Already faced with less-than-satisfactory uptake of 3G services, operators are now grappling with the issue of 3G roaming agreements. In end-December 2011, the Department of Telecommunications (DoT) issued notices to the operators, demanding immediate termination of these agreements. The operators approached the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), and the matter currently rests with it. Industry experts share their opinion in this regard…

What are your views regarding the recent conflict between the government and the operators on the 3G roaming agreements?

Kunal Bajaj

During the pre-auction conference organised to address queries related to 3G spectrum allocation, it was stated that 3G roaming agreements would be valid. In this regard, the written question-and-answer document states that roaming arrangements for 3G services should be in accordance with the existing regulations related to roaming of services in the sector. This means that roaming for 3G services should be subject to the same set of rules and guidelines as for 2G.

Abhishek Chauhan

The Telecom Regulatory Authority of India (TRAI) and DoT have deemed the 3G roaming deals between the incumbents as illegal on the following grounds:

•  The nature of the deal is similar to the mobile virtual network operator model that is not yet legal in India and therefore violates licence policies. As per the regulator, an operator cannot offer a service in a circle where it does not have a licence.

•  National security

•   Loss to the exchequer.

Prima facie, it appears that the regulator’s stand is justified. However, some reports suggest that prior to the auction DoT had clearly mentioned that roaming agreements would be allowed. Thus, DoT’s new stand is a complete volte-face on its earlier opinion. The operators have incurred a lot of expenditure in terms of buying spectrum and in setting up the necessary infrastructure. In order to monetise 3G services, it is vital that the operators have a pan-Indian presence. Thus, for optimum network utilisation, 3G roaming agreements must be allowed. These deals would allow efficient usage of spectrum and help in decreasing the digital divide in the country by increasing the penetration of mobile broadband services. Moreover, they would  fulfil the expectations of end-consumers for seamless 3G connectivity.

Jaideep Ghosh

The whole issue highlights that significant improvements are required in terms of policy clarity. Both the regulator and the bidders were equally responsible for ensuring that the rules of the game were clear before the bids were initiated. All the queries regarding the kind of roaming arrangements allowed within the ambit of 3G services should have been addressed before the auction took place.

Dr Mahesh Uppal

The government has been unfair to the operators with regard to the 3G roaming issue. If there were any discrepancies between the rules for 3G roaming and within the provisions of the licences, the government should have fixed these by making the necessary alterations in the licences. We must consider the fact that the operators did not secure the 3G spectrum through unfair means. In fact, they paid billions of dollars to acquire 3G spectrum. However, none of the operators was able to get spectrum across all circles. This left the mobile companies with no other option but to share the spectrum allotted, in order to offer services across the country. Thus, consumer interests demand that the issues regarding the 3G roaming agreements get resolved in the simplest way and as soon as possible. Both the government as well as TRAI should have taken care of roaming options within the licence provisions. The uproar concerning the roaming agreements has been neither pro-operator nor pro-consumer.

What will be the probable outcome of the impending case?

Kunal Bajaj

It is impossible to comment whether TDSAT will favour the government or the operators. However, the documentation seems to support the operators’ view that 3G roaming agreements should be allowed.

Further, operators were not given any licences for 3G unlike the case of 2G; they were just allocated spectrum. So, if an operator has a UAS licence, it is authorised to provide 3G services under the same set of rules as for offering 2G services. Further, since the pre-auction question-and-answer document states that the rules prevailing in the sector should be applicable to 3G services as well, it becomes evident that such arrangements should be allowed.

Dr Mahesh Uppal

It is very difficult to comment on whether TDSAT will favour the government or take the operators’ side. Both the parties stand an equal chance of a positive verdict. However, if TDSAT supports the government, 3G customers of operators offering these services through roaming pacts would be left with no choice but to shift to licensed 3G operators.

How are the dynamics of the telecom industry likely to be affected if the verdict is in favour of the government?

Kunal Bajaj

A scenario where TDSAT favours the government is not going to be favourable for driving 3G penetration. We believe that by entering into such agreements the operators are trying to balance the high costs incurred for purchasing 3G spectrum. They are bringing in multiple partners to drive 3G penetration in a particular market. It should be noted that when there are more players in the market, it leads to high competition, which increases the penetration of a service and attracts more subscribers.  Thus, it is better for the industry to have more players driving competition. However, inadequate spectrum remains a constraint. We do not have the spectrum to support that many players.

If the verdict does go in the government’s favour, we will witness a situation where only three or four operators that won spectrum in a particular circle would offer 3G services.

The verdict would have a greater impact on the consumers who subscribed to 3G services of operators who are offering these services through roaming arrangements. For instance, a user subscribing to 3G services from Idea Cellular in Delhi may be at a loss because the company does not have 3G spectrum in Delhi and is offering these services solely through a roaming agreement with operators who do. Subscribers, in general, will be impacted by the pricing of these services, the lack of competition in the 3G market and the overall development of the 3G segment.

Abhishek Chauhan

If the verdict is in favour of the government, it may have the following consequences:

•   Deeming the deals illegal might further dampen 3G uptake in the country. The operators would lose the enthusiasm to invest in this technology. Also, such a move would limit the number of subscribers who can avail of 3G services in a particular circle. While mobile broadband is expected to help realise the government’s vision of 600 million broadband subscribers by 2020, such policies would act as roadblocks in achieving this target and further slow down the adoption of broadband in the country.

•   There would be a possibility of an increase in subscriber churn in a given circle.

•   It would directly impact the operator revenues.

•   There is a possibility that the operators might surrender the spectrum they won in low-ARPU circles such as Category B and Category C cities.

•    The focus would shift to 4G services and the operators may decide to directly jump from 2G to 4G technology.

Some strategies that the operators may adopt following this debate are:

•   Appeal against DoT’s decision in court.

•    Wait for the National Telecom Policy  to be implemented, which would take some time.

•   Focus on other technologies like long term evolution, though most of the operators with roaming pacts either do not have a broadband wireless access licence or do not have it for all circles.

Jaideep Ghosh

A scenario where operators are not permitted to continue their 3G roaming agreements would undoubtedly lead to a loss of revenues for telecom companies. A verdict that favours the government would also have a moderate effect on subscribers, especially those who are inclined towards 3G. These customers are currently using the services of operators that do not hold a licence in a circle and have the option of switching to another operator that holds 3G spectrum in that circle.

Dr Mahesh Uppal

TDSAT’s verdict, if in favour of the government, would not have a very serious impact on the Indian telecom industry. The dynamics are not likely to change in a very big way. However, it will create some confusion for a while. We will definitely see a huge churn with subscribers switching from operators who are not permitted to offer 3G services to those who are. The verdict will not have a serious impact but it will create much confusion for a while.

DoT recently stated that spectrum sharing will not be allowed among licensees holding 3G spectrum. What are your views in this regard?

Kunal Bajaj

Not allowing spectrum sharing for licensees holding 3G spectrum reiterates the fact that the government wants only those players to offer 3G services in a given circle that have won spectrum in that circle.

Dr Mahesh Uppal