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As was expected, the telecom industry has reacted vehemently to the recently released recommendations by the Telecom Regulatory Authority of India (TRAI) on spectrum allocation and other issues. Given that spectrum is a necessity for many groups and a contentious issue, there was never going to be any chance of pleasing everyone. Even before the recommendations had been finalised, grievances were being aired. Now emotions are running even higher, sparking off allegations and controversies.

Taking stock post-May 13, 2005, we look at some of the contentious issues that have been raised and what the reactions have been.

The stage is set...
In its recommendation paper on spectrum allocation and other issues, TRAI has recommended the allocation of 800 MHz band to CDMA operators while allowing for additional spectrum to be made available for them in 450 MHz band as and when there is a demand. It has suggested that spectrum in the 800 MHz band be made available within one month of the spectrum policy coming into effect.

Provision has also been made for the allocation of spectrum to GSM operators. TRAI has recommended that the 2x4.8 MHz spectrum in the 900 MHz band be vacated by the defence services and that a part of it should be allocated to those GSM operators in circles where they have been allocated only 1800 MHz band. The additional spectrum will be made available no later than December 2006.

In addition, if these recommendations are accepted, both GSM and CDMA operators will have access to spectrum in the IMT-2000 band. Each existing operator who demands this spectrum will be granted 2x5 MHz in the IMT-2000 2GHz band.

The recommendation paper was released on May 13, 2005. The stage was set for a drama with many twists and turns...

Act I –­ "Backdoor entry into 3G" and other such issues
Needless to say, the release of the recommendations prompted strong reactions from both the GSM and CDMA lobbies. Each side pushed the propaganda war into a higher gear. The COAI's preliminary comments on the recommendations had the GSM group calling them a "replay of the WLL(M) recommendations whereby the CDMA operators had got a backdoor entry into mobile services".

The COAI pointed to the fact that TRAI's recommendation that CDMA operators be given additional spectrum within one month would give them an immediate backdoor entry into 3G services and would be "grossly anti-competitive". GSM operators felt wronged and believed that a level playing field had been skewed in favour of CDMA operators because the extra spectrum allocated to GSM operators would be freed by the defence services only by 2006 at the earliest.

CDMA players expressed their own woes, alleging that it was GSM players who had been favoured. The spectrum allotted for 3G services was one for which equipment and handsets were available to GSM players. Thus, they could make an immediate entry into such services.

CDMA operators had originally demanded the 1900 MHz USPCS band for which they had handsets and equipment readily available. TRAI did not recommend this band for 3G services as the defence services were unable to vacate it. Moreover, TRAI found that it was not desirable to allocate spectrum both in IMT-2000 2 GHz band and 1900 MHz USPCS band as interference was likely to be an issue.

Recent news reports indicate renewed demands from some CDMA operators for the USPCS band. These players are reportedly in talks with the government on this issue.

Interestingly, despite the protests by CDMA operators, the CDMA Development Group (CDG) responded to the spectrum allocation rather positively. "The CDMA industry commends TRAI for their effort to balance the needs of all operators and technologies and to encourage operators to deploy more spectrally efficient technologies," said Perry LaForge, executive director, CDG.

It went even further, saying it "acknowledged TRAI's recommendations which represent a major step towards rectifying imbalances in spectrum allocation and accelerating the introduction of IMT2000 (3G) services in India" and that the CDMA industry "supports the TRAI proposal to allocate additional 800 MHz spectrum to CDMA operators".

The CDG also welcomed TRAI's recommendation on the proposed revision of the current subscriber-based spectrum allocation criteria for both CDMA and GSM, so that additional spectrum allocations are technology neutral.

This was not what the COAI felt. It claimed that the CDMA operators' demands for extra spectrum were unjustified. They claimed that at the height of the WLL(M) litigation, the Association of Basic Telecom Operators (ABTO) had given written submissions in court that CDMA was 5.31 times as efficient as GSM. Therefore, the COAI said that according to ABTO's own claims in court, the 5 MHz of CDMA which has been given to CDMA operators equalled more than 25 MHz of GSM spectrum. If anyone was being disadvantaged, the COAI argued, it was GSM operators.

This is because, they argue, that GSM and CDMA technologies have different capacities. This fact has been recognised even by the government which has laid down separate subscriber-linked spectrum allocation procedures for both GSM and CDMA.

The spectrum allocation recommendations by TRAI have proposed the revision of the current subscriber-based spectrum allocation criteria for both CDMA and GSM operators, so that additional spectrum allocations are technology neutral. Currently, the required number of subscribers for allocation of additional spectrum is different for GSM and CDMA operators. When these guidelines were made, it was presumed that the two technologies had different capacities. According to TRAI, this difference diminishes as traffic grows. So it has suggested more technology-neutral criteria for allocating spectrum.

