Allotment of 3G spectrum and some aspects of its pricing

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: The telecom industry regulator, Telecom Regulatory Authority of India (Trai) and telcos need to look closely at the issues associated with third-generation (3G) implementation before venturing into it. Fitch Ratings points to the difficulties experienced by telcos globally in terms of over-bidding for licenses, the huge capex requirement for commercial roll-out, high cost of 3G handsets, coupled with the lack of "killer application" and the low average revenue per user (ARPU) in the Indian telecom market.

Trai has come out with a consultation paper on allotment of spectrum for 3G services and pricing aspects and is seeking response from the various stakeholders. This is the second time that the government has sought recommendations on spectrum from Trai. Prior to this, Trai, under the chairmanship of Pradip Baijal, had submitted recommendations on 3G spectrum in May 2005 in which it had suggested allocation of spectrum for 3G without any additional cost.

3G is notable for its ability to support faster and larger quantities of data, which enables additional service offerings in the form of games, music and video using voice, video and data (together known as "triple play") and helps to bring about broadband on mobiles. Triple play was initially launched by operators in Japan and is currently provided by a host of countries around the world and especifically Hong Kong, Singapore and Korea in the Asian region. Important amongst the services, from the economic viewpoint are the services relating to commercial activities i.e., mobile commerce service (M-commerce) though other services like video conferencing and gaming are also popular. 3G services are supposed to provide high-speed data rates at a minimum of 144 Kbits per second in all use scenarios going up to 2 Mbit per second in low mobility and indoor environments. In addition, it has higher capacity and improved spectrum efficiency.

The key issue facing the regulator is the appropriateness of the policy on 3G services with respect to identification of the appropriate band, criteria for allocating spectrum and pricing mechanism considering the spectrum scarcity in the country. Traditionally three methodologies have been used for licensing in the other countries.