India Telecom Commentary

The existing GSM operators are enjoying spectrum of up to 2x10 MHz in excess of cumulative maximum limit of 4.5 MHz for metros and 4.4 MHz for circles set under their original contracts. It was increased to 6.2 MHz in 2004. Most of them have got licences and spectrum without any payment of ‘entry fees’.

In 1999, they secured substantial financial benefit from the government under ‘migration package’. They delayed MTNL’s GSM services by three years through litigation.

They even objected to the launch of WLL-Limited Mobile service of MTNL. They have not taken even a single initiative to reduce tariffs and instead cartelised and hiked tariffs. They never favoured bidding for spectrum allocation.

They had expected that whatever spectrum is vacated by defence ministry would be entirely allocated to its members for expansions. In fact, in their July 6 response to Trai they had advocated preferential treatment for themselves. Airtel and Vodafone had demanded spectrum as high as 2x22.5 MHz for expanding their existing 2G networks alone.

These propagandists, represented by the Cellular Operators Association of India (COAI), are now strategically engaged in maligning government policy so that the allocation of spectrum being vacated by ministry of defence is delayed. They have been spreading canards that the government will lose Rs 50,000 crore in case it does not invite fresh bidding for ‘entry fees’ for allocation of spectrum.

Trai’s recommendations of August 28 came as a shock to them. Trai not only corrected the anomaly in the existing spectrum allocation criteria but also recommended cross-technology spectrum allocation. Later, the Telecommunication Engineering Centre (TEC), an independent organisation under the department of telecommunications (DoT), further tightened the criteria. Both, TEC and Trai reports have shown that the existing operators have excess spectrum.

That being the case, the available spectrum can be given to all those existing licensees who are waiting for initial tranche of spectrum, including Reliance and Tata, who have applied for additional spectrum in GSM band.

Predictably, COAI is upset. Well strategised plans of spectrum hoarding by its members have gone awry. COAI has recently moved TDSAT challenging the new spectrum allocation criteria of the government.

Legally, COAI is on a weak footing to take on DoT’s decision on permitting cross-technology spectrum allocation for licences, which are already technology neutral. Advocacy of preferential treatment in terms of spectrum allocation for existing players places it in a precarious condition as this would mean inclusion of Reliance and Tatas as well, which it does not want.

COAI has now built-up an argument of spectrum allocation through fresh bidding which is aimed at thwarting competition. It has launched a campaign that allocation of spectrum without fresh bidding for ‘entry fees’ would mean loss of up to Rs 50,000 crore.

This is an absurd figure. In June 2001, the licence of Delhi was awarded for an entry fee of Rs 170.70 crore through bidding, but with teledensity in Delhi now touching 97%, the chances of getting better ‘entry fees’ is very remote.

Similarly, in June 2001, when pan-India licences were awarded for Rs 1,568.57 crore through bidding, at that time the teledensity was at about 3.5% and there was less of competition. With a teledensity of near 22% and more number of active operators, the chances of getting better ‘entry fees’ is unlikely.

In any case, the focus of the policymakers should be on faster rollouts, which will ensure much higher level of revenue in the form of licence fees and taxes. Teledensity will shoot up from the present level of about 22% to over 50% in three years. Of course, there will be efficient utilisation of spectrum in the shortest possible time.

Realty check on spectrum congestion
Is there congestion due to spectrum shortage throughout India? The answer is ‘No’. Only a small number of pockets in Delhi and Mumbai face congestion due to spectrum, e.g., in Delhi there may be only three such pockets — Nehru Place, Rajendra Place and CP. Trai and TEC have suggested technical solutions to deal with such congestion without earmarking additional spectrum for such pockets.

New spectrum allocation criteria
The old subscriber-linked spectrum allocation policy was flawed, as it allocated higher quantum of spectrum for areas which have lesser population density. For example, Orissa has a population density 283 times lower than Kolkata, but for both the places, the spectrum allocation criteria was the same.

Cross technology spectrum allocation
Can an operator be condemned with his initial choice of technology for all times to come? The answer is ‘No’. In any case DoT needs to give spectrum to the existing CDMA players, and under a technology neutral licence it should not matter to the government if further allocation is in the GSM or CDMA band, as long as the operator uses the allocated spectrum efficiently. COAI expects that CDMA players seeking further spectrum in GSM band should obtain a new licence, which is nothing but an absurd thinking.

Anti-competitive behaviour
Tariff reductions have always been initiated by either PSU operators (MTNL & BSNL) or CDMA operators (Reliance & Tata). Reliance’s ‘monsoon hungama’ on July 1, 2003, under which phones were provided for Rs 501, forced GSM operators to slash tariffs. Similarly, the lifetime scheme was triggered by Tata’s ‘Non-Stop Mobile’ scheme initiative in October 2005 under which free incoming calls were provided for two years without recharge. MTNL has made Delhi-Mumbai calls local and BSNL ushered in all-India calling at Rupee One.

We are yet to see any consumer-friendly initiatives from GSM operators. On the contrary, they have hiked tariff by 20% to 32.5% matching each others’ tariff. The cartelisation is evident from the fact that on the same date i.e., August 16, 2007, all the three private GSM operators of Delhi (Bharti Airtel, Vodafone and Idea) informed Trai about the hike which was effected by them from the same date i.e., August 13, 2007. This hike is making them richer by Rs 300 crore every month.

Via Economic times