DPS Seth: What about 3G spectrum?

It is more efficient than 2G spectrum but is still not available for use

Recent press reports on the meetings of the Group of Ministers (GoM) on radio spectrum for mobile services would suggest the authorities view 2G spectrum as more important than the 3G one. So, it is likely that additional 2G spectrum will be made available for commercial use soon, but giving a greater priority to 2G spectrum over 3G spectrum is illogical.

First, the introduction of 3G services can only help in improving the use of ICT for commerce and will therefore help the economy grow faster. The argument that 2G is more important than 3G since only the richer strata in urban areas will use 3G services is irrelevant since spectrum is not even an issue in rural areas, whether it is 2G or 3G. Only an ill-informed policy maker will disregard the fact that 3G networks are up to 2.5 times more efficient than 2G networks for voice communication, apart from the fact that they provide a high data rate access to data-based services. It is often also forgotten that once high-end users move to 3G services, this will substantially reduce the load on 2G networks. This released 2G capacity will then be available for adding new customers to existing 2G mobile networks and will, at the same time, provide relief on the Quality of Service front. These are not the ramblings of an arm chair thinker, but are supported by well-researched and widely-quoted reports such as the re ent CII report on Wireless India "" Catalysing Next Wave of Economic Growth.

Second, the government has to take a holistic view in line with its own vision and objectives. It has been repeatedly, and rightly, said that the growth of broadband is important for economic growth and the well-being of the country. Presumably policy makers know that 3G services are a major means of providing broadband services. If not, they only need to look at the most recent TRAI draft recommendations on broadband services released in September 2007. In fact, the same aspect was brought out by TRAI in its earlier recommendations on 3G and BWA (Broadband Wireless Access) services released in March 2007.

Third, the band being considered at the moment for 3G spectrum is the 2.1 GHz one. Again, going by press reports, as also the earlier recommendations of the TRAI, it appears the armed forces will find it a lot easier to release this band as compared to the 1800 MHz band (the so-called 2G band). Some reports even suggest that parts of this band are available even today (recall the statements of the earlier communications minister).

This implies that there is no linkage between the release of 3G spectrum and the 2G spectrum. Why, and on whose behest then, is a linkage being created between the two types of spectrum? Does this have anything to do with the valuation of 2G licenses, whether they are of existing or of new players?

Let us examine this conjecture. The TRAI has recommended tightening of the subscriber norms for spectrum allocation. That the approach to fix subscriber norms is incorrect is another issue and let us examine the implications of this recommendation if the government accepts, rejects or modifies it. If the government rejects the recommendation in toto or accepts it with some modification, it is clear that the existing operators will hope to get some more spectrum. In my view, this will help improve the QOS as well as provide scope for further growth of mobile connections. It is possible that this will enhance the value of the licenses of existing players. If this is true, are such operators behind this approach of prioritising 2G spectrum over 3G?

The other possibility is that the government accepts the TRAI revision of subscriber allocation norms for spectrum. In such a situation, it appears that almost none of the existing operators will get any part of the newly-released spectrum and all of it will go to new operators along with the license. If 20 MHz becomes available, it would appear that at least 4 new operators can be given licenses. The government's approach of not capping the number of operators is indeed the right one. However, converting it to a priority objective in a market where 6 or 7 players already exist and where the HHI is 0.2 or less (this indicates there is healthy competition in the marketplace) is difficult to understand. Surely, we do not, under these circumstances, need top government officials and ministers spending their precious time to bring in new operators deliberately in an already competitive market.

What then is the objective for holding back 3G services and taking decisions on only 2G spectrum? Could it be the anomaly created by differences in the manner of allocation in the two cases. For 2G spectrum, a subscriber norm is used which allows operators to get spectrum virtually free; an auction approach is recommended for 3G spectrum which implies paying for it. While priority of 2G spectrum over 3G due to these differences may be logical for operators, is it logical for the policy makers?

The author is a former CMD of BSNL and a former member of the TRAI.