The Hindu Business Line : Widening spectrum

THE TELECOM REGULATORY Authority of India (TRAI) recommendations on allocation of additional spectrum to mobile operators are based on the right premise that mobile telephony should be encouraged at all costs. Helped largely by competitive tariffs, which are among the lowest in the world, there has been an unprecedented growth in the mobile subscriber base from 30 million to over 50 million in the past fiscal. But that may not be enough. Given the Government's target of raising the mobile subscriber base to 200 million by 2007, TRAI has specifically suggested the need-based release of additional spectrum to mobile service providers and, to keep tariffs from rising, it wants no entry fees for 3G, or third generation, services.

However, the proposed modalities for allocation of spectrum is contestable on at least three counts. First, TRAI has mandated that the additional spectrum be released to CDMA operators within a month of acceptance of the recommendations by the Government. This is likely to place them at a competitive advantage vis-à-vis the GSM operators, as the latter may get additional spectrum only in a phased manner till December 2006. Second, after consistently holding the view that CDMA is spectrally more efficient than GSM, TRAI has done a volte face on these recommendations. It has recommended that CDMA operators be allocated spectrum using the same subscriber addition criteria as applicable to GSM players. But TRAI's reasoning for allocating more spectrum to CDMA operators stands on weak ground and it is hardly surprising that GSM operators are strongly protesting this change. Finally, making additional spectrum available to CDMA operators under the new criteria will give them a headstart over their GSM peers in offering bandwidth-rich and high-speed 3G and-like services. While finalising the spectrum policy, the Government will have to look into these aspects carefully as these have the potential to raise conflicts between the two technology camps.

To minimise the impact of these changes, TRAI has recommended that both GSM and CDMA operators be given additional spectrum in the 2000 MHz band (intended for 3G services) as an extension of their existing 2G services. TRAI's suggestion of waiving the entry fee on 3G spectrum and charging only an additional revenue share of 4 per cent is welcome as it will, over a period, help a large set of consumers enjoy premium 3G services at low tariffs. At a time when several GSM operators are ready to launch 3G services, TRAI's suggestion of sticking to the revenue-share formula rather than go in for the more contentious spectrum auctions may be eminently sensible.

Though some operators have shown a willingness to pay an upfront entry fee and bid for the highest revenue share, the Government will be better off staying away from that course. After all, government levies already account for over 20 per cent of the adjusted gross revenues of the telecom services sector. Any further imposts in the form of upfront entry fees or spectrum auction proceeds from 3G services can only raise tariffs and end up slowing the scorching growth of the mobile telephony market in the country.

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