Towards better mobile services

Towards better mobile services

One of the most striking changes one notices, as an occasional visitor to India, is the increasing role of mobile telephony. In India, as in China, mobile networks have, in a very short span of time, provided the modern, widely available and affordable communications infrastructure needed to support the growth and modernization of the economy.

Mobile penetration has increased from 6% to more than 17% in the last two years, making India one of the world’s largest markets today. Although impressive, this is still far from levels reached, for instance, in China, where penetration is around 38%. Also, while networks are widely deployed, there are sometimes problems with capacity, leading to a mixed user experience.

Of course, there is no shortage of willing investors, both domestic and foreign, given the market’s size—almost 200 million users—and the business potential it offers. There is also a healthy level of competition, with five or six players competing in each of the most attractive markets. This combination of investment and competition should lead to high-quality, widely available services, as it has in other markets. In principle, it should also lead to the deployment of advanced broadband services.

In countries where there is a lack of high-quality fixed-line infrastructures, new wireless technologies such as mobile broadband services based on 3G and other technologies such as WiMAX are essential to increase the availability and take-up of broadband Internet access. But, in India, there is one missing ingredient; spectrum.

To allow the mobile industry to achieve the next 21% of penetration, to improve quality and to move from voice to broadband, India must modernize its management of the radio spectrum.

Historically, all governments carefully managed the use of the radio spectrum. Their spectrum management authorities decided who would use it and for what purpose. Much of the spectrum was given to public sector bodies, such as the military, police, emergency services and state broadcasters. A priority was the avoidance of harmful interference between users. With radio waves crossing international boundaries, all this is coordinated by the International Telecom Union, which meets every two-three years to decide which services can be used in which bands of the radio spectrum. This system of international agreements and careful domestic regulation of the spectrum is sometimes referred to as a “command and control" system for spectrum management. However, it has proved less than ideal for ensuring that spectrum is allocated to the companies that will make best use of it, and that it is used efficiently.

Spectrum has traditionally been granted, based on a “first come, first served" method, before its true value was recognized. With the rise of mobile telephony, wireless broadband and digital broadcasting services, it has become clear that spectrum is an essential, scarce, and hence highly valuable resource. Military and other public sector users are under increasing pressure to use spectrum efficiently and to make as much spectrum as possible available to commercial users. They have released considerable amounts of spectrum—particularly in bands which have been internationally harmonized for commercial services such as mobile telephony. Also, regulatory authorities have moved away from administrative procedures, instead favouring auctions, whereby market forces determine how the spectrum gets assigned.

India itself was an early user of auctions for GSM licensing in 1995. Specific licences were issued, along with an initial allocation of spectrum, which could be extended as the operators grew. In many ways, this was was similar to mobile licences in some other parts of the world—the licence itself was auctioned, but the amount of spectrum available to a licensee granted according to an administrative formula.

In many advanced markets, the licence for telecom services (fixed and mobile) is now freely available for a nominal fee, whereas the spectrum (the scarce resource) is auctioned—the opposite to the situation of 2G licences in India—on a technology-neutral basis. And, as licensing is open to all, spectrum auctions are typically open to all participants.

These changes in the international best practice have a bearing on India, which, like many other countries, has a 2G spectrum management framework partially rooted in the history of “command and control" mechanisms. The department of telecommunication (DoT) decision to open 3G spectrum auctions to all, including foreign bidders, goes some way in modernizing the framework. But, unfortunately, the amount of spectrum that DoT mentioned, 30Mhz, is less than half of the spectrum band typically made available in other countries that auctioned 3G spectrum. Given the spectrum shortages in 2G, it is important that the maximum amount of spectrum for 3G is made available, for higher service quality and to attract more players in the market.

In some countries, work is under way to auction additional spectrum in the 2.5Ghz band, which can be used for 3G services or other wireless technologies to provide broadband Internet services. India should aim to release this spectrum in addition to the 2.1Ghz spectrum, by way of an open auction as soon as possible.

India needs to introduce the market mechanisms used in the US, Europe, other parts of Asia and, increasingly,?worldwide. This will allow existing and new operators to offer new, high-speed services with improved quality. The winner will be the consumer.

Andrew Wright is managing director of Analysys Consulting, a UK-based company focusing on telecoms, IT and media. Comment at