The Hindu Business Line : No let-up in sight

ON April 26, at the Cellular Summit 2005, the Bharti Group Chairman, Sunil Bharti Mittal, proclaimed that finally the telecom industry was witnessing times of peace.

Just three weeks later, on May 18, the industry was in the midst of yet another fierce battle, which forced the same man to take up issue with none other than the Tata Industries chairman, Ratan Tata.

And the spark that triggered the war of words amongst the mobile operators is a recommendation by the Telecom Regulatory Authority of India (TRAI) on the issue of spectrum allocation to offer third generation services (3G).

For the uninitiated, spectrum is the basic raw material required to offer mobile telephone services. At present, mobile operators using the Global System for Mobile (GSM) technology, such as Airtel and Hutch, get anywhere between 6 Mhz and 12 Mhz of radio frequency while those using the Code Division Multiple Access (CDMA) technology, such as Reliance Infocomm and Tata Teleservices (CDMA), get a maximum of 5 Mhz in each circle they operate.

The quantum of spectrum given to an operator depends on the subscriber base. For instance, a GSM operator gets 10 Mhz radio frequency to offer services to 12 lakh subscribers while the CDMA operators get 5 Mhz for 10 lakh subscribers.

This is also the first point of disagreement between the telecom operators. The TRAI, in its recommendations, has suggested that since both GSM and CDMA players must be on a level playing field, both camps ought to get an equal allocation of spectrum. TRAI has said that both GSM and CDMA should get between 60 Mhz and 100 Mhz by 2007.

TRAI's position is fiercely contested by the GSM operators, spearheaded by the Cellular Operators Association of India (COAI).

In a missive to the Communications Ministry, which will take the final decision on the TRAI recommendations, the COAI says, "the GSM industry is aghast to note that the TRAI is actually recommending a dilution of the Government's subscriber-linked spectrum allocation criteria for CDMA and recommends further that the CDMA operators be given additional spectrum through such `revised' criteria within one month. There is no justification whatsoever for CDMA operators to get any spectrum beyond 5MhZ. In fact, in most places in India, they do not justify even three carriers and, rightfully speaking, should actually be surrendering some spectrum." GSM operators also point out that the CDMA operators had stated in written submissions in Court that CDMA is more than five times more efficient than GSM which implies that GSM needs at least 25 MhZ to have a level playing field with CDMA.

The CDMA operators, led by the Association of Unified Telecom Service Providers of India (AUSPI), attack COAI's contention on the grounds that GSM operators are not playing fair."It is only with the entry of CDMA players that consumers started getting low mobile tariffs. Till then GSM operators were fleecing users with high tariffs. Now with CDMA operators adding close to half a million subscribers every month, they want to stall growth," says S.C. Khanna, General-Secretary, AUSPI.

Simply put, spectrum for mobile is like highways for cars. If the highway is an eight-lane one, it can accommodate more number of vehicles and the flow would also be smooth. AUSPI claims that the GSM lobby was trying to choke the bandwidth available to CDMA operators, which would congest the network, resulting in poor services.

The COAI's T.V. Ramachandran, however, says that the real dispute has arisen because the TRAI has urged the Government to release spectrum for CDMA within a month's time while no such time lines have been set for GSM players.

"We don't have a problem if they get more spectrum as long as the GSM operators are also allocated adequate radio frequency at the same time. The problem here is that TRAI has given the Government time till December 2006 for releasing 3G spectrum for GSM operators even as CDMA players get fresh radio frequency in one month. Is that fair?" poses Ramachandran.

The COAI's fears are not unfounded.

According to market watchers, if a company like Reliance Infocomm is given additional spectrum in the existing 800 Mhz frequency band, it can launch high-speed data mobile services using the EVDO technology within a few months.

In contrast, GSM players would not only require additional spectrum exclusively in the 2000 Mhz band, it would take at least six 6 months to launch their 3G services after the spectrum is allocated. “With revenues from voice traffic falling day by day, getting a foothold in the data market is very crucial for operators. If an operator gets to launch data services six months in advance compared to another other operator, then it can effectively kill competition,” says a telecom analyst.

