Business Today

Spectrum dole-out

A 3G policy gives telecom players something to look forward to.  The telecom companies are betting on 3G’s far more efficient net-works to handle the growth of voice telephony, which is expected to reach 750 million Indians by 2011.

Print Edition: August 24, 2008

In Hong Kong, one of the more high successes of 3G network deployment, streaming television and movies are available on phones. This has prompted scores of users to quit their wired broadband connections, thanks to the dazzling speeds of the service. So, when Telecom Minister A. Raja announced the 3G spectrum guidelines on August 1, the Indian telecom industry finally had something more to look forward to.

Sounds good: Voice clarity may be better
Sounds good: Voice clarity may be better
The telecom companies are betting on 3G’s far more efficient net-works to handle the growth of voice telephony, which is expected to reach 750 million Indians by 2011. “Quality of voice telephony will be improved” with 3G spectrum that would allow companies to “provide good quality services to a larger number of subscribers,” the government said in a statement. “CII welcomes the 3G Policy, which was long awaited. This will facilitate the penetration of broadband. This will also partially alleviate spectrum congestion, besides providing mobile users with better voice quality,” says Chandrajit Banerjee, Director General, CII.

However, there were some mutterings in the background, not the least of which revolved around the scarcity of spectrum in Delhi and Mumbai. These two cities account for over 10 per cent of India’s cellular user base, and also have the highest-value customers. Instead of opening up five licences in the two cities, the government will only offer two licences in addition to one for state-owned operator MTNL. The other state-owned operator BSNL will get a 3G spectrum slot in each of the other 20 telecom circles in India. The other gripe in some circles is the government reserving three slots for CDMA operators in each circle. While publicly some operators have welcomed the 3G licensing norms, they privately concede that with the government hoping to mop up between Rs 30,000 and Rs 40,000 crore from the spectrum auction (the base price for an all-India licence is pegged at over Rs 2,000 crore), which is over half the expected revenue deficit for the year, 3G could take a while to permeate down the value chain.

However, there are others, including the telecom ministry, that do not believe that scarce national resources (radio spectrum is owned by the “public” in India and the licences are technically just “leases”) should not be given away for a song as happened with 2G spectrum in 1997. Therefore, with high prices expected to be paid in the auction, initial 3G services in India could have the same stuttering start as they did in Europe where many 3G services such as streaming movies and video-telephony might be too expensive. And with Delhi and Mumbai having less available spectrum, things could get even more expensive.

A major saving grace, however, will be the far cheaper cost of deployment of networks than in Europe. “We welcome the government’s announcement of its 3G policy and believe this will benefit the entire telecommunication ecosystem in India. Over the next few years, we believe India will build a robust and truly national telecom infrastructure that will enable it to deliver ubiquitous, world class yet cost-effective connectivity to its citizens and to businesses,” says Michael Kuehner, Managing Director, India, Nokia Siemens Networks, the world’s leading network infrastructure manufacturer.

However, given the litigious nature of the telecom industry, expect anyone who loses out in the 3G battle to seek legal redress. The rules of engagement have been announced, the war is only just beginning.

Kushan Mitra

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