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Sunil Jain: Dialling more collusion

RATIONAL EXPECTATIONS

Sunil Jain  |  New Delhi 

You have to hand it to and the ever-watching If it wasn’t bad enough that the duo played favourites and allotted dirt-cheap to a favoured few while creating a special category of mobile licence for primarily, they’ve now gone and created another special category of mobile players at a fourth the price of the others in the 3G space; and while making a pretence of revisiting the 3G guidelines, they’ve ensured the market remains closed to newcomers.

First, the 3G collusion. On August 1, the government announced a set of 3G auction guidelines that looked fair since, apart from the existing players, anyone with 3G experience could also bid. The problem was that the policy required newcomers to pay Rs 1,651 crore more for an operating 2G licence as well, but without the spectrum that goes along with it. So what’s the change here? Well, the September 12 clarifications make it clear the wannabe 3G player need not now pay the Rs 1,651 crore to the government for a 2G licence but can simply buy it off an existing 2G player. It makes it clear the objective is not to fetch revenues for the government but to ensure there’s a good price for private sector players who want to sell out. And since many big foreign players are wary of coming in under such hostile conditions (see “The fourth G of 3G,” 4/8/08), there will probably be just as many existing players as there are potential licences. In which case, the bids are unlikely to cross Rs 13,000-14,000 crore, a far cry from the Rs 45,000 crore being touted when the 3G policy was being formulated.

The other change the 3G policy makes is in the spectrum reserved for in the 800 MHz band. The earlier policy said need not necessarily bid for this spectrum but could simply get it if they matched the bids of the GSM-mobile players for the spectrum they bid for — except, since there was only one slot available in the 800 MHz band, the policy said the firm with the most subscribers (Reliance Communications!) would get the first choice. This clause has now been dropped, so even the Tatas have a chance of getting in — few others want to do CDMA-mobile.

But this one good thing has been more than made up with the shocking policy on what’s called Broadband Wireless Access (BWA), a policy ostensibly meant to promote the use of broadband speed internet in the country through wireless. Since it is believed that broadband penetration, especially in rural areas, is good for the country, the August 1 policy said the minimum price for the auction for BWA spectrum would be fixed at a fourth that fixed for the 3G mobile spectrum. This was always a bad idea since even a layman knows that thanks to convergence you can do telephony on BWA spectrum just as much as you can do broadband internet on 3G mobile spectrum. It didn’t help matters that while 10MHz of spectrum was on offer for each 3G player (5 each for uplinking and downlinking) versus 20MHz for the BWA ones, effectively offering a greater growth path on BWA.

The September 12 clarifications claimed to fix this by reducing this BWA advantage. But while the August 1 policy said the minimum BWA price would be a fourth that of 3G per MHz of spectrum, the September 12 notification mentions a figure in Rs crore — it too works out to a fourth that of 3G! And while the August 1 policy said BWA would be used only for data services, the September 12 one removes the term “data services”, making it clear it can be used for telephony as well (it for this reason that, internationally, the practice is to just auction the spectrum without stating what it is to be used for). So what, you’d say — the reserve price doesn’t mean the auction price can’t go higher. After all, with the September 12 change, the BWA effectively becomes just another 3G licence and so prices across all 3G licences will converge. Absolutely, but if the BWA auctions take place after the 3G ones, as they well may, the story’s likely to be quite different. So, if the price of spectrum is different, the government is once again trying to decide who the winner in the telecom game will be — for those interested in history, the government tried to much the same thing when, during Ram Vilas Paswan’s ministership, it fixed more favourable commercial terms for CDMA mobile phones versus GSM ones.

There’s more. The original BWA policy was neutral in terms of which technology was to be used — just as there are two types of mobile phone technologies, GSM and CDMA, there are two types of BWA technology, TDD and FDD. Technology suppliers like Qualcomm, Nokia and Ericsson offer FDD services in this part of the BWA band since this is the international standard — yet, India wants to create a new standard to benefit one or suppliers and so, the September 12 notification says only TDD is to be permitted!

If at the end of 40 days of deliberations, all that the DoT can come up with to fix the obvious flaws in its recommendations is to replace one favouritism clause with another set, you wonder why it even bothered.

