The Big Fight

Reliance, HFCL and Shyam Telecom were allowed to provide on their existing licence. By the time Tata Teleservices got this licence, Reliance was already getting established. In late-2003, after repeated complaints from GSM operators,

Reliance was asked by the government to pay the difference between its lower-priced WLL licence and the full-mobility licence that GSM players had.

Reliance paid up, as did the Tatas, and everyone migrated to a new technology-neutral, unified licence system. By this time, Reliance had grabbed more market share than the Tatas, an advantage it has since retained. Since the subscriber-linked spectrum allocations continued despite the technology-neutral telecom service licences, Tata Tele started feeling the burden: will it always end up with less spectrum than its rivals, both GSM and CDMA?

In India, GSM uses the 900 MHz and 1,800 MHz spectrum bands, while CDMA runs on 800 MHz. Both technologies started facing capacity constraints in 2004, as subscriptions grew faster than expected. Late last year, operators said that, in the metros and large towns, they were close to capacity in the bands designated for voice, SMS, 2G and 2.5G. And since they were setting their sights on 3G 8212; the West8217;s ubiquitous voice and video connectivity 8212; they wanted the spectrum allocation policy to be redrawn.

Besides, all operators have big expansion plans, which makes spectrum even more critical. Tata Tele is going to 20 new circles, Hutch-Essar to seven, Idea to three. BSNL has planned 60 million new lines and Bharti is extending its reach to 5,000 more towns. As is Reliance, which is now going for a GSM expansion as well.

The target set by the government is 250 million lines by 2007, 500 million lines by 2010 and, most important, to beat China. But in May, India had managed 100 million 8212; only a fourth of China.

Inadequate spectrum is cited as one of the reasons. Compared with global standards, India8217;s spectrum allocation is low 8212; about half the world average for GSM and one-third for CDMA.

While CDMA players complain about disadvantages and over-reporting of subscription figures by GSM operators, the latter, backed by the GSM Association, a powerful international GSM operator grouping, isn8217;t silent either. First, GSM doesn8217;t want CDMA to get spectrum in the coveted, but yet to be allocated, 1,900 MHz band. Says Sunil Bharti Mittal, chairman, Bharti Airtel: 8220;It will lead to unforeseen interference with GSM services. Even in countries like South Korea and the US, where 1,900 MHz has gone to CDMA, the spectrum is being re-farmed to avoid interference issues.8221; Second, they don8217;t want CDMA to get more of its earmarked 800 MHz kitty immediately, as, they claim, it will amount to 8220;unfair advantage8221;.

Such talk makes blood curdle at India8217;s top CDMA operator association, Association of United Telecom Service Providers of India AUSPI. Says S.C. Khanna, director-general, AUSPI: 8220;CDMA has been allotted 1,900 MHz in 20 countries. We need it to harmonise our services with them. Our subscriptions and roaming options will be severely limited without it.8221; Of late, AUSPI has claimed that recent technological developments have sorted out the compatibility issues in 1,900 MHz.

Why GSM doesn8217;t want additional 800 MHz carriers to be immediately allocated to CDMA is more complex, with roots in CDMA8217;s claim that they can introduce 3G services like video downloads and faster Internet connectivity immediately.

The GSM industry is adamant that all operators should get 3G spectrum together, so that the level-playing field is not disturbed. The regulator tried, in 2005, to sort out this debate by declaring that the 2 GHz band be given to both GSM and CDMA for 3G. But not only is this band not free, CDMA operators said they don8217;t have handsets for this band yet.

Another looming concern for India is that the teledensity is not increasing as fast as we imagine, as regulations are convoluted and spectrum allocations unplanned. Vikram Mehmi, chief executive officer, Idea Cellular, the third-largest GSM player, says the real trouble with spectrum is not brewing in the 3G arena, which will have limited takers in India; it is the metros and, soon enough, smaller towns that could get cramped. 8220;The market is expanding more rapidly in SEC B and SEC C towns than in the metros. We are not short of spectrum, but it needs to be allotted in time, and someone has to take a proactive stance to do so,8217;8217; Mehmi says.

