The Department of Telecommunications (DoT) recently increased the number of subscribers required by telecom operators to apply for additional spectrum. While CDMA operators have welcomed the move, most GSM operators have strongly opposed it. tele.net asked industry associations and analysts about their views on the new spectrum criterion and the reactions it is likely to generate…
What is the rationale behind DoT enhancing the subscriber limit for spectrum allocation, that too only days after the communications minister categorically stated that the existing policy would not be changed?
Nitin Gupta: The rationale, from DoT’s point of view, is one of encouraging efficient use of spectrum and ensuring that rollout obligations are met. However, industry associations have opposed the criterion recommended by the Telecom Regulatory Authority of India (TRAI) on the grounds that it lacks a scientific and technical basis. TRAI had recommended that the number of subscribers required for spectrum allocation be hiked by two to six times.
It is understood that raising the subscriber limit for spectrum allocation will result in most existing operators being disqualified from getting additional spectrum in their existing circles. For example, under the new policy guidelines, a GSM player in Delhi would need to have a minimum subscriber base of 5 million to get additional spectrum of 5 MHz. Such numbers might be difficult to achieve in the near term.
Sourabh Kaushal: DoT feels that spectrum, which is a scarce resource, is not being utilised efficiently by the operators. The move to increase the subscriber count is aimed at pushing the operators towards utilising the available spectrum more efficiently. But this logic does not hold true for state-owned Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), as they have been allocated 10 MHz additional spectrum despite not meeting the new criterion.
S.C. Khanna: The driving force behind “Indian telecom reforms” is encouraging intensive competition among players who have built telecom networks in 22 service circles in India.
Today, operators do not have a rightful claim to spectrum beyond a certain limit ?? 6.2 + 6.2 MHz for GSM and 5 + 5 MHz for CDMA ?? as per their licence agreement. Many of the GSM operators have been allocated spectrum beyond the contracted amount, while CDMA operators are still languishing below the contracted spectrum. This has clearly created a nonlevel playing field between the two technologies, and is an issue which needs to be corrected without any further delay.
Large-scale technological innovations have taken place during the past five years, enabling telecom service providers throughout the world to use spectrum much more efficiently. The recent innovations include the adaptive multi-rate codec technique, single-antenna interface cancellation, in-building solutions, low-power femto cells and six-sector BTS. An interesting fact in this context is that, on an average, mobile operators in China serve 8.5 million subscribers per MHz while those in India cater to 3.9 million users per MHz.
In view of the various innovations, there is no justification for allocation of additional spectrum to GSM operators beyond the contracted amount. Any operator who has spectrum beyond the contracted amount should be charged for it on the basis of market forces. Keeping in mind the innovations in GSM technology, there is a need to bring parity between GSM and CDMA in terms of spectrum allocation and correct the anomaly which is a result of the government’s technology-neutral policy.
On the basis of these concerns, DoT’s decision (based on TRAI’s recommendations), taken on October 19, 2007, of allowing crossover technology whereby an operator can offer both GSM and CDMA mobile service on payment of the prescribed fee, is a welcome step. The prescribed fee is the same as the entry fee for getting a new unified access service licence in the same service area.
Romal Shetty: DoT believes that GSM operators are not using their spectrum efficiently and need to address this issue. This can be the only rationale behind DoT enhancing the subscriber criterion for spectrum allocation. On the CDMA side, there has been no change in the criterion because CDMA itself is a spectrum-efficient technology. But on the GSM side, the Telecom Engineering Centre (TEC) study points out that spectrum is not being used efficiently.
While the new criterion gives an advantage to CDMA operators like Reliance Communications and Tata Teleservices, how does it impact existing cellular operators who have been in the queue for spectrum for years?
Sourabh Kaushal: While the existing operators will not get additional spectrum, operators such as Vodafone, Idea and Aircel, who have the licences for new circles but have not been able to begin operations due to lack of spectrum, will get spectrum on a priority basis as and when the defence services make it available. As GSM has lesser subscribercarrying capacity than CDMA, GSM operators will be required to invest heavily to sustain subscriber additions.
S.C. Khanna: The TEC has brought out new subscriber norms for allocation of GSM spectrum which have been accepted by DoT. As a result, GSM service providers will have to use spectrum more efficiently, which will lead to more players and competition, bringing about overall affordability and better quality of service. The government’s move has been welcomed by all CDMA players and a few GSM players like BSNL and MTNL.
Romal Shetty: If new companies are allowed to enter the market, the existing operators cannot grow because of lack of spectrum. The government is basically sending out the wrong signal to these operators. According to them, by allowing new players into the telecom arena, the government has shortchanged the existing operators who have been in the race for a longer time and are still waiting for spectrum. These new players will target the existing operators’ subscriber base.
How will overall competition in the sector be affected by the new norms?
Nitin Gupta: In the long term, this move will facilitate competition and offer subscribers benefits in the form of enhanced services, new product offerings and tariff revisions. All in all, the industry looks set for a major overhaul.
Sourabh Kaushal: The new regulation will further increase the rift between GSM and CDMA operators. GSM operators will have to make fresh investments, which will impact their profitability in the long run.
The competition will increase as operators like Vodafone and Idea are expected to get the required spectrum on a priority basis, thus becoming pan-Indian operators.
S.C. Khanna: The improvement in the efficiency of spectrum usage will lead to technological innovations and make available additional spectrum. This will lead to a greater number of players and more competition. Ultimately, the benefit of this initiative will be enjoyed by the customers in the form of choice of services and affordable tariffs. We expect a substantial escalation in the monthly subscriber addition figure which is currently 7.5 million.
The government will soon be finalising a similar policy for CDMA spectrum also. We trust that the new policy will uphold the principle of technology neutrality and create a level playing field.
Romal Shetty: From a competition perspective, it will tend to get more intense. It will become more difficult for operators to make money. Earlier, there were two dominant sides ?? a GSM side and a CDMA side. But now there are more players on the GSM side. Hence, prices are going to reduce even further. From the consumers’ point of view, it will become better as they will end up getting a better deal in terms of lower prices. But from the operators’ perspective, it will mean tighter margins. So, consumers are at an advantage while operators are at a loss.
What, according to you, are the long-term alternatives for spectrum allocation?
Nitin Gupta: The way forward would be to revisit the licensing and spectrum allocation system, unbundle services from licences and thereafter open the process to auction. Auction is one of the most favoured methods worldwide and eliminates all risks of inefficient usage, hoarding of spectrum, etc. However, the interests of existing operators need to be kept in mind.
Sourabh Kaushal: The government needs to come up with a clear-cut and transparent policy for spectrum allocation. The process should be scientific, technical and thus non-controversial. The government should take a look at the models followed by some of the developed countries and adopt the best practices.
Romal Shetty: There are two things to be noted. First, the quantity of spectrum available needs to be identified. For example, the defence services do not require the entire spectrum they possess. Second, the government should take a long-term view on how to release the available spectrum.
The government should free up the excess spectrum and the operators should utilise it more efficiently by using the latest techniques.
Auctioning of spectrum is another possibility. I am not saying that auction is the perfect solution but it is one of the available solutions. But prior to that, we need to figure out how much spectrum is available.
Further, the government should draw up some guidelines for operators to use the spectrum and where it finds that operators are not meeting these standards they should be penalised adequately.
