3 G to 2 G…..

I had the opportunity to go through the recent recommendations released by TRAI. Though the entire recommendations report comes around 431 pages, a 13 page summary is also included in the recommendations report which gives a brief idea about various recommendations made by the authority. (For the recommendations please click here)

The recommendations begin with the Authority claiming the scarcity of spectrum required to be used for the next four years. The authority suggests that the spectrum be re-farmed and the Government should draw a spectrum management plan while reviewing the usage of existing spectrum allocated. The authority proposes to undertake spectrum audit on a regular basis to oversee efficient utilization of spectrum by the service providers.

Next the TRAI recommended the capping of the amount of spectrum up to 6.2 MHz for GSM and 5 MHz for CDMA. For any additional spectrum the service providers have to pay an additional amount equivalent to the current price of 3 G determined through auction. TRAI justified this measure by stating that the existing players have enjoyed benefit of excess spectrum for 10 years. Now they have to pay or return spectrum.

On infrastructural front TRAI recommended that the Telephone Tower companies which currently have IP I (Infrastructure Provider) registration to be brought within the preview of license. At present these companies which are often part of big telecom companies are under obligation to register only. Apart from the proposed IP I license holders even ISP holders who at present are charged license fee of only Rs 1 should be charged license fee according to the Authority at the rate 4% for 2010-2011 & at 6 % in the year 2012—2013. The authority also proposed to have uniform license fee and urged the Government to delink license with the spectrum.

The Authority in its recommendations also stressed the importance of rural telecommunications while assigning obligation on service providers to reach out rural areas in the form of roll-out obligations. Any failure on the part of the service provider to full fill these obligations would entail penalty in the form of additional spectrum usage charges. Authorities concerns regarding the reach of telecommunications in rural areas seem to be genuine as the authority further stipulated a condition in its recommendations. The authority has made the assignment of additional spectrum depended on the fulfillment of roll-out obligations by the service providers. Assignment is subject to the condition that the service provider will complete the roll-out obligations for 2 years, within a period of six months from the date of assignment of additional spectrum. The authority maintained the present license renewal mechanism with the only change it proposed is in the form of renewal of license fee which is equivalent to the entry fee.

Regarding Mergers and Acquisitions the authority prescribed that minimum 6 service providers are required even after M& A activities. It further laid few guidelines like the resultant company after M&A shall not have 30% of the entire subscriber base of the licensed area. It further suggested that the resultant company shall not hold more than 14.4 MHz/10 MHz (GSM/CDMA). The companies can use only one tranche of spectrum and for addition spectrum t has to pay. The authority allowed spectrum sharing as long as both of the companies does not hold more than 4.4 MHZ/2.5 MHz (GSM/CDMA). Though spectrum trading has been referred but authority’s position is not provide specifically.

The authority has prescribed a specific manner for allocating additional spectrum.

a) First to the operators who have the startup 4.4 MHz and are eligible for 6.2 MHz

b) Then to the operators who have 6.2 MHz and need additional spectrum

c) Last in the queue are the operators who don’t have 4.4 MHz startup spectrum also.

The authorities have also suggested to impose higher spectrum usage fee from the operator having additional spectrum. These are the basic features of the TRAI recommendations on spectrum management.

Few companies like Reliance have gained while for companies like Bharti (Airtel) it has been a loss. But these recommendations have created a distinct path for developing plan on spectrum management a crucial part which the Government has to cover post 3 G auction. Now it depends on DoT and the government either to accept or to reject these recommendations. As per the TRAI act these recommendation are not binding in nature, though they have to be given due weight age by DoT.

Here are certain responses from various Industry observers.

TRAI’s recos to discourage new operators.. click here

R-Comm Favours TRAI’s views on spectrum allocation.. click here