian companies” will bid for 3G spectrum, when it is made available. As the constraint of 3G spectrum will limit the number of players in this sector, and since it will also not be possible for these players to roll-out these services on a pan-India basis, their customers will therefore have to depend on the 2G networks of existing operators when on roaming, the DoT committee has said. “In view of the limited number of service providers being recommended for 3G services and the fact that the extensive, country wide roll-out of 3G networks will take a reasonably long time, the 3G customers will have to depend on 2G networks and services in areas where 3G services are not available, or on 3G networks of other operators, wherever available for such time. Hence roaming amongst all service providers would be required and is therefore recommended to be mandated,” the DoT’s committee report said. Currently, all private operators share their network infrastructure and allow their customers to roam on the networks of competing service providers. The DoT committee recommendation gives private operators reasons to cheer as BSNL is the only telecom operator in India which does not share its infrastructure. In fact, many private operators have also demanded that the incumbent be mandated to share its nation-wide network created largely with public funds, on reasonable and non-discriminatory terms, adding that the terms of such sharing be regulated by Trai. The regulator has also been advocating the move. The Department of Telecom committee has also endorsed most of Trai’s recommendations on the allotment of 3G spectrum. While approving of Trai’s proposal that 3G spectrum be made available in the 2.l Ghz and 800 Mhz (for CDMA), it has however said that the availability of the 450 Mhz would be difficult. With just over 40 Mhz of 3G spectrum slated to be vacated by the defence forces, the committee has recommended that the allocation of the resource be limited to just four players, through a bidding process. Additionally, it has also recommended that ‘for security reasons, one slot of 3G spectrum be reserved for BSNL and MTNL’ during its allocation, where the PSUs will have to pay the price quoted by the second highest bidder during the auction process.

Limiting the number of operators to ensure spectrum availability
At this point of time the Indian telecom space is hit by the unavailability of spectrum. The Department of Telecom is said to be now considering to limit the number of operators in each service area to maintain a minimum quality of service. The step was necessary as "spectrum is a scarce resource and to ensure that the adequate quantity of spectrum is available to the licensees to enable them to expand their services and maintain the minimum quality of service." There are 23 telecom circles in the country. Currently, there is no cap on the number of service providers in a service area. As on date, 159 licenses have been issued for providing access services in the country and generally there are 5-8 providers in each service area. Since any Indian company can apply for unified access license, this is increasing the demand for spectrum in a substantial manner. In an evolving sector like telecom to ensure that the policies keep pace with the changes, DoT is seeking TRAI's recommendations on the issue of limiting the number of Access Providers in each service area. The Department is considering to review the whole set of crucial guidelines in the terms and conditions of access providers (cellular/unified access/basic) licenses. The terms and conditions slated to be reviewed are "substantial equity holding by a company/legal person in more than one license company in the same service areas, transfer of license and merger and acquisition guidelines." Besides, other guidelines like permitting service providers to offer access services using combination of technologies (CDMA/GSM and or any other) under the same license, roll-out obligations and requirement to publish printed telephone directory will also be reviewed. TRAI's decision could also decide the fate of Reliance Communications which is aspiring to enter the GSM space in a pan India presence and has thus applied for spectrum. As per DoT norms, no single company can have more than 10 per cent stake in two different cellular operators in the same circle. The guidelines also deal with market dominance and stipulate that the total market share of the combined entity cannot exceed 67 per cent in any circle.

Rajya Sabha MP and former owner of BPL Mobile, Rajeev Chandrasekhar, has joined the ongoing battle between the government and telecom operators regarding the allotment and pricing of 3G spectrum. In a communication to Prime Minister Manmohan Singh, Mr Chandrasekhar said that that the Department of Telecommunications’ (DoT) plans to allow foreign and non-telecom players to bid for 3G spectrum through an auction process must not be held hostage by Indian telecom companies. Mr Chandrasekhar’s communication comes as Tata Teleservices and GSM operators have expressed concern over DoT plans to allow foreign players to bid for 3G spectrum and said that “the existing 2G players must have the have the first right to use 3G spectrum as and when it is made available for allotment”. Mr Chandrasekhar is not a disinterested party. He is planning to bid for 3G spectrum in some metros, and will be prevented from doing so if the government bans non-telecom Indian players from participating in the auction. He has also pointed out that there were no restrictions on fourth round of cellular licenses and the recent FM licenses, while adding that restricting bidders would depress the real value of spectrum. Tata Teleservices, in its communication to DoT had alleged that the Centre was ‘disregarding the recommendations of Trai for facilitating the progress of existing GSM and CDMA operators from 2G to 3G services’. “At a minimum, we would expect that the issue of entry of new players, especially from overseas markets to be discussed openly. The interests of existing telecom licence holders who have done so much to make India the fastest telecom market in the world must be protected and a level-playing field provided to them,” the company had said.

