India’s telecom regulator, expected to make sweeping recommendations changing the way wireless spectrum is allocated to mobile phone service companies and change cross-ownership rules among phone firms, chose not to.
Instead, the regulator made three broad suggestions on spectrum allocation, including one based on auctions, but deferred the decision to a multiple-member committee that would be headed by a scientist and have representatives from the government’s department of telecommunications and trade bodies.
This team could also consider a flat fee for use of spectrum more than a threshold limit or tighten the current subscriber-linked formula the department of telecommunications (DoT) uses to allocate scarce spectrum, the airwaves on which mobile phone services run.
On cross-holdings, the Telecom Regulatory Authority of India, or Trai, did relax the limit to 20% from 10% that one telecom firm can own in another firm in the same ‘circle’ or licensed area.
Analysts said this was too small a change to spur acquisitions in a sector that has over a dozen firms vying for a share in the fastest growing telecoms market in the world. India has nearly 200 million mobile phone users and 40 million fixed-line phones.
Trai recommendations are not binding on the government which, in the past, has sometimes turned them down.
The regulator’s decision will disappoint CDMA (short for code division multiple access, a digital communications standard) operators such as Reliance Communications Ltd and Tata Teleservices Ltd, who had made presentations to the regulator that changes be made enabling them to enter the more popular GSM services.
The regulator, however, accepted a suggestion made by CDMA operators that they be allowed to roll out services using any other technology, provided they pay for the required spectrum.
While, on paper, this will allow CDMA operators to apply for GSM spectrum and launch GSM-based mobile phone services, Trai also put in a rider that they have to queue up as other applicants with no overriding preference owing to their telecom service licence.
There are already more than 100 applicants awaiting spectrum in the 22 circles, dampening the chances of CDMA firms getting the spectrum in time to roll out services. The GSM operators’ association had opposed the CDMA camp’s request.
A Reliance Communications spokesperson declined immediate comment.
S.C. Khanna, secretary genereal of the Association of Unified Service Providers of India, a trade body representing fixed-line and CDMA phone firms, said he would comment only after reading the 178-page document released by Trai.
Trai also turned down a government suggestion of ensuring better spectrum availability by preventing the entry of new players into the market and said it was in favour of no cap on the number of players.
“We do not think that as a regulator and as a government, we should decide on whether it makes sufficient business sense for a new player to enter the market... It is for the companies to decide whether they see a business model or not,” said Trai chairman Nripendra Misra.
Instead, it suggested that spectrum be conserved by not allocating spectrum automatically to existing players and instead charging them for the allocation.
“The present spectrum allocation criteria, pricing methodology and the management system suffer from a number of deficiencies,” Trai noted, suggesting the setting up of the spectrum committee to come up with an alternative allocation method.
While recommending a thorough revision of the subscriber-linked spectrum allocation policy, Trai also suggested that, in the interim, the existing operators may be allocated extra spectrum on the same basis, but with tighter norms.
It doubled the required number of subscribers for a GSM operator to be eligible for getting more than 10 MHz of spectrum from one million in the metros to two million, and in rural areas, or ‘C’ circles, from 900,000 to four million.
It also suggested that beyond 10 MHz, operators be made to pay for the spectrum as well.
The move was criticized by the Cellular Operators’ Association of India, a trade body representing GSM-based phone firms.
“The move would add significantly to the cost of service and adversely impact the achievement of national telecom objectives,” said association director general T.V. Ramachandran.
On cross-holding recommendations, “allowing an operator to hold 20% in another, instead of the previous 10%, does not make much of a practical difference as far as the attractiveness of the acquisition is concerned,” said Alok Shende, head of the technology related practice of consultant Frost & Sullivan, India. “One needs at least a 26% stake to have a meaningful say in the running of a company.”