Centre comes around to spectrum auction

While the ministry of communications has cleared the policy to allow CDMA-mobile phone firms such as Reliance Communications to offer GSM-mobile services, the brass of the Department of Telecommunications (DoT) appears to be distancing itself somewhat from the policy, which was decided late in the evening of October 18, and was announced the next morning. Reliance paid its entry fee on the same day and, by virtue of this, advanced in the queue to get spectrum.

A note prepared for Communications Minister A Raja by the DoT officials cites the October 18 meeting and offers various options available before the ministry given that it does not have enough spectrum to meet the needs of the 46 companies who have made 575 applications for spectrum in 22 telecom circles across the country.

The note recommends that, to begin with, the licensing wing of the DoT ascertain how much spectrum is available and how much will be needed for the expansion of existing firms.

The first option, the note says, is to issue Letters of Intent to all companies that meet the eligibility criterion and then give them 15 days to deposit the entry fees, requisite bank guarantees and other documents.

The note does not discuss the October 19 policy, so it is not clear if it is to supercede the policy or is meant to be in addition to it.

The note says, "The criterion followed for award of new licences for UASL has to be transparent and must withstand any legal scrutiny at a later date".

Interestingly, the Cellular Operators Association of India (COAI), which has appealed against the October 19 policy in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), filed a Right to Information (RTI) application today asking for all notes/discussion papers that went into the making of the policy as well as into the making of the Telecom Regulatory Authority of India (Trai) recommendations "" apart from rooting in favour of a first-come, first-served policy, Trai had recommended an increase in the subscriber norms for spectrum by 2-5 times, which the COAI feels are arbitrary.

Having said this, the DoT argues for auctions as the best policy. It points out that the current entry fee of Rs 1,651 crore was based on a bidding in 2001, and since the sector has grown hugely after this, a new "bidding/auction process will establish the entry fee based on current market perception".

It then suggests either a "three-stage informed ascending" auction or an online one. If this policy is adopted, the DoT is in favour of all (46) applicants being allowed to participate in the auction (The DoT's note suggests that existing CDMA players who wish to offer GSM services "may also be included in the bidding process").

The third option suggested is also related to auctioning "" this suggests that all 46 applicants be issued Letters of Intent but making it clear that spectrum will be allotted only through an auction. Those who have deposited their licence fees but don't win the auction are to be refunded their money.

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DoT'S CALL...

Option One: Issue Letters of Intent to all companies that meet the eligibility criterion

Option Two: A "three-stage informed ascending" auction or an online one

Option Three: All 46 applicants be issued Letters of Intent but spectrum allocation only through auction.