The Hindu Business Line : The rush for spectrum

It is not surprising that there are as many as 46 companies wishing to gain a foothold in the mobile telephone services business. The number of subscribers is booming: more than 7 million new subscribers got hooked on to the mobile in September taking the total number of wireless phone connections in the country to over 209 million. One in six people in the country flaunts a mobile phone, and spends about Rs 250 a month on it — low by standards overseas, yet enough t o make the telecom industry revenue grow by more than 20 per cent to Rs 1,06,000 crore in 2006-07.

More significantly, the business has proven to be eminently profitable for the dozen service providers. The earnings before interest, tax, depreciation and amortisation for the private sector service providers grew by 71 per cent. Such numbers have proved too attractive for serious (and even non-serious) investors to resist, which is why so many are falling over one another to get into the arena. For phone users, more operators may mean more choice and even lower tariffs. The trouble is that spare wireless spectrum is scarce — only about half a dozen players can be accommodated in the bandwidth released by the Defence Ministry — and some of the current service providers are themselves seeking more spectrum.

When demand is more than supply, the most equitable way of settling the issue would be a bidding process, which is precisely what the Department of Telecommunications has suggested. What has queered the pitch has been the decision of the Ministry this month to award CDMA players such as Reliance Communications and HFCL, a licence to run GSM services as well, and to collect the requisite fees from them. Do these players have a superior right over others to the spectrum given the current policy of first-come-first-served? Assigning spectrum on such a basis to anyone cannot be justified in the present context, where there are too many claimants. For many months existing GSM service providers too have been asking for more spectrum to manage the needs of their growing list of subscribers, but what is also true is that their networks seem to need extra spectrum acutely only in some cities and for some hours in the day. That need can be addressed technically either by their buying into more spectrum or by their investing more in infrastructure that allows for more intensive use of the available spectrum. This is a call the service providers can make when they size up their bid for the new spectrum. The other applicants, of course, need a slice of the new spectrum to get into the fray, and the cold fact is that not many slices are available. Clearly, the only way for the Ministry to address this rush is to level the playing field and organise a transparent auction for spectrum.

Related Stories:
DoT pushes for auction of GSM spectrum
No spectrum allocation till Nov 12, says Centre
Tata Tele jumps on the GSM bandwagon
RCom pays entry fee for foray into GSM segment

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