TRAI insists that its recommendations are being misread. “We have kept a technology-neutral policy. Rather than suggesting that one side should get and the other should not, what we have said is that both GSM and CDMA needs spectrum urgently and the Government should make it available at the earliest,” says said a TRAI official.

TRAI sources point out that in fact the telecom regulator had accepted the suggestions made by the GSM operators in allocating 3G spectrum in the 2000 Mhz band instead of the 1900 Mhz band, as demanded by the CDMA players, because it was in line with global trends.

However, despite TRAI dismissing their claims to the 1900Mhz, the CDMA Developers Group (CDG), an international body promoting CDMA technology, commended the regulator for the “technology neutral” stance.

The CDMA Development Group acknowledged TRAI’s recommendations which represent a major step towards rectifying imbalances in spectrum allocation and accelerating the introduction of IMT-2000 (3G) services in India. The CDMA industry supports the TRAI proposal to allocate additional 800 MHz spectrum to CDMA operators. The CDMA industry commends TRAI for their effort to balance the needs of all operators and technologies and to encourage operators to deploy more spectrally efficient technologies,” says said a CDG press release. The CDG has also expressed its disappointment for not getting the 1900Mhz.

The other point of difference that has divided the industry is on the entry fee for 3G services. While this was a non-issue with almost all the operators, irrespective of the technology being used, supporting TRAI’s suggestion of zero entry fee, Mr Ratan Tata, Chairman, Tata Group, set the cat among the pigeons suggesting a Rs 1500-crore entry fee for 3G spectrum. The rationale for the entry fee is that spectrum being a scarce resource, an entry fee would act as a deterrent against non-serious operators who could otherwise hoard radio frequency.

While Mr Tata’s comments seems to have found favour with officials in the Finance Ministry, who are salivating at the prospects of earning close to Rs 9000 crore from the six national operators, others, such as like Bharti’s Mr Mittal, are vehemently against the proposal to set an entry fee.

Mittal, in fact, urged Ratan Tata, through the media, to donate money to the Prime Minister’s relief fund if he had excess funds. “I completely oppose that. Because we do not want to raise the bar of infrastructure projects in the country, not only telecom, airports, ports, electricity, wherever this country needs key infrastructure... Please make the cost of infrastructure as low as possible", Mittal said recently.

Bharti’s views finds support with in state-owned telecom giant Bharat Sanchar Nigam Ltd ‘‘We are against any abnormal charges for 3G spectrum. It should be free or at best could be charged normally like the current spectrum charges of 2-6 per cent. 3G may be advanced service for data but buying spectrum for such services at hefty entry fee is certainly not worth it,’’ says Mr A.K. Sinha, Chairman and Managing Director, BSNL.

Both COAI and AUSPI have supported this view. In fact Tata Teleservices, a subsidiary of the Tata Group, had also suggested zero entry fee. However, Ratan Mr Tata has found support in smaller operators like the Mr Sivasankaran-promoted Dishnet DSL. Some of the opinion makers in the industry have also supported Ratan Mr Tata’s views to impose an entry fee on the grounds that the money could be ploughed back into the telecom sector.

The division has also caused the communication ministry to do a re-thinking. Though initially Mr Dayanidhi Maran, Communication and IT minister, hinted at imposing zero entry fee for 3G services in order to keep the costs down, last week the minister has now said that the Government is was open to the idea of imposing a fee as long as it did not have an impact on the tariffs. Communication ministry officials, however, admit privately an entry fee may not be advisable since it would not be easy task to convince Finance Ministry to plough the money, generated from the fee, back into the telecom sector.

Even as the Government think-tank is thrashing out a compromise formula for spectrum allocation, the operators are gearing up for another prolonged battle that may delay the launch of 3G services in the country. As for the consumers, they may have to wait a little longer to experience high-speed data connectivity on their mobile handsets. n

Picture by A. Roy Chowdhury

tkt@thehindu.co.in

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