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Indian Regulator Responds to DOT on 3G

Following its recommendations for auctioning WiMax spectrum last week, the Telecom Regulatory Authority of India (TRAI) has weighed in with its response to the Department of Telecom's suggested modifications for 3G policy. (See India's Regulator, DOT Butt Heads on WiMax.)

In a letter to the DOT, the TRAI has agreed with its proposal to double the reserve price of 3G spectrum, but not without throwing in some snark on the department's slow progress in formulating the policy.

The regulator made its initial recommendations in 2006, and the industry has been waiting for the two to reconcile their differences ever since. (See India Prepares for 3G Rollout, India on Edge Over 3G, and India Plans 3G Auction.)

The DOT has proposed starting the auction for spectrum at a reserve price of 21 billion Indian Rupees (US$486 million) for a 2 x 5 MHz block in the 2.1-GHz band for nationwide coverage, double the amount the regulator had proposed in 2006. It says it's basing that price on a calculation of 0.5 percent of Gross Domestic Product (GDP), but the regulator suggests checking that math: based on the government's Economic Survey for 2007-2008, 0.5 percent of GDP works out to INR214.15 billion ($4.96 billion). "DOT may like to revisit this assertion," it sniffs.

The TRAI questions the link with GDP, saying, "it is very difficult to specify 'which is the cause and which is the effect,' adding that telecom "cannot be estimated as [a] standalone contribution." The letter cautions: "isolated or piecemeal hikes with a view to mopping up additional revenue may hurt the growth of infrastructure and in the long run the telecom sector itself."

But in a show of going along to get along, TRAI says: "However, as the reserve prices are only to fix the minimum price and the final price is determined through the auction process, therefore, the Authority in order not to further delay the process of roll out of 3G services in India agrees with the reserve price proposed by DoT."

The regulator also scolds the DOT for the lack of available spectrum in the 450-MHz and 800-MHz bands.

In its 2006 document, the TRAI recommended refarming 2x10 MHz in the PCS 1900 band "in the near future;" adjusting the 800-MHz band to add one carrier with 1.25 MHz of spectrum; vacating 2 x 5 MHz of spectrum in the 900-MHz band to re-farm GSM operations within the band and allocate an additional 2 x 5 MHz for CDMA operators in the 800-MHz band; and allocating spectrum in the 450-MHz band for CDMA operators with a commitment to providing rural coverage.

The TRAI writes: "DoT in its letter has conveyed non availability of spectrum in 450 MHz and 800 MHz bands. However, the Authority is not aware of the actions / decisions taken by DoT on its recommendations quoted above."

The TRAI remains opposed to the Department of Telecom's insistence that new and foreign operators be allowed to bid for spectrum. In a letter dated April 25, the TRAI writes that it's "apprehensive" that operators who missed out on the latest round of 2G licenses will drive up the bidding price in their eagerness to get into the market. "This will result in a) high tariffs for the 3G services and b) deprive the existing operators from providing the 3G services. The Authority firmly believes that in the interest of the growth of the Indian telecom sector, entry of this kind must be strongly discouraged."

It goes on to say: "Presently, the UAS [Unified Access Service] license permits a foreign company 74% 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." (See A Guide to India's Telecom Operators.)

But the Department of Telecom has pulled rank: In its letter asking for the regulator's recommendations, the DOT cited the TRAI Act of 2000, which says, "After receipt of further recommendation, if any, the Central Government shall take a final decision."

— Nicole Willing, Reporter, Light Reading

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