Operators are tiring of the CDMA versus GSM war, realising it means little to consumers. They are coming around to the view that the spectrum crunch needs to be sorted out through creative solutions, not just piecemeal handouts. Like Ratan Tata8217;s offer to pay Rs 1,500 crore for the 3G spectrum, which TRAI did not want to price.

The choices are many, but what will it be? How many players? Free or paid? Shared or exclusive? 8220;The government only has to see that spectrum is efficiently used and priced effectively. If someone is willing to pay for it, they should, as long as there is no speculation involved and the user is encouraged to use the spectrum efficiently,8217;8217; says an industry analyst. The spectrum wars can be fixed 8212; that is, only if everybody wants to.

8216;Crunch in urban areas8217;

Darryl Green Chief Executive Officer, Tata Teleservices

On spectrum being a constraint. The biggest problem is not spectrum, it is the difficulty of transporting material to places you want to provide connectivity in. This is especially true in rural areas, where the requirement is for voice and, possibly, SMS only. What you really need is a good distribution network.

On an urban spectrum crunch. In urban areas, there is a constraint. Even so, the important thing is to use spectrum efficiently. Till voice and SMS are the key services, it is less of an issue. It will become an issue for the more advanced wireless services, for which spectrum hasn8217;t been allocated yet.

On what if Tata is the only CDMA player left. It8217;s too early to say. Most of our customers don8217;t really care. The trick is to have more people use their phones to full capability, on faster networks, using bigger, better applications. The high-end capabilities of CDMA will definitely play a role in these choices.

On Tata Tele8217;s expansion strategy. Today, teledensity growth is 24 per cent in the metros and 54 per cent in 8216;C8217; category towns. So, we can8217;t ignore the smaller towns and rural areas.

8216;Why this discussion at all?8217;

Sunil Bharti Mittal Chairman, Bharti Airtel

On the spectrum wars. I8217;m surprised at the decibel of this debate. The government has a clear policy on how spectrum for the current run of services is to be given out. Since there hasn8217;t been any fundamental shift from these rules, why this discussion and controversy?

On the CDMA claim of getting less. It is an established rule in India that CDMA gets the 800 MHz band, GSM 900 MHz and 1,800 MHz. Why change it? If CDMA is as efficient as claimed, then give them half. Or, let the government assess how much they need and give them that much; likewise, for GSM. India must stay with the spectrum bands determined worldwide so that we are not isolated from the world telecom map.

On the basis of allotment. Operators should use it or lose it. The problem is, we are still following the old, socialist piecemeal model. When worldwide operators have got as much as they need such as 15 MHz, to start with, as other governments predicted massive growth why should India give only one-third and then be constantly surprised by growth in the sector?

Spectrum wars: the issues8230;

What is spectrum?

Operators send and receive signals at various radio frequencies to enable communication. Since the number of frequencies is limited, the government allocates them to operators, based on their number of subscribers. For this, it charges them a one-time entry fee and an annual charge of 6 per cent of their adjusted gross revenues.

What are GSM and CDMA?

These are two technologies for mobile telephony. CDMA is the newer, cheaper and more efficient of the two, but GSM is the more popular, as it is older and more flexible. In India, Reliance and Tatas are the two big CDMA players, though the former is now planning to shift part of its operations to GSM. Bharti is the big GSM player.

What are they squabbling over?

Operators need more spectrum to expand and offer third-generation 3G services 2G is essentially for voice. The tussle is over how much of additional spectrum is to be allocated, on what basis and when. CDMA, led by Ratan Tata, wants the subscriber-based rule to be scrapped and spectrum to be priced. GSM, led by Bharti8217;s Mittal, feels the current system where it gets twice as much as CDMA is fine.

What happens now?

TRAI8217;s recommendations: review of the allocation criteria as demanded by Tata and recommended by the Aspen Institute, no one-time charge for 3G spectrum and no allocation in the 1,900 MHz band to CDMA as wanted by GSM. It8217;s the government8217;s call now.