With the completion of the 3G and broadband wireless access (BWA) spectrum auctions, the sector is gearing up to replicate the success of mobile telephony in broadband. The potential of BWA technologies is evident from the fact that the auctions fetched the government over seven times the reserve price per block. tele.net recently organised a conference, “BWA in India”, to provide a platform to discuss the potential and challenges associated with these services. The following section on Regulatory Issues brings forward the views of Kunal Bajaj, Director, Analysys Mason and Yateesh Wahaal, Associate Director, Noesis...

Kunal Bajaj, Director, Analysys Mason

The Telecom Regulatory Authority of India’s (TRAI) recommendations on spectrum management and the licensing framework will have a varied impact on operators. A look at the different aspects of the recommendations and their likely impact…

Spectrum refarming: More than 50 per cent of the spectrum owned by incumbent GSM operators like Bharti Airtel, Vodafone Essar, Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL) and Idea Cellular is in the 900 MHz band. Refarming spectrum from the 900 MHz to the 1800 MHz band for GSM operators at the time of licence renewal will have a negative impact on these operators. Even the new operators that have been allotted spectrum in the 1800 MHz band will have to bear a higher capex as the number of towers required to cover a certain area with the 1800 MHz band is 1.5 times higher than in the 900 MHz band.

The 800 MHz band, which is currently allocated to CDMA players, will also be refarmed and these players will be reallocated spectrum in either the 450 MHz or the 1900 MHz band.

Spectrum assignment: The additional spectrum allocation criterion has been changed from subscriber linked to coverage and market share-linked. While most of the incumbent operators have already rolled out their 2G networks and will not be impacted by this change, new operators that have recently commenced operations will be impacted as additional spectrum will only be allocated after they achieve a specified market share and coverage.

Excess spectrum charges: Incumbents such as Airtel, BSNL and Vodafone Essar face the negative impact of TRAI’s recommendations as they will have to pay a one-time fee for spectrum held beyond the contractual limit of 6.2 MHz. Most of the CDMA operators, however, will not be impacted as the spectrum held by them is within the contractual limit of 5 MHz..

Sharing spectrum: The recommended spectrum sharing norms are favourable for new operators as they do not hold more than 4.4 MHz of spectrum for GSM and 2.5 MHz of spectrum for CDMA in any service area. 3G spectrum has not been opened for sharing. Given the high prices paid by 3G winners, spectrum sharing would have improved the business case for these services.

Licence fee: TRAI recommends a uniform licence fee across all telecom licences and service areas. While it will not impact UASL holders, it will have a negative impact on both infrastructure and internet service providers.

Merger and acquisition (M&A) guidelines: Mergers between or involving incumbents are not possible as the post-merger entity’s market share will cross 30 per cent (both in terms of subscribers and revenue) in most service areas. The recommended guidelines for M&As encourage new operators to merge among themselves; however, paying spectrum transfer charges of 5 per cent may restrain them from merging.

In the future, the spectrum policy formulation needs to focus on existing issues such as allocation, availability and capacity.

Building a comprehensive broadband policy will require several issues across broadband network layers to be addressed. These pertain to the Universal Service Obligation Fund, right-of-way (RoW), spectrum, e-governance applications, infrastructure sharing, international connectivity, national fibre optic backbone, etc.

Yateesh Wahal, Associate Director, Noesis

There are several constraints restricting broadband growth in the country. These include inadequate last mile access, absence of backhaul with adequate capacity, high cost of consumer premises equipment (CPE), lack of local content and useful applications, lack of consumer awareness and unaffordable tariffs. Regulatory intervention is, therefore, necessary to synchronise the development of the broadband wireless access ecosystem.

Intervention is sought on the following issues – laying down of the National Optic Fibre Plan, making uniform RoWs across all states, opening up of the 700 MHz and 2.6 GHz bands, network sharing, ensuring local content development and promoting innovations in low-cost CPE. Some of these are discussed below:

Need for a core network: Existing core networks either consist of optic fibre cables that cannot handle the expected bandwidth requirements of the future or are limited in their reach. There is a need to not only fully utilise the existing infrastructure but also to lay additional infrastructure to augment capacities and reach deeper into the country. However, such a network cannot be provided by any one operator, and extensive government funding and intervention is required.

Content development: VAS developers lack the incentive to develop useful content as revenue sharing across the value chain is currently skewed towards operators. The government needs to ensure a conducive environment for the development of relevant applications.

3G and BWA: Six operators have been allotted BWA spectrum with one operator having a pan-Indian licence. However, these licensees are allowed to offer only data services on this spectrum. On the 3G front, voice and data services running together on the same network will hamper network quality and capacity. Limited spectrum with 3G operators and restrictions in the BWA guidelines can, therefore, prompt 3G and BWA operators to complement each other and overcome their limitations. These arrangements can accelerate subscriber growth and help achieve the target of attaining a quarter of a billion subscribers by 2014.