An amicable resolution of the spectrum ssue remains as elusive as ever. While both GSM and CDMA operators need the scarce resource to serve their growing subscriber base and to facilitate future growth, they do not see eye to eye on the matter.
Over the past two months, the battle for spectrum has taken an unpleasant turn, and has led to fresh controversy, debate and bad blood. Angry letters have been shot off by both sides to Prime Minister Manmohan Singh and Communications Minister A. Raja, asking for their concerns to be addressed.
The spark that set off the fire was the Telecom Regulatory Authority of India (TRAI)’s proposition that telecom operators increase their subscriber base between two and six times before being granted additional spectrum. According to these recommendations, none of the existing operators would qualify for additional spectrum.
GSM operators, through the Cellular Operators Association of India (COAI), challenged TRAI’s proposal before the telecom tribunal. This resulted in the Department of Telecommunications (DoT) asking its technical arm, the Telecom Engineering Centre (TEC), to prepare a fresh report on spectrum allocation norms.
Based on a “scientific” methodology that used various parameters to calculate the number of subscribers that could be accommodated in a given quantity of spectrum, TEC suggested that the service providers actually needed to increase their subscriber base by as much as eight times before being granted more spectrum.TEC’s report was accepted “in principle” by the government.
Naturally, this did not go down well with the cellular operators as they had been lobbying for additional spectrum for a long time. The decision was all the more crucial for operators like Idea Cellular, Vodafone, Aircel and Spice Telecom, which were looking at increasing their footprint in more circles.
Meanwhile, DoT added to the tangle by taking the decision of allowing operators to use dual technology ?? CDMA and GSM ?? to offer services after paying an entry fee. Reliance Communications Limited (RCL), Himachal Futuristic Communications, Shyam Telelink and Tata Teleservices Limited (TTSL) were allowed to offer dual-technology services in their existing circles. The decision also allowed state-owned Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) to use dual technology to offer mobile services without paying any entry fee.
For cellular operators, this was the biggest blow. They perceived RCL to be a major beneficiary of the new policy.Having already paid Rs 16.5 billion for GSM spectrum, it would get additional spectrum and would get it fast, as DoT’s new norm considers allocation of spectrum from the date of payment of the prescribed fee.
The only GSM operators that could hope to derive any benefit were Idea Cellular, Vodafone and Maxis (Aircel).These companies had paid the fees for operating in new circles (Idea for two circles, Vodafone for six and Aircel for 14), and were therefore eligible for the initial 4.4 MHz allotment of GSM spectrum.Otherwise, for each additional MHz of spectrum, GSM operators would have to pay Rs 160 million in the four metros and Category A circles, Rs 80 million in Category B circles and Rs 30 million in Category C circles.
COAI, taking into account the developments, revised and resubmitted its petition to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). Meanwhile, TRAI picked a bone with DoT stating that it was unfair on DoT’s part to take action on selective parts of TRAI’s recommendations while ignoring the rest.
Faced with growing differences between the operators, DoT ordered a review of the TEC recommendations which it had accepted “in principle” only a few days ago. In an attempt to avoid further controversy, DoT recently decided to invite scientists and professors from prominent institutes such as the Indian Institute of Technology and the Indian Institute of Science, Bangalore, to give their opinion on efficient use of spectrum and spectrum allocation.
Moreover, DoT decided to process unified access service licence applications received up to September 25, 2007 first, and the remaining thereafter, depending on the availability of spectrum.
However, the chiefs of Bharti Airtel, RCL and Vodafone are not willing to give up easily. Sunil Bharti Mittal openly disagreed with the new criterion for spectrum allocation and took up the issue with the prime minister. He also expressed his doubts regarding the ability of BSNL and MTNL to roll out model networks with limited spectrum.
