Divvy Up The Blue

• Win Some, Lose Some
  DoT's compromise formula stays, GSM players accept crossover of technology and TRAI norms. In return they get spectrum preference.
  
  
• The Middle Path
  Government offers modified subscriber-linked spectrum allocation formula in consultation with industry. GSM industry withdraws case.
  
  
• Stalemate Continues
  The review committee upholds expert body TEC's norms, which are stiffer than those of TRAI. Industry rejects it, and talks fail.

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he pressure is beginning to tell. After weeks of marathon meetings, letter writing, political interventions, and all kinds of lobbying, the debate over who gets first right to scarce spectrum has reached a feverish pitch. Are we watching the final episode of the great Indian spectrum soap opera? Well, there is a deal on the table and negotiations are on. Now it all depends on who will blink first.

Under political and PMO spotlight, the Department of Telecommunication (DoT) is keen to get GSM operators—led by Bharti Airtel's Sunil Mittal and Vodafone's Arun Sarin—to agree to an acceptable subscriber-based formula for the airwaves that operators need to run their services on. In return, it seeks the withdrawal of their litigation against the government. On the other side is the CDMA lobby—led by Anil Ambani's Reliance Communications—which recently received a licence to offer GSM services, a decision that sparked off the legal battle.

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GSM players may accept the crossover
clause but are unwilling to go by the
TRAI recommendations in full.

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The genesis of the fight lies in the recommendation by the Telecom Regulatory Authority of India (TRAI) to clamp stiffer subscriber norms (an increase of 2-4 times) for allotment of spectrum. This has been opposed by GSM operators, who say the TRAI calculations are flawed and based on wrong assumptions. They have appealed to the telecom tribunal. Says T.V. Ramachandran, director-general, Cellular Operators' Association of India (COAI): "We do not want to compromise on spectrum on this basis."

To add to their woes, the Telecom Engineering Centre (TEC), an expert body formed to look into TRAI's recommendations, has put out numbers that make it even stiffer for operators, doubling TRAI's subscriber norms. TRAI, however, asserts its numbers add up. Says its chairman Nripendra Mishra: "Our terms are quite modest and we have taken the most liberal norms for arriving at the decision, comparable with anything in the world. To challenge everything that is not 'your pie' may not be acceptable. The surprising thing is that many operators are already achieving these numbers but are opposing it."

On the other hand, there's the government's controversial decision to allow crossover technology (where CDMA operators like Reliance Communications and Tata Teleservices can offer GSM services). Reliance Communications applied for a GSM licence and was given one on October 19. This makes it eligible for spectrum immediately even though some of the leading GSM players have been waiting for additional spectrum for almost two years. Coupled with the large number of new applicants who have applied for Universal Access Service Licences—and can claim a minimum of 4.4 Mhz of spectrum—this limits the chances of existing GSM players getting any fresh spectrum.

For obvious reasons, GSM operators oppose this and say they're ready for a fight to the finish. Says an official from a leading company: "The spectrum applications of Vodafone, Aircel and Spice are pending since March 2006. The new licencees, including those coming via the crossover route, can't be given priority in this situation."

Another point of debate is the licence fee the new players, including crossover ones like Reliance, are expected to pay. According to the existing rules, Reliance had to pay just Rs 1,651 crore to get an A circle licence bundled with 4.4 Mhz of starting spectrum, as per the rates fixed in 2001. This, feel experts, is the cheapest in the world. Says TRAI's Mishra: "The need to take a relook at the fee cannot be asserted enough. At today's prices, the Rs 1,651 crore should easily be around Rs 6,000-10,000 crore." The GSM operators could not agree more with this view.

Incidentally, GSM operators also opposed the government's earlier decision to allow new entrants in the auction for spectrum to offer data-friendly 3G services next year on the grounds that the incumbents should get a preference. In a bid to pacify the agitated companies, the government seems to have come around to the GSM point of view.

The fight took another dimension with Reliance Communications alleging that there was large-scale spectrum hoarding by GSM players, and that they should refund the excess spectrum to the government. According to Reliance, if the TEC norms were accepted, about 55 MHz of spectrum would be available via refund from GSM players. In response, GSM players have said they are entitled to spectrum of up to 15 Mhz under the existing policy. However, it appears that even if the TEC norms are upheld, the government might not press on this issue as part of its trade-off with the GSM players to solve the overall spectrum issue and give the players a time-frame to prove their subscriber numbers.

The DoT compromise formula to the GSM lobby asked them to accept the TRAI recommendations in return for getting spectrum for the pending applications. Cases filed against crossover applications would also have to be dropped. Sources also say that GSM players have been given the option of either accepting the TRAI norms or going by the decision of the review committee looking into the spectrum issue, which might even uphold the stiffer TEC numbers. The GSM operators are cautious. Says a leading industry official: "While we may accept the crossover clause, we won't accept the TRAI recommendations in full, especially those on network utilisation and traffic requirement in certain areas. But we should be given spectrum at par with what the government's given bsnl and mtnl."

DoT has now asked the telecom companies to come forward with their own proposals to refine the compromise formula. These are likely to be presented in the coming days. Going by the tone of things, it could pave the way for a resolution of an issue that has been hanging fire for several months. The review committee examining the issues is expected to finalise its report shortly. But even before that, it's possible that a solution—wherein the government offers a modified subscriber-linked spectrum formula—is worked out.

However, COAI may also need to arrive at a consensus among its own members. That's because there seems to be some kind of a division within COAI itself. In last Monday's meeting, Aircel and Spice met DoT officials separately while Bharti Airtel, Vodafone and Idea officials met them in a different group. It appears several operators are unhappy with the way a few dominant players are running the show.

There's also a sense of time running out. Telecom secretary D.S. Mathur, who has been instrumental in trying to hammer out a solution, is due to retire by the year-end. If a solution doesn't happen by then, there could be a further delay. That's something aggressive players in the fastest-growing telecom market in the world can ill-afford.