India looks to a new telecom
generation By Indrajit Basu
KOLKATA - Succumbing to pressure to
further open up its telecommunications sector,
India this week unveiled the broad guidelines of
its long-awaited policy for newer,
third-generation ( 3G) telephony. But
simultaneously, by dashing the hopes of some local
players, it could also divide the country's
telecom sector down the middle.
Recently
appointed Telecom Minister A Raja announced that
in ignoring suggestions of the powerful Telecom
Regulatory Authority
of
India (TRAI), his ministry would offer the
available radio frequencies that can provide 3G
services via an auction process in which not only
would all existing operators be allowed to bid,
new international players could also participate.
(These frequencies, called spectrum, are
electromagnetic frequencies used for
communications, including those for radio, radar
and television, and they are much sought after
globally.)
The announcement came as a
surprise to the industry because in a recent
discussion paper TRAI recommended, and the
government promised to adopt, that only existing
operators would be allowed to bid for 3G spectrum
during an auction.
According to the
minister, the Department of Telecom (DoT)will
initially offer 10 megahertz ( MHz) of 3G spectrum
each to three bidders in each of India's telecom
circles. And if the government decides to allot a
lower band (5 MHz) of spectrum in certain telecom
circles, more than three players will be allowed
to bid. Telecom circles are sectors or regions
into which the country is divided for telecom
services.
The DoT also said that
additional spectrum will be offered to those
providing telecom services using code division
multiple access (CDMA) technology, while spectrum
has been set aside as well for the introduction of
WiMAX, (worldwide interoperability for microwave
access) services. WiMAX is a telecommunications
technology aimed at providing wireless data over
long distances in a variety of ways, including on
the radio frequencies used by 3G technology. (3G
technologies enable network operators to offer
users a wider range of more advanced services
while achieving greater network capacity.)
In other words, India has not only paved
the way for 3G services for three to six players
in each of the country's 23 telecom circles, it
has also opened up for cutting-edge WIMAX
services. Moreover, by auctioning 3G separately
and not clubbing the services with the older
second-generation (2G) services - as recommended
by TRAI - experts said that "the government has
categorized 3G as a separate form of telecom
services that makes 3G's entry easier for
everyone, including new foreign bidders".
According to a statement by DoT, the base
price for 3G spectrum will range from US$7.5
million to $40 million, depending on the city in
which it is offered. "The 3G licenses will be
granted through a controlled, simultaneous
ascending e-auction, by a specialized agency to
ensure transparency in the selection process," the
DoT statement said. Besides the initial one-time
spectrum fee, successful operators will also have
to pay an additional spectrum charge of 0.5% of
their revenue, which will be increased to 1% after
three years.
"For India's telecom sector
this is a significant development as the country
has now moved a step forward towards introducing
latest-generation mobile services," said analysts.
And that is not just because Indian consumers and
telecom companies have been anxiously waiting for
over three years for the government to announce a
3G policy, but also because India perhaps is the
only country to take a big leap towards
next-generation telecom technologies (3G and
WiMAX) all at once. In most other regions,
including China, South Korea, Europe and the US,
3G services came much before WiMAX.
So,
how can 3G and WiMAX change the telecom landscape?
The answer is simple - significantly. A typical 3G
or a WiMAX mobile network can deliver very high
speed connectivity (from 3-4 million binary pulses
per second –Mbps - for 3G to 15 Mbps for WiMAX.).
Plainly put, this means that besides voice and
messaging services, these networks can drive a
variety of applications on a handheld device to
facilitate video telephony and video conferencing,
mobile TV, interactive gaming, streaming video and
music downloads and mobile TV.
But more
importantly, 3G and WiMAX could prove to be a gold
mine for local telecom service providers. Most of
these face tough times because they have been
unable to improve the quality their services and
hence the average revenues per user (which have
been plummeting over the past five years driven by
cut-throat competition) due to the government's
inability to release additional spectrum.
The 3G (and WiMAX) spectrum that the
government has just decided to release could
therefore provide an opportunity for local mobile
service providers "to position 3G mobile telephony
as a premium service and boost their average
revenue per subscriber and focus on its adoption
in urban and rural areas", says a recent report by
IDC, the global information technology research
group.
Yet, many local operators -
particularly those offering GSM (global system for
mobile communications) services - including the
two largest GSM service providers, Bharti Telecom
and Vodaphone - are unhappy that the government
has decided to auction 3G spectrum separately to
new players instead of giving existing GSM
operators the first rights, as recommended by
TRAI.
"The new policy benefits just select
operators and encourages poaching of subscribers
of existing GSM players," said T V Ramachandran,
director general, Cellular Operators Association
of India (COAI), a GSM lobby. COAI has also
alleged that the government's decision violates
the regulator's (TRAI) laws and is "bizarre" since
it proposes as many as eight to nine operators in
every 2G circle while seeking to introduce a near
monopoly market for 3G players.
The other
reason the GSM lobby is not excited about 3G, says
Rajesh Jain, a former dotcom entrepreneur and now
a telecom expert, is that many GSM operators have
already invested heavily and launched the
higher-end 2G service called EDGE (enhanced data
rates for GSM evolution; also called 2.75G in
industry parlance), and are not keen on incurring
the "huge incremental investments" required for
3G.
However, the Association of Unified
Telecom Service Providers of India (AUSPI), a
telecom lobby that represents the CDMA community,
has lauded the new policy. AUSPI says that while
benefiting customers, the new policy will also
help accommodate more players and enable the
provision of value-added services through
broadband, even in remote areas.
But with
COAI announcing that it has decided to challenge
the new policy in the courts, it appears that as
happened in many other countries earlier, 3G's
introduction in India faces tough times.
Indrajit Basu is a Kolkata-based
journalist.
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