Amid the ongoing debate over the entry of foreign players in 3G mobile services and opposition to this idea by domestic players, officials of Tata Teleservices, Bharti Airtel and Cellular Operators Association of India on Thursday met Telecom Secretary D S Mathur.
Sunil Mittal, CMD, Bharti group told the media, "My only point is existing players should get enough spectrum. We all know there is scarcity of 2G (voice spectrum)."
Former telecom minister Dayannidhi Maran had said foreign players should be considered to offer 3G services to bring in quality and comeptition. However, domestic players have opposed this proposal.

Who has got the right on spectrum - GSM v/s CDMA operators
In the fight for the spectrum, Cellular Operators Association of India has said CDMA players should be granted GSM spectrum only after the needs of the cellular service providers (GSM) have been fully met and secured.
Leading CDMA player Reliance Communications has applied for GSM spectrum to expand its mobile services in the country.
Both policy and regulation emphasize adequate availability of spectrum for existing service providers before considering the needs of new players, the COAI said in an approach paper on allocation 2G spectrum (voice).
It further said as the government is in the process of vacating spectrum in the 1800 MHz band to meet the additional spectrum requirements of GSM licensees, it is important to arrive at an equitable approach on how this additional spectrum be allotted among various service providers.
The requirements of CDMA service providers are met through spectrum in the 800 MHz band and when they migrated to UASL from fixed/WLL(M) licenses, it was on the understanding that they would provide the service in their already allotted spectrum and no additional spectrum will be given.
All the GSM licensees who are in commercial operations will come into the category of existing licensees and their spectrum requirements must be safeguarded up to at least 2x15 MHz before any subsequent licensee is considered, it said.

With the government expected to soon take a decision on the allotment of 2G spectrum for Reliance Communication’s GSM foray, existing GSM players have approached the Department of Telecom (DoT) demanding that allocation of this resource be prioritised. GSM players have said that despite the licence being technology neutral, they should have the first right to 2G spectrum as and when it is available. Besides, a GSM player who wants to expand operations to pan-India level should be given priority over new entrant Reliance Communications, they said. Last year, RCOM, which currently offers GSM services in eight circles, had applied for GSM spectrum on a pan-India basis. The company is also learnt to have floated a mega GSM tender estimated at over $6 billion. Recently, announcing the results for the year ended March 2007, chairman Anil Ambani had said that RCOM would roll out GSM services across the country within a year of spectrum being allotted. Opposing the move, the Cellular Operators Association of India (COAI), the body representing all GSM technology-based operators, had told DoT that telecom regulator Trai, during its earlier recommendations, had said that ‘additional spectrum, if available, should be given to existing operators for cost effective service. Quoting Trai, COAI said a fair balance between the two objectives of increasing competition on one hand and improving quality, coverage and price-efficiency of service on the other, has to be maintained so that the larger objective of providing quality services at affordable prices is not jeopardised. COAI also added that if new entrants were allocated GSM spectrum, at the expense of existing operators, then this will lead to ‘a sub-optimal cost structure and quality of service, which in turn will be detrimental to the growth of teledensity’. According to the GSM body, currently, the paucity of adequate spectrum for existing licensees have resulted in serious ‘quality of service’ issues, which have been highlighted by the regulator from time to time. Trai in its study papers have repeatedly said that spectrum shortage faced by operators was affecting the service quality. “Given that both policy and regulations emphasise on adequate availability of spectrum for existing service providers before considering the needs of new players, it is submitted that in the event that any CDMA licensee seeks an allotment of GSM spectrum, he will be able to get the same only after the needs of the GSM providers have been fully met and secured,” COAI said.

RCOM, Tata Teleservices and other CDMA operators have approached telecom tribunal TDSAT, seeking refund from the government of the excess fee charged during 2003-06 due to late implementation of the revenue sharing regime in allocation of spectrum. Accepting a petition by RCOM and CDMA body Association of Unified Telecom Service Providers of India, TDSAT chairman Justice Arun Kumar issued notices to the DoT and directed it to file a reply within four weeks. In the petition, the operators requested the tribunal to direct DoT to charge them for allocation of microwaves on revenue share basis from 2002 when the Unified Access Service License regime was implemented. AUSPI and Reliance in the petition also urged that spectrum charges should be taken from the date of commercial operations of telecom companies and not from the date of allocation of microwave. During proceedings, counsel Ramji Srinivasan, appearing for the operators, contended that after UASL implementation in 2002, DoT had assured them it would take spectrum charges on revenue share basis.

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