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Sunil Jain: Dialling more collusion

RATIONAL EXPECTATIONS

You have to hand it to Communications Minister A Raja and the ever-watching Prime Minister Manmohan Singh.

You have to hand it to and the ever-watching If it wasn’t bad enough that the duo played favourites and allotted dirt-cheap to a favoured few while creating a special category of mobile licence for primarily, they’ve now gone and created another special category of mobile players at a fourth the price of the others in the 3G space; and while making a pretence of revisiting the 3G guidelines, they’ve ensured the market remains closed to newcomers.

First, the 3G collusion. On August 1, the government announced a set of 3G auction guidelines that looked fair since, apart from the existing players, anyone with 3G experience could also bid. The problem was that the policy required newcomers to pay Rs 1,651 crore more for an operating 2G licence as well, but without the spectrum that goes along with it. So what’s the change here? Well, the September 12 clarifications make it clear the wannabe 3G player need not now pay the Rs 1,651 crore to the government for a 2G licence but can simply buy it off an existing 2G player. It makes it clear the objective is not to fetch revenues for the government but to ensure there’s a good price for private sector players who want to sell out. And since many big foreign players are wary of coming in under such hostile conditions (see “The fourth G of 3G,” 4/8/08), there will probably be just as many existing players as there are potential licences. In which case, the bids are unlikely to cross Rs 13,000-14,000 crore, a far cry from the Rs 45,000 crore being touted when the 3G policy was being formulated.

The other change the 3G policy makes is in the spectrum reserved for in the 800 MHz band. The earlier policy said need not necessarily bid for this spectrum but could simply get it if they matched the bids of the GSM-mobile players for the spectrum they bid for — except, since there was only one slot available in the 800 MHz band, the policy said the firm with the most subscribers (Reliance Communications!) would get the first choice. This clause has now been dropped, so even the Tatas have a chance of getting in — few others want to do CDMA-mobile.

But this one good thing has been more than made up with the shocking policy on what’s called Broadband Wireless Access (BWA), a policy ostensibly meant to promote the use of broadband speed internet in the country through wireless. Since it is believed that broadband penetration, especially in rural areas, is good for the country, the August 1 policy said the minimum price for the auction for BWA spectrum would be fixed at a fourth that fixed for the 3G mobile spectrum. This was always a bad idea since even a layman knows that thanks to convergence you can do telephony on BWA spectrum just as much as you can do broadband internet on 3G mobile spectrum. It didn’t help matters that while 10MHz of spectrum was on offer for each 3G player (5 each for uplinking and downlinking) versus 20MHz for the BWA ones, effectively offering a greater growth path on BWA.

The September 12 clarifications claimed to fix this by reducing this BWA advantage. But while the August 1 policy said the minimum BWA price would be a fourth that of 3G per MHz of spectrum, the September 12 notification mentions a figure in Rs crore — it too works out to a fourth that of 3G! And while the August 1 policy said BWA would be used only for data services, the September 12 one removes the term “data services”, making it clear it can be used for telephony as well (it for this reason that, internationally, the practice is to just auction the spectrum without stating what it is to be used for). So what, you’d say — the reserve price doesn’t mean the auction price can’t go higher. After all, with the September 12 change, the BWA effectively becomes just another 3G licence and so prices across all 3G licences will converge. Absolutely, but if the BWA auctions take place after the 3G ones, as they well may, the story’s likely to be quite different. So, if the price of spectrum is different, the government is once again trying to decide who the winner in the telecom game will be — for those interested in history, the government tried to much the same thing when, during Ram Vilas Paswan’s ministership, it fixed more favourable commercial terms for CDMA mobile phones versus GSM ones.

There’s more. The original BWA policy was neutral in terms of which technology was to be used — just as there are two types of mobile phone technologies, GSM and CDMA, there are two types of BWA technology, TDD and FDD. Technology suppliers like Qualcomm, Nokia and Ericsson offer FDD services in this part of the BWA band since this is the international standard — yet, India wants to create a new standard to benefit one or suppliers and so, the September 12 notification says only TDD is to be permitted!

