After all the years of to-ing and fro-ing, the country finally has a formal announcement on how it is going to get 3G (for third generation) telephone services. There is no firm date set for the auction of 3G spectrum, but it is likely to take place before February 2009 since the government may need the money to keep its deficit within control; current estimates put the initial entry fee bids that the government will get at anywhere between Rs 30,000 crore and Rs 40,000 crore. In that case, by about December 2009, India may get broadband-type internet speeds on mobile phones. That, in turn, will allow users to view movies on their mobile phones, conduct video telephony while on the move, and so on.
The policy on 3G spectrum has gone through various permutations. A few years ago, the telecom regulator, Trai, was of the view that this spectrum should not be auctioned, but given as a matter of right to the existing mobile phone players who offer what are called second generation (2G) mobile services. The argument was that they did not have enough spectrum to expand their 2G offerings – while 2G services can be given on 3G spectrum, the reverse isn’t possible. This raised a furore and, predictably, the then telecommunications minister ignored the Trai suggestion. Then, under a new chief, Trai recommended that 3G spectrum be auctioned, but only to the existing 2G players. This too caused a furore since it seemed unfair to restrict the country’s telephony for all time to just a handful of existing operators – in no other industry does this happen. This time too, the telecom minister didn’t agree with the regulator and said newcomers would be allowed to participate in the auction.
Despite this, the four-page guidelines put out by the department of telecommunication on Friday leave as many doubts as they seek to resolve. For instance, one of the eligibility criteria is that bidders have previous experience in running 3G telecom services. That may be sensible, but the conditions also say it is enough for the bidder to have an existing 2G mobile licence. This is paradoxical since there are several firms who have no telecom experience but have been awarded 2G licences – so, though they have no experience, they are to be eligible to bid for and run 3G services. Similarly, it is obvious that a mergers and acquisitions policy is critical for any bidder to take part in an auction, but while stating that the existing M&A policy is what is operational, the 3G guidelines leave matters open to ‘any subsequent revision thereof’.
It is also not clear why, while allowing newcomers to bid for 3G services, the government should want successful bidders to pay for a 2G licence first. Since the 2G licence has just been sold for Rs 1,651 crore, this is an additional cost which puts newcomers at a disadvantage, es[ecially when there is nothing to suggest that these newcomers who pay Rs 1,651 crore will get 2G spectrum. There are several companies already in the queue for 2G spectrum, so there’s little chance of any new player getting into the action. Why then pay for a 2G licence? Till such issues are cleared up, it is unlikely that the 3G policy is going anywhere fast. In other words, what is already the third version of 3G policy could well into a fourth and a fifth version.