RCL chairman Anil Ambani and Vodafone Essar vice-chairman Arun Sarin also wrote to the prime minister highlighting their points of view. Ambani, who supports the government’s decision to allow CDMA operators to provide GSM services under their existing licences, accused GSM players of providing false and misleading information that might prevent the entry of new players in the industry. In his letter, Ambani indicated that some GSM operators were hoarding spectrum, and accused them of being instrumental in delaying the implementation of new initiatives “through a combination of litigation and policy uncertainty to enhance their own dominance”.
Ambani is of the opinion that DoT, in line with global practice, should demand the surrender of excess spectrum by GSM players as certain large GSM operators are occupying 2G spectrum far in excess of the quantity they are entitled to. This, Ambani feels, has enabled these GSM operators “to enjoy savings in capital expenditure of an estimated Rs 200 billion, generating abnormal profits for themselves while depriving the government of revenues in direct and indirect taxes”.
He also contested the allegation by GSM players that the government had favoured RCL by allowing it to offer dual technology, claiming that DoT had followed “due process of law”.
Vodafone’s Sarin also expressed “deep concern” over the recently announced spectrum allocation criterion to both the prime minister and the communications minister. He sought the prime minister’s intervention and support “to ensure that a thorough and transparent re-evaluation of the technical basis” for spectrum allocation is conducted. He also offered to aid the process by bringing in international experts to ensure that the matter is thoroughly investigated. In his note to Raja, he suggested that the TEC report might be flawed as the calculations and conclusions on spectral efficiency were inconsistent with Vodafone’s operational experience of serving over 230 million customers in 25 countries across five continents. According to Sarin, unless spectrum-related problems are resolved, users will have to deal with severely constrained network capacities, deteriorating voice call quality and inferior data services.
With operators taking different sides in the regulatory battle, a resolution to the tricky spectrum allocation problem is far from sight. Telecom analysts are worried that the spectrum impasse is already taking its toll. Telecom share prices are decreasing, as is the collective market capitalisation which fell by almost Rs 330 billion in October 2007. Bharti Airtel’s market cap fell to Rs 1,678.2 billion from Rs 1,934.52 billion as investors turned edgy. Idea Cellular, MTNL, Spice Communications and Tata Teleservices (Maharashtra) also saw a similar drop in market cap. Only RCL’s market cap has remained more or less steady at Rs 1,444.62 billion.
Analysts caution that if policies are not properly planned, not only will the quality of service be affected, but the adoption of newer technologies like 3G will also be hindered. “As India is looking to compete with China, better infrastructure and regulations are needed soon,” says telecom analyst Mahesh Uppal.
Timeline of events (2007)
August 28: TRAI gives its recommendations on review of licence terms and conditions for telecom service providers. Reiterates the policy of putting no cap on the number of operators.
September 24: DoT sets October 1, 2007 as the cut-off date for new applications for mobile licences.
October 1: DoT receives 575 applications from 46 companies.
October 15-19: DoT approves dual-technology norms ?? allowing operators to offer CDMA and GSM services in the same circle. The department also approves the recommendation regarding the subscriber-linked criterion for spectrum allocation, whereunder the number of subscribers needed for additional spectrum is hiked. RCL, the largest CDMA service provider, deposits licence fee of Rs 16.51 billion to launch GSM services.
October 23: COAI approaches TDSAT against the government’s decision, alleges favouritism towards CDMA operators.
October 26: TEC gives its report on TRAI’s recommendations, significantly enhancing the minimum number of subscribers needed by service providers to qualify for spectrum allocation. The government accepts the report “in principle”.
November 2: COAI revises petition and approaches TDSAT again. However, two GSM operators ?? Maxis (Aircel) and Spice Communications ?? withdraw their petitions.
November 7: The government, stepping back in the face of stiff opposition from cellular operators, forms a committee to review the TEC report on spectrum allocation.
November 11: RCL chairman Anil Ambani and Vodafone Essar vice-chairman Arun Sarin write to the prime minister stating their opinions and seeking intervention.