As far as the allocation of extra spectrum to CDMA is concerned, TRAI has said that the spectrum that both GSM and CDMA operators have in India is much below international averages. In order for all operators to be able to plan their neTworks efficiently, it is important to ensure that they have adequate spectrum.

Act II –­ Spectrum fee, the twist in the tale
As the industry grappled with these issues, Ratan Tata dropped a bombshell. He reportedly wrote to the minister of communications and IT, Dayanidhi Maran, suggesting an entry fee of Rs 15 billion or so for an all-India allocation of 3G spectrum. His letter stated that a scarce nationWhile TRAI has recommended zero entry fees with a revenue share model, Ratan Tata has reportedly suggested an entry fee of Rs 15 billion for an all-India allocation of 3G spectrum as it would provide a disincentive for hoarding and inefficient use of spectrum.... However, Sunil Bharti Mittal opposes such a levy on the grounds that it would raise the cost of infrastructure and eventually impact tariffs. al resource like spectrum should not be allocated free to any operator. An entry fee would provide a disincentive for hoarding and inefficient use of spectrum. TRAI had recommended zero entry fees with a revenue share model.

Interestingly, Tata Teleservices had not favoured an entry fee for third-generation services. In its recommendations to TRAI's consultation paper on spectrum, it had not recommended any pricing of spectrum other than cost recovery. It felt that operators had already paid a high entry fee and had paid additional fees for migration to a unified access service licence. An additional fee, was, therefore, unwarranted.

Reports indicate that Tata Teleservices responded to this anomaly by suggesting that Ratan Tata had written to the minister as a "statesman" and in "the national interest" and there was no clash of interests.

Whatever the truth, this proposal unleashed a flurry of angry protests. One of these came from Sunil Bharti Mittal who opposed the levy of such a fee on the grounds that it would raise the costs of infrastructure and subsequently impact tariffs. The same Rs 15 billion, he felt, could be better invested in 5,000 base stations to improve telecom services.

Mittal has a point. The experience of Europe where 3G licences were auctioned at prohibitive costs saw the estimated market value of the major telecom companies fall by as much as $600 billion. This unpleasant scenario looms over Indian operators. Even Pradip Baijal, TRAI chairman, feels that in the pricesensitive Indian market, the only way for 3G services to take off is for them to be affordable.

In the Indian context, Deepak Kapoor, ED and leader infocomm practice, PricewaterhouseCoopers, feels it is important to define whether the objective is to promote the wider availability of 3G or to promote and maximise competition. If the objective is the former, then he feels that applying a fee structure will add to costs. If it is the latter, then a fee can be used as a selection criterion.

Similarly, Sidharth Sinha of the Centre for Telecom Policy Studies, IIM (Ahmedabad), thinks that cheap spectrum will lead to the excessive deployment of spectrum relative to capital equipment. The logical conclusion is that since spectrum is scarce, it should be employed more efficiently.

The whole issue has been energetically debated in every public forum, with experts expounding their views and the government making comments. In a recent interview with Business Today, Maran said: "We have to be a little careful with this. I don't want a licence raj. And the very idea of India as a success story is its low cost of tariff. Highly priced spectrum will result in an increased cost for consumers.

The government has many objectives that it has to consider and balance. It is talking to all the stakeholders to get their viewpoints.

Act III –­ Another twist
After all the debates and protests against the levy of entry fees, a surprise statement by the COAI looked as though it might give the debate some direction. According to news reports, the COAI attempted to create consensus among GSM operators about considering a one-time spectrum charge for 3G services. However, instead of the Rs 15 billion suggested by Ratan Tata, it suggested a much lower value of Rs 3 billion.

Unfortunately, the COAI failed to arrive at a consensus. Reports indicate that an overwhelming majority of GSM players have refused to pay any entry fee for 3G spectrum.

The finale –­ Well, not quite
The spectrum controversy revealed something else of interest. TRAI's recommendations to form a group of ministers who would be responsible for drawing up and overseeing plans to allocate spectrum to telecom operators were met with stiff criTicism from Maran: "TRAI has overstepped its mandate of giving recommendations on spectrum," he said. The minister clearly felt that the Wireless Planning and Coordination Wing was more than qualified to handle the issue. The fact that the policy-maker and the regulator were having a tiff in public was not very edifying.

So no finale yet. If anything, the plot just keeps thickening...