India's Regulator, DOT Butt Heads on WiMax

India's Telecom Regulatory Authority of India (TRAI) sent off its recommendations on allocation and pricing of spectrum for wireless broadband/WiMax to the Department of Telecom on Friday that make it clear the two still don't see eye to eye on several issues.

While mobile services are booming in India, broadband growth is sluggish: There were 272.71 million mobile subscribers at the end of May compared with just 4.15 million "broadband" (defined as at least 256 Kbit/s) users. Part of the reason for that has been the scarcity of spectrum for wireless broadband services and the government's slow progress in coming up with a licensing and allocation policy.

About 40 MHz of spectrum has become available in the 2.3-2.4GHz band and another 40 MHz in the 2.5-2.69GHz band, and on July 1 the DOT asked the regulator to respond to a number of suggested modifications to its initial recommendations submitted in 2006.

For starters, the departments disagree on who should even be allowed to bid for spectrum.

The TRAI says that because Unified Access Service License (UASL) holders, Cellular Mobile Service Providers (CMSPs), and Internet Service Providers (ISPs) can offer broadband services, they should be all eligible to participate in the auction for wireless broadband. But the DOT says that because there's a large number of UASL holders and "category A" (nationwide) ISPs, "category B" (regional) ISPs need not be included. TRAI responds: "not allowing category ‘B’ ISPs for participation in the auction process will be against the principle of equity and level playing field," especially since the Unified Access Service Licenses include regional telcos.

In its initial recommendations, TRAI suggested allocating spectrum in blocks of 15 MHz per operator, whereas the DOT wants to offer blocks of 10 MHz. The TRAI has come back with a different idea: "The Authority has deliberated at length on this issue and feels that as there are already certified profiles available for 5 and 10 MHz channelization plan in above two bands, therefore, in order to enable both these profiles, it is recommending allotment of spectrum in block of 5 MHz with flexibility to the service providers to take two or three blocks of 5 MHz i.e. maximum of 15 MHz spectrum in these two bands."

The TRAI has agreed with the DOT's proposal to raise the reserve price of the auction, so that bidding for 10 MHz of spectrum covering the whole country would start at 5.25 billion Indian Rupees rather than the INR1.12 billion for 15 MHz that TRAI had proposed. But it wants that to be split in line with an allocation of 5 MHz, so that nationwide spectrum would have a reserve price of INR2.63 billion.

They also differ on the period of validity for licenses and spectrum. The DOT contends that because ISP licenses are valid for 15 years, after which service providers can apply for extensions, spectrum should be allocated for 15 years. So if the operator has less than 15 years left on its license it should be automatically extended so it doesn't expire before spectrum does. The TRAI disagrees, saying "the right to use the spectrum for providing a service is dependent on the service license conditions, therefore the validity of spectrum usage cannot exceed that of the service license." Instead, it says operators should still have to apply for license extensions when they are originally due to expire and pay the applicable renewal fees.

The TRAI initially wanted a one-stage sealed bid auction for each of India's telecom circles, or service regions, whereas the DOT prefers a "controlled simultaneous ascending e-auction" where all successful bidders will have to match the highest bid so they all pay the same price. The TRAI now agrees with that, but there's a "however" -- it says service providers that want contiguous blocks of spectrum should pay the highest bid for the first 5 MHz, and then 25 percent more for any additional blocks.

According to the TRAI document, seven or eight service providers have each been assigned two blocks of 7 MHz of spectrum in the 3.3GHz band in selected cities, where some have already rolled out WiMax services. That would include the likes of Aircel Ltd. and Bharti Airtel Ltd. (Mumbai: BHARTIARTL), which are using Alvarion Technologies Ltd. (Nasdaq: ALVR) gear to provide last-mile access for corporate services. (See Bharti Picks Alvarion.)

The government's Wireless Planning Committee, which is responsible for managing spectrum, has ordered service providers that have received frequency in both 3.3GHz and 2.5GHz bands to give up the latter immediately so it can be reallocated.

— Nicole Willing, Reporter, Light Reading