Cellular wars intensify

GOVERNANCE | telephony | spectrum policy
Cellular wars intensify
High-intensity crossfire has led to emergency intervention by the PM’s office

by NARESH MINOCHA
THE never-ending challenge of managing air waves and conflicting aspirations of fiercely competitive cellular telephone operators is bound to generate sparks. This time it is not just sparks but fireworks that have forced the Prime Minister’s Office (PMO) to intervene. And, the fireworks have not been set off by Telecom Minister A Raja but by Telecom Regulatory Authority of India (TRAI).
The statutory regulator stepped on the toes of dominant cellular operators in its efforts to redefine the rules of existing mobile services referred to as second-generation (2G services) in May. Following a media storm kicked up by dominant operators over TRAI’s game-changing plan, the PMO decided on June 22 to assign the task of taking a decision on the TRAI recommendations to the existing empowered Group of Ministers on 3G, chaired by Finance Minister Pranab Mukherjee.

Tata Teleservices has accused dominant operators of scuttling rational pricing of the 2G spectrum.

The dominant operators that control the GSM technology-based cellular lobby platform, Cellular Operators Association of India (COAI), are leaving no stone unturned to derail the TRAI recommendations. These operators, including Airtel, Vodafone and Idea, led COAI into suspending the voting rights of Tata Teleservices Limited (TTL) and other new entrants in the GSM cellular mobile space.
TTL has accused dominant operators of trying to prevent rational pricing of 2G spectrum and thus prevent fair competition. In a scathing letter dated July 12, attacking COAI’s operations, TTL has resigned from the association and reserved its right to take appropriate legal action. The industry is abuzz with speculation that other new entrants will quit COAI and float a new association.
Meanwhile, Raja has shown the PMO the rule book to have a say in settling the unfolding corporate war over pricing and allocation of 2G radio frequencies and the underlying revenue scam. On July 1, Raja reportedly put on record his stance that the Full Telecom Commission should first take a call on the TRAI recommendations. The Commission, comprising Secretaries of key economic Ministries, should be aided by an in-house committee of the Department of Telecommunications (DoT), he is said to have insisted.

NTP is actually the survival kit for Raja (above), who has been under attack for doling out licences at 2001 prices.

Subsequently, on July 7, DoT constituted a nine-member committee under the chairmanship of the TC Member (Technology) to process the TRAI recommendations and industry representations thereon.
TRAI has recommended levy of onetime fee for additional 2G spectrum allotted by the government to dominant players over and above the contractual obligations. The proposed fee should be linked to the recently discovered market price for 3G, a recommendation that has been opposed tooth and nail by dominant operators. TRAI has also recommended jettisoning of discretionary criterion for allotment of additional spectrum with auction. It wants the government to delink licensing with allotment of spectrum. At present, the initial allotment of 4.2 Mega Hertz (MHz) comes bundled with the entry or licence fee. This can later be enhanced to 6.2 MHz.
No 2G service provider or applicant has thus ever paid a separate one-time upfront fee for spectrum. This fee is different from annual spectrum charges that all users of radio frequencies are required to pay.
The licensing agreement does not explicitly provide for allocation of excess spectrum above this ceiling. It, however, gives the government enough elbow room to exercise its discretionary powers to go on granting additional spectrum to its favoured ones. The government never thought of putting an end to this practice and allocating additional spectrum to aspiring entrants to catalyse competition or to just auctioning such frequencies to established players. The recommendations of official committees on reforms in the area of allocation and pricing of 2G spectrum were allowed to gather dust in Sanchar Bhavan.

The task of taking a decision on TRAI recommendations is with the group on 3G, chaired by Mukherjee (above).

Another TRAI recommendation that would give a deadly blow to dominant players envisages taking away of excess spectrum from operators at the time of renewal. The recommendation reads: “While renewing the licence, the Government should assign spectrum only up to the prescribed limit or the amount of spectrum assigned by it to the licensee before the renewal, whichever is less. Spectrum assigned by the Government to the licensee in excess of the Prescribed Limit shall be withdrawn. The spectrum will be assigned at the current price, duly adjusted to the year of renewal.”
In its comprehensive recommendations titled ‘Spectrum Management and Licensing Framework’, TRAI says: “The Authority is conscious of a concern that assignment of spectrum beyond 4.4 to 6.2 MHz is likely to be perceived as resulting in loss of revenue to the Government, particularly in the context of the current price of spectrum. At the same time, the licence conditions stipulate the contracted spectrum. Besides, several incumbent operators have received spectrum beyond the contracted limits free of cost and have benefited from the same over several years. The Authority would like the Government to take a well considered decision in this regard keeping all factors in view.”
The TRAI recommendations threaten to rock the cozy relationship between dominant operators and powers that be. The government would find it difficult to bail out dominant operators from the game-changing plan of TRAI because it would find it hard to defend double standards – one for 2G and the other for 3G. For the first time, it decoupled licence fee and spectrum charges in the recent ascending e-auction for 3G and broadband wireless access (BWA) that fetched Rs 106, 262 crore revenue.
The 3G-BWA auction thus marked a complete policy shift from administrative pricing of radio frequencies as in 2G to market pricing, which in effect, means maximization of the government’s non-tax revenue from the sale of spectrum. The exorbitant prices for radio frequencies would obviously make 3G and BWA services a costly proposition for both service providers and consumers.
The policy shift has happened without making any formal amendments to the National Telecom Policy (NTP), 1999. The NTP is actually the survival kit for Raja, who has been under attack for the past two years for doling out an all-telecom services permit named Unified Access Service Licence (UASL) to several companies at the 2001 price instead of organizing a bidding competition to discover the highest price and thus enhance accruals to the national exchequer. The companies paid a fee of Rs 1,650 crore, which was the pan- India fee discovered through bidding competition for the fourth cellular licence in all telecom circles in 2001.
Raja has put up the following defence: “The other contentious issues as well as major policy changes proposed such as revising the structure of UASL and delinking of spectrum, etc as suggested by TRAI, will have to be taken at the level of E-GOM or Cabinet, since those decisions were taken earlier by the Cabinet under NTP ’99.”
Policy or no policy, the brief history of India’s mobile telecom revolution is replete with instances of revenue forgo and losses at different times subject to pulls and pressures of corporate lobbies. The revenue losses have occurred through post-tender policy and regulatory changes: repeated reductions in the licence fee, release of additional spectrum to influential players without bidding competition and extension of validity of the licence period.
The country’s mobile telephone revolution is outrageously tarnished by the blatant foul play, fickle and messy governance, policy and regulatory manipulations by wheeler-dealers, crony capitalism, webs of litigations, and, last but not least, periodic shifts and swings in the government’s priorities.