The Hindu Business Line : The travails of 3G services

There is an urgent need for introduction of broadband wireless services through 3G networks in the country. The Government should thus not allow itself to be bogged down by pressures but go ahead with the auction of 3G spectrum forthwith, says D. P. S. SETH.

The problem of assessing spectrum charges separately on 2G and 3G may also arise when two-technology phones come into use.

It was way back in 2004 that the Telecom Regulatory Authority of India (TRAI) gave its recommendations to the Government on the need to promote broadband services in the country and outlined how this could be done.

A key recommendation was that without introducing wireless-based services, a major push cannot be provided to the introduction of broadband services. 3G technology was one of the main commercially viable technologies available at that time for introdu ction of broadband wireless services, though WiMax technology (also referred to as broadband wireless access technology at that time) was a very promising development taking place.

Unfortunately, though the government came out with the Broadband Policy in 2004, the flavour at that point of time was voice services through mobile phones.

As a consequence, 3G and BWA technologies (now formally referred to as IMT technologies) did not receive the attention they deserved, though they could have brought in a broadband revolution in India on the lines of the mobile telephony (so-called 2G) revolution, which brought such fame to the telecom sector.

Vested interests

One can only assume it was a lack of willingness on the part of the policy-makers to track the path of ICT developments worldwide, and retain a narrow vision instead, as the main reason for this.

The other reason possibly was the pressure exerted by vested interests who were keen to highlight the 2G spectrum scarcity and downplay the importance of broadband wireless.

It was, therefore, most refreshing and welcome news when, a few months back, the Government announced the 3G Guidelines.

The highlight of these guidelines/policies was the announcement that spectrum shall be made available through auctions.

This most progressive step has, however, faced many hiccups and is yet to be implemented, evidently once again because of the pressures exerted by certain vested interests who seem to be questioning why they should pay (and that too, possibly high costs) for what they have been getting free of cost, or at a low cost, in the past. After the controversies on whether only the existing players should be allowed to participate, whether foreign players will be permitted to bid, whether the new bidders must take a UASL license (with no 2G spectrum in sight), etc., the latest controversy is about whether it is possible to separate the 2G and 3G services revenues since there is a rather reasonable incentive to 3G services in the form of lower spectrum charges (1 per cent) for the initial years.

Separate charges

The genesis of the latest controversy lies in the decision of the government to allow separate computation of spectrum charges for the two technologies GSM and CDMA, when both are offered by one operator under the dual spectrum mandate.

This should not have been done in the first place as spectrum being leased to an operator is a resource that is taxed on the grounds that the sovereign is offering its assets for use by an operator, irrespective of what service or services are offered by the operator receiving the right to use this asset.

However, once such a decision is taken, consistency must be maintained and therefore when two segments of the asset (spectrum for 2G and for 3G services) are made available to an operator, the separation of taxes must be retained.

In a network it is always difficult to maintain a very precise separation but it is possible to do so to with reasonable accuracy.

We must not forget that as two-technology phones become available (both GSM and CDMA), the same problem will arise for the decision to assess spectrum charges separately on CDMA and GSM services offered in the same area by an operator.

(This is not a hypothetical case as such phones are in the offing). The methodology suggested by one of the feuding groups of basing the account separation on traffic data seems to be the most reasonable approach.

Greater rollout

Besides being technically feasible with a fair accuracy it cuts out the incentive to manipulate. Further, since a traffic-based approach is dependent on network utilisation, it also becomes independent of tariffs.

If 3G tariffs are high and the 3G network is not sufficiently developed, there will be greater utilisation of 2G networks and, therefore, higher spectrum usage charges will apply.

This will encourage 3G operators to roll out 3G networks more. If 3G tariffs are low to attract more customers, so much the better for the consumer, and therefore the government, as more and better services will be available.

On the other hand, manipulation is possible if the accounting is based on number of subscribers because there would then be an incentive to show 2G subscribers as 3G subscribers, based on the argument that if the former own a 3G capability handset, they could use the 3G network at some point of time.

Accounting based on traffic will not encourage this type of manipulation and will, in fact, encourage operators to actually attract as many subscribers to 3G services as possible to benefit from lower spectrum charges compared to 2G spectrum.

The need for urgent introduction of broadband wireless services through 3G networks in the interest of impacting economic growth is paramount.

The Government should thus not allow itself to be bogged down by pressures but go ahead with the auction of 3G spectrum forthwith.

Ideally, the auction for all available technologies namely WCDMA in 2.1 GHz band, Wimax in 2.3 and 2.5 GHz bands and EVDO in 800 MHz band should be held simultaneously, allowing bidders a choice of technology and enabling them to work out their strategies for bidding.

(The author is a former member, Telecom Regulatory Authority of India and Ex-Chairman, BSNL.)