Spectrum war: end or the beginning

Written by Vrishti Beniwal | Updated: Jan 24 2008, 05:38am hrs
The department of telecommunications (DoT) has been in full swing over the past few weeks and has finally acted on the long-pending issues bogging the sector. It finalised criteria for allocating spectrum and issued letters of intent (LoIs) to telecos wanting to expand operations. It also allocated GSM start-up spectrum to four players. But, none of these steps were flawless. DoT has drawn flak from all stakeholders over these actions and the spectrum war is far from over. In fact, it might be the beginning of a new brawl. On the surface, things seem to have smoothened, but a close look reveals more fissures.

Telecom experts say that the war might have gotten worse with the Central Vigilance Commission (CVC) and Telecom Regulatory Authority of India (Trai) chairman Nripendra Misra questioning DoTs moves.

CVC has asked DoT to explain the reasons for allotting spectrum to GSM players beyond their eligibility. When in the licence agreements, it was written that the operators would be provided a cumulative maximum spectrum of 6.2 MHz, then under what circumstances did DoT permit higher quantum of spectrum It sent Dot top brass in to a huddle. CVCs intervention may give a boost to CDMA lobbys demand that GSM operators return spectrum beyond 6.2 Mhz for allocation to the new players. The department has to make a detailed presentation to CVC on January 28.

Before CVC, in a strongly-worded letter to the newly-appointed DoT secretary Siddhartha Behura, Misra lashed out at the department for deviating from Trais criteria on GSM spectrum allocation and then misinforming telecom tribunal TDSAT on Trai recommendations. It will be unfair and misleading if Trais proposals were not implemented in totality The likely availability of spectrum in different bands in all the circles, the time period by which it will be available for allocation and the criteria to be adopted for setting up the queue system needs to be made public.

In December, DoT had totally accepted the subscriber base criteria suggested by Trai for CDMA operators. But for GSM spectrum, it took the middle path by deciding to allocate additional frequency in multiples of 1 Mhz, as suggested by a review panel on spectrum allocation.

Although DoT later issued a new order, aligning it with Trai recommendations to a large extent, the move failed to impress the GSM players. In fact, it resulted in sharp reactions from CDMA players, with Tata Teleservices attacking Trai for favouring GSM mobile operators. Trai is constituted as an independent regulator and we are pained, distressed to note that Trais concerns on DoTs implementation of interim spectrum allocation norms are relating to existing GSM operators who are already holding more spectrum than the contracted amount under their license and who are admittedly not using the spectrum efficiently, said TTSL MD Anil Sardana. So Trais intervention is likely to complicate the issue. According to SC Khanna, secretary general, Association of Unified Telecom Service Providers of India (Auspi), any guideline issued by DoT prescribing spectrum allocation beyond the licence mandated 4.4/6.2 Mhz should be withdrawn. Furthermore, DoTs move earlier this month, where it informed through a release on its website that those wanting telecom licences would have just one hour (between 3.30 and 4.30 pm) to deposit their cheques, kicked up much dust. DoT directive said that all players would also have to apply to the Wireless and Planning Coordination wing for a spectrum licence and the allocation would be based on who pays first.

Just as the roadside brawl outside the DoT office at Sanchar Bhawan was on, communications minister A Raja reaffirmed that seniority would be followed in allocating spectrum to new LoI holders. According to him, seniority was to be judged on who was the first to deposit the licence fee, even if the difference between the two depositors was a fraction of a second. Under the earlier policy, priority in queue for the licence ensured the same priority in the queue for spectrum.

DoTs and Rajas move placed Idea second in the queue after ByCell, which actually applied for licences/spectrum much later. But Raja completely ignored the earlier queue and pushed back some applicants who had applied for licence in June 2006. Some applicants had suggested that the spectrum to all the nine companies, who had applied before September 2007, be allotted simultaneously to avoid the legal battle, but it was ignored.

The process might have been very transparent for Raja, but it did not go down well with Ideas MD Sanjeev Aga, who said the company had been waiting since mid-2006 for licences and had been asking the government to accept its payments. We were prevented from making payments the government did not accept it, Aga said in a letter to the DoT secretary.

Industry observers say that the idea of first-come first-serve policy is defeated if those who actually come first are not given the licence first. Under the current conditions, those who applied for the licences before others should have been given a chance to pay up before others.

BK Modis Spice Telecom also challenged DoTs rejection of its application for 16 circles. TDSAT has now sought a reply. DoT had also raised doubts over Telekom Malaysias investment (39% stake) in the company.

Telecom experts say the government should have raised money by selling spectrum, a scarce resource. Net, net, the government mixed up all the issuestransparency in allotment, efficient usage of spectrum, preventing hoarding and trading of spectrumand ended up messing all. While other players are jostling to get additional spectrum and are being denied of it citing scarcity, Rcomm has been promised a second lot of spectrum to start new services with it.

With Rcomm being given spectrum to operate with a different technology (it has been allowed to operate GSM services, in addition to its existing CDMA offering), the government has left open the field for others to ask for additional spectrum in the name of crossover of technology. This will likely defeat any mechanism to ensure efficient usage of the available spectrum with the operators.

A highly-priced spectrum, instead of being sold at the prices fixed way back in 2001, will ensure that only serious players committed to the development of the industry through investments and capital expenditures enter into the fray. High cost will automatically lead operators to use the spectrum more efficiently. And, they still will have plenty of room to make money, considering that some operators have been reporting profit margins as high as 40%.