3G spectrum auction with quota for CDMA

A total 32.5 MHz will be available for 3G services.

The Telecom Regulatory Authority of India has recommended auctioning radio frequencies for 3G (third-generation) telecom services at a reserve price of Rs 1,050 crore to companies seeking to offer nationwide high-speed Internet and streaming video.

The base price for spectrum in cities like Mumbai and Delhi and Category A telecom circles is Rs 80 crore; in cities like Chennai and Kolkata and Category B circles Rs 40 crore; and in all other cities Rs 15 crore.

The government will net at least Rs 6,000 crore in an auction that delinks spectrum allocation from the subscriber base of telecom companies.

Spectrum will be allocated in three bands: 25 MHz will go to five operators "" each requires 5 MHz to offer these services "" in the 2.1 GHz band; 1.25 MHz each to the two CDMA operators in the 800 MHz band (there are only two CDMA players in most states, Reliance Communications and Tata Teleservices); and 5 MHz on the 450 MHz band to one CDMA operator.

CDMA operators are free to bid both in the 2.1 GHz and the 450 MHz bands but they will be allocated spectrum only in one.

Pricing of these two bands is linked to the auction in the 2.1 GHz band. CDMA operators will pay the same as the second-highest GSM bidder. And if there is more than one claimant in the 450 MHz band, the reserve price will be half of that arrived at in the 2.1 GHz band.

Another rider is that if the highest bid is a quarter more than the lowest, the lowest bidder has to raise its bid to 75 per cent of the winning bid.

"A total of 32.5 MHz was available for allocation within the next 6-9 months. We expect (3G) services to begin from June 2007," Trai Chairman Nripendra Misra said while announcing the recommendations.

He hoped that the allocated spectrum would be enough for the next two years and said Trai would recommend freeing up more spectrum for those who lose out in this auction.

Trai has also recommended auctioning 200 MHz for broadband wireless access services like Wimax and has proposed a national frequency management board to oversee spectrum availability and its efficient use.

The telecom industry is divided on the recommendations. "I had ideally expected the base price to be lower, but we can live with it," said Sunil Mittal, chairman, Bharti Airtel.

"They are going back on what they said during the unified licence settlement: that 2G was an extension of 3G. The reserve price is absurd, and I cannot understand the logic of CDMA spectrum being priced lower than ours," said the CEO of a rival GSM operator.

"Trai's recommendations are fair to all participants and are progressive. We are happy that the regulator has maintained an evidently technology-neutral approach," said Darryl Green, CEO, Tata Teleservices.

But there are problems CDMA operators may come up against. "Operating 3G services on 450 MHz is a problem because we do not have dual-band phones that work both in 450 MHz and in 800 MHz (the band in which CDMA operates in India)," an executive with a CDMA equipment company said.