5 to 10 3G operators in a circle. But spectrum?

NEW DLEHI; In the backdrop of scarce spectrum or airwave, the government has announced a global auction policy for 3G (third generation) telecom and wireless broadband services, all on the condition of availability.

Union communications minister A Raja said on Friday the number of operators in a circle or a service area offering 3G could go up to 10, while the initial number will be 5. He added that the number of operators would be subject to availability of spectrum.

Despite all the uncertainties related to spectrum availability, the government is targeting revenue worth Rs 30,000 crore to Rs 40,000 crore from 3G and wireless broadband auctions.  

Delhi and Mumbai, the two most happening telecom markets in India, for instance, cannot accommodate more than 2 to 3 telcos offering 3G services, out of which one slot will certainly go to Mahanagar Telephone Nigam Ltd (MTNL).

Realistically speaking, Delhi and Mumbai cannot have more than one private operator each for 3G, where the demand for the service is expected to be maximum.
The other telecom PSU, Bharat Sanchar Nigam Ltd (BSNL), would get a reserved 3G slot across the country except in Delhi and Mumbai.

Raja admitted that, while pointing out that most other circles (except Delhi and Mumbai) could have 3 to 5 operators in “the near future”. And the number could go up to 10, if more spectrum is available.

When asked about the status of spectrum availability with the Department of Telecommunications (DoT), Raja failed to come up with a clear answer.
He only said that effort is on to get unused spectrum vacated from defence forces and space agencies.

The National Security Advisor, Raja said, was advising the defence ministry on the matter, and that within two months the issue could be resolved.

However, the defence ministry’s stand is that an alternate communications system should be in place for the forces (army, navy and air force) before it could vacate any spectrum.

But, DoT is insisting on phased vacation of spectrum after an alternate network for the
air force is in place.

It is learnt that there hasn’t been much interaction between the defence ministry and DoT over the matter in the recent months.

According to DoT officials, the 3G global auction could be completed over the next four months. Players like Bharti are saying that they could roll out 3G services within 6 months after grant of spectrum.

Going by the DoT version, the 3G auction process will be completed by the end of this year, and that should be the timeframe for spectrum allocation as well.

So, by June 2009, many players like Bharti could be ready to roll out services. The current UPA government’s regime would come to an end around April-May 2009.
For the global auction, the reserve price for pan-India 3G licence has been kept at Rs 2,020 crore.

While for the A circle cities and towns (Delhi, Mumbai, Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Tamil Nadu) the reserve price is Rs 160 crore each, that for B circle (Kolkata, Kerala, Punjab, Haryana, UP (West), UP (East), Rajasthan, Madhya Pradesh and West Bengal) it is Rs 80 crore each. For C circle towns (Himachal, Bihar, Orissa, Assam, North East and Jammu and Kashmir), the reserve price has been kept at Rs 30 crore each.

Spectrum in the 2.1 GHz band would be allocated for 3G services.
For broadband wireless services, the reserve price for auction would be 25% of the 3G price.

Separate auction would be conducted for each telecom service area or circle by a specialized agency. For both 3G and broadband, the highest bid price has to be matched by all successful players in a circle.

Besides existing telecom players in fixed telephony and 2G mobile services, new and foreign players will also be allowed to bid. The new players should have 3G experience in some part of the globe. Also, the new players have to pay an entry fee equivalent to the Unified Access Service Licence (UASL) currently at Rs 1,650 crore for a pan-India presence. The recent entrants in the telecom space like Swan, Videocon and Unitech would be permitted to bid for 3G as they already have the UASL licence.

While there wont be any spectrum usage charge in the first year of 3G operations, thereon 1 per cent of the AGR would have to be paid to the government. DoT has fixed rollout obligations and penalty for spectrum hoarding as well. The 3G licence would be for a period of 20 years.

But, the government has made it clear that it reserves the right to amend or modify these terms and conditions before the commencement of the auction process. And, the final conditions shall be indicated in the bidding document.

CDMA Development Group (CDG) India country head B V Raman said, “We welcome DOT’s decision to open internationally harmonised bands, namely 450, 1900 & 2100 MHz. bands for 3G services. CDG also hopes that the DOT will make spectrum available in the 450 & 1900 MHz. bands for auction at the earliest.” CDMA represents players like Reliance Communications and Tata Teleservices.

GSMA, the global trade body for the mobile industry, and the Cellular Operators Association of India (COAI), have welcomed the government’s plans to award licenses for 3G spectrum via an auction and to automatically extend the underlying 2G licenses to make them co-terminous with the 3G allocations.

“The Indian Government’s 3G policy is a fair and transparent way of allocating additional spectrum amongst the Indian service providers. Furthermore, the automatic extension of the underlying 2G licences will ensure continuity and stability of service and is in the interest of Indian consumers,” they said. GSM players include Bharti, Vodafone, BSNL, Idea and Aircel.