If at the end of 40 days of deliberations, all that the DoT can come up with to fix the obvious flaws in its recommendations is to replace one favouritism clause with another set, you wonder why it even bothered.

image
Business Standard
177 22

Sunil Jain: Dialling more collusion

RATIONAL EXPECTATIONS

You have to hand it to and the ever-watching If it wasn’t bad enough that the duo played favourites and allotted dirt-cheap to a favoured few while creating a special category of mobile licence for primarily, they’ve now gone and created another special category of mobile players at a fourth the price of the others in the 3G space; and while making a pretence of revisiting the 3G guidelines, they’ve ensured the market remains closed to newcomers.

First, the 3G collusion. On August 1, the government announced a set of 3G auction guidelines that looked fair since, apart from the existing players, anyone with 3G experience could also bid. The problem was that the policy required newcomers to pay Rs 1,651 crore more for an operating 2G licence as well, but without the spectrum that goes along with it. So what’s the change here? Well, the September 12 clarifications make it clear the wannabe 3G player need not now pay the Rs 1,651 crore to the government for a 2G licence but can simply buy it off an existing 2G player. It makes it clear the objective is not to fetch revenues for the government but to ensure there’s a good price for private sector players who want to sell out. And since many big foreign players are wary of coming in under such hostile conditions (see “The fourth G of 3G,” 4/8/08), there will probably be just as many existing players as there are potential licences. In which case, the bids are unlikely to cross Rs 13,000-14,000 crore, a far cry from the Rs 45,000 crore being touted when the 3G policy was being formulated.

The other change the 3G policy makes is in the spectrum reserved for in the 800 MHz band. The earlier policy said need not necessarily bid for this spectrum but could simply get it if they matched the bids of the GSM-mobile players for the spectrum they bid for — except, since there was only one slot available in the 800 MHz band, the policy said the firm with the most subscribers (Reliance Communications!) would get the first choice. This clause has now been dropped, so even the Tatas have a chance of getting in — few others want to do CDMA-mobile.

But this one good thing has been more than made up with the shocking policy on what’s called Broadband Wireless Access (BWA), a policy ostensibly meant to promote the use of broadband speed internet in the country through wireless. Since it is believed that broadband penetration, especially in rural areas, is good for the country, the August 1 policy said the minimum price for the auction for BWA spectrum would be fixed at a fourth that fixed for the 3G mobile spectrum. This was always a bad idea since even a layman knows that thanks to convergence you can do telephony on BWA spectrum just as much as you can do broadband internet on 3G mobile spectrum. It didn’t help matters that while 10MHz of spectrum was on offer for each 3G player (5 each for uplinking and downlinking) versus 20MHz for the BWA ones, effectively offering a greater growth path on BWA.

The September 12 clarifications claimed to fix this by reducing this BWA advantage. But while the August 1 policy said the minimum BWA price would be a fourth that of 3G per MHz of spectrum, the September 12 notification mentions a figure in Rs crore — it too works out to a fourth that of 3G! And while the August 1 policy said BWA would be used only for data services, the September 12 one removes the term “data services”, making it clear it can be used for telephony as well (it for this reason that, internationally, the practice is to just auction the spectrum without stating what it is to be used for). So what, you’d say — the reserve price doesn’t mean the auction price can’t go higher. After all, with the September 12 change, the BWA effectively becomes just another 3G licence and so prices across all 3G licences will converge. Absolutely, but if the BWA auctions take place after the 3G ones, as they well may, the story’s likely to be quite different. So, if the price of spectrum is different, the government is once again trying to decide who the winner in the telecom game will be — for those interested in history, the government tried to much the same thing when, during Ram Vilas Paswan’s ministership, it fixed more favourable commercial terms for CDMA mobile phones versus GSM ones.

There’s more. The original BWA policy was neutral in terms of which technology was to be used — just as there are two types of mobile phone technologies, GSM and CDMA, there are two types of BWA technology, TDD and FDD. Technology suppliers like Qualcomm, Nokia and Ericsson offer FDD services in this part of the BWA band since this is the international standard — yet, India wants to create a new standard to benefit one or suppliers and so, the September 12 notification says only TDD is to be permitted!

If at the end of 40 days of deliberations, all that the DoT can come up with to fix the obvious flaws in its recommendations is to replace one favouritism clause with another set, you wonder why it even bothered.

image
Business Standard
177 22