Spectrum Fight Escalates in India

India's Department of Telecom is making its way through a mountain of applications for mobile licenses and navigating a growing tussle among operators over the limited availability of spectrum.

The Department was deluged with several hundred applications for licenses in India's 23 telecom "circles," or regions, after the Telecom Regulatory Authority of India (TRAI) recommended at the end of August that there not be an auction for 2G licenses and that there should be no cap on the number of carriers in each circle.

The Times of India reports that, at the final count, 46 companies have filed a whopping 575 applications -- 15 companies applied for all 23 regions, four requested 20 or 21 licenses, while others applied for just one or two.

The rush for licenses reflects the intense interest in a market that is continuing to grow at a rapid pace and has a lot more room to expand. According to the latest figures, India's GSM operators signed up 5.6 million new subscribers in September alone; numbers are yet to come in for Reliance Communications Ltd. (RCom) and the country's other CDMA operators. The total number of mobile subscribers crossed the 200 million mark in August, and in a country of more than 1.1 billion people, that means there's major potential for further growth.

The licenses are also going cheap. The government is charging operators an entry fee of 16.6 billion rupees (US$422.28 million), based on the price of the fourth mobile license auction held in 2001. Contrast that with the billions of dollars carriers are paying for licenses in the Middle East, and it's little wonder everyone wants in.

The Department of Telecom stopped accepting applications after October 1 and has set up a committee to come up with new guidelines for issuing the licenses. It has also asked its technical arm, the Telecom Engineering Centre (TEC), to come up with new criteria for spectrum allocation.

In the past, spectrum has automatically been bundled with mobile licenses and scaled up as operators added more subscribers, but a shortage of frequency has meant that operators are waiting in line for additional allocations even as their subscriber bases have soared. The likes of regional player Idea Cellular Ltd. have been awarded licenses to expand into new circles, but not the spectrum to go with them.

The Department of Telecom is waiting on the Defense Ministry to free up some spectrum, which is expected to accommodate two, maybe three new national operators.

It will have to weed out applicants from among the list of telecom service providers, cable manufacturers, real estate developers, and others that have joined the rush.

AT&T Inc. (NYSE: T), which earlier this year received licenses to offer long-distance services in India, is among those that have applied for licenses nationwide. (See AT&T Eyes India and AT&T Goes Long Distance in India.) Russia's Sistema JSFC (London: SSA) is in the fray through its recent acquisition of Shyam Telecom Ltd. , which has also applied for licenses in all regions. (See Russia's Sistema Buys Into India.)

The stack of new applications has agitated operators that were already fighting over spectrum. In a letter to India's Department of Telecom last week, the Association of Unified Telecom Service Providers of India (AUSPI) , which represents CDMA carriers, wrote: "We recommend that a thorough scrutiny of each application is carried out with respect to net worth and other eligibility criteria, so that non serious operators do not enter the telecom industry and spoil the scene by hoarding the scarce spectrum without rolling out the services."

The AUSPI has come into conflict with the GSM body, Cellular Operators Association of India , arguing that GSM operators have been unfairly allocated more frequency. "As a matter of fact," says the letter, "the GSM operators have already been allocated spectrum beyond this contracted limit [6.2 MHz], while CDMA operators are still languishing at 5 MHz or below 5 MHz, which is the contracted spectrum for them. Thus, a non level playing field has been created and needs to be corrected without further delay. Internationally, the regulators are moving to spectrum allocation on a technology neutral basis."

The COAI maintains that the policy of allocating spectrum on the basis of "usage, justification, availability" allows for up to 15 MHz per GSM operator, and that operators in other countries have been awarded more.

The Telecom Regulatory Authority of India has told GSM operators that they will need to use the spectrum they already have much more efficiently, noting that they serve 3.9 million subscribers per MHz, compared to, say, China, where mobile carriers serve 8.5 million subscribers per MHz. By that measure, operators should be able to reach 450 million subscribers with the spectrum they already have, it says.

India's Department of Telecom supports that view and has asked operators to submit a compliance report listing the technologies they're using to enhance the efficiency of their spectrum.

Last month, the COAI served a legal notice to the Department of Telecom asking it to allocate more frequency and to give priority to operators that had already received licenses. According to a statement on its Website, "Mr. TV Ramachandran Director General COAI said that the GSM operators had been facing a severe crunch on spectrum and have been waiting for months or even years to get spectrum. He stated that the non-availability of spectrum was affecting both new licensees who were yet to get their initial allotments and also the operators who had far exceeded the subscriber linkages that had been prescribed by the Government."

The argument escalated this week as reports indicate that state-owned operator Bharat Sanchar Nigam Ltd. (BSNL) has been given an additional 10 Mhz of spectrum, and its sister company Mahanagar Telephone Nigam Ltd. (MTNL) has received 8 Mhz, a move that has private operators up in arms.

— Nicole Willing, Reporter, Light Reading

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