(25 April 2008 7:00 pm)

NEW DELHI: The Telecom Regulatory Authority of India (Trai) has rejected the Department of Telecom's (DoT) proposal to reconsider allowing foreign players to offer 3G telecom services.

The sector regulator has said that the existing players would be able to roll out the network faster. They have made huge investments in the infrastructure and their systems are in place. They will be in a better position to deliver 3G services efficiently at low incremental cost, Trai has said in its views on 'Permitting New Entity for 3G Services.'

As the number of service providers have gone up to 13-14 per circle, sufficient competition exists to ensure that the spectrum is priced competitively, Trai has said. This will also discourage cartelisation and offer services that are acceptable in terms of quality and price.

DoT had asked Trai to revisit its original recommendations to see if "other Indian/ foreign" prospective operators could be allowed.

Trai has reiterated its earlier recommendation of allocating 3G spectrum only to existing UAS/CMTS licensees and said that the spectrum module for the auction would be 2x5 MHz.

Trai has also recommended that the total availability of spectrum should be made public at the stage of the auction so that the bidders are fully aware regarding the first and subsequent phase of allocation on the price determined by the auction.

"It is conceivable that the total quantum of spectrum required for the existing licensees may not be available in one lot.

"It was in this context that the Authority had recommended that those who do not get accommodated in the first phase will be placed in the queue and will be allotted spectrum as and when available on the same terms and conditions as granted to the licensees in the first phase," Trai has said.

It says now that in view of the future expected technological advancements, the Authority recommends a review after three years.

Trai has based its decision upon following considerations:

• The existing licensees due to their available infrastructure are in a better position to deliver 3G services efficiently, quickly and at low incremental cost in the Indian price sensitive market.
• The existing licensees will be able to roll out the services faster than the non-licensed bidders, not yet operating in the country.
• In view of existence of about 13-14 licensees in each service area, the Authority believes there is sufficient competition in the market to ensure that the spectrum is priced competitively, discourage cartelization and offer services that are acceptable in terms of quality and price.
• 2x5 MHz is a viable and technologically acceptable quantum for the existing licensees who are either offering or planning to offer 2G services. With 2x25 MHz to 2x30 MHz of available spectrum in 2.1 GHz band, the Authority reiterates its recommendation of allocation in blocks of 2x5 MHz of spectrum so as to accommodate maximum number of existing licensees and also to avoid any possible legal challenge. This will also ensure a level playing field and will meet the need for fair and healthy competition.

The statement from Trai adds: "The Authority has always advocated that the grant of license should be only after ascertaining the adequacy of spectrum. This is critical so that the existing licensees do not face any uncertainty and have a predictable path for investment.

"It is in this context that the Authority had earlier recommended that those who do not get accommodated in the first phase will be placed in the queue and will be allotted spectrum as and when available on the same terms and conditions as granted to licensees in the first phase."
Another crucial factor behind the decision is that by deploying the 3G technologies, the existing licensees can migrate their high-end subscribers to 3G technology and will be able to partially ease 2G spectrum availability, which can be utilised for achieving the government's target of 500 million subscribers by 2010.

Trai argues that if the new entity is allowed to bid for the spectrum for 3G and if becomes successful in bidding, then it will get an automatic right to get UAS license.

This will, Trai says, create legal complications and litigations as it will be construed as an indirect backdoor entry. In case the entity is given only license and not spectrum (2G), then it will tantamount to creation of new license category which will be against the NTP 99.

Finally, it says: "Presently, the UAS license permits a foreign company 74 per cent Foreign Direct Investment.

"With 13-14 licensees in each service area, the Authority believes that any new aspirant can join hands with the existing licensees.

"The Authority is conscious that a number of rapid technological advancements are taking place in the telecom sector and these needs to be taken into consideration in future. In view of this, the Authority recommends to review the scenario after three years."