Much ado about nothing

Why is there a ruckus about intra-circle 3G roaming?

Opinion is building up within the government against telecom companies that have allowed intra-circle roaming for third generation or 3G services. Essentially, under this arrangement, companies that don’t have 3G spectrum can hire it from those that do. The Telecom Regulatory Authority of India, the law ministry and some wings of the Department of Telecommunications or DoT want these agreements to be declared illegal, arguing that the licence agreements do not allow such sharing of spectrum. Since the spectrum was given to companies so that they could roll out their 3G services, the renting out of spectrum by the telecom companies has caused a revenue loss to the government, they insist, though nobody has as yet tried to quantify that loss. Some have even said that this poses a security threat — in case a subscriber should be monitored, to whom should the investigators go? The original allottee of the 3G spectrum, or the one offering the roaming service?

Unless the government can prove that these telecom companies are renting out spectrum at a premium to what they paid the government – somewhat akin to the allotment of inexpensive spectrum in 2007-08 – the argument doesn’t hold. There would indeed have been a loss to the government if this was happening when it had vacant slots of 3G spectrum. But there are no such vacant slots; they have all been taken by telecom companies, and after paying hefty fees. So there is no loss, not even notional. As a matter of fact, 3G services haven’t picked up in India — perhaps because compatible handsets are still relatively expensive. Until their prices come down, telecom companies should be allowed to put their spectrum to the best possible use. Any calculation of net loss or gain ought also to take into account additional government revenue from the expansion of 3G services, which clearly give better (per-user) revenue than do 2G services. When a 2G service company offers 3G services, its revenue streams will therefore improve, and since the government gets a share of every telecom company’s adjusted gross revenue, the exchequer stands to gain from it.

Remember, inter-circle roaming agreements were allowed from day one. And in 2008, A Raja, as telecom minister, also allowed intra-circle roaming agreements. Thus a company that has the licence for a circle, but hasn’t installed its network, could start by hiring someone else’s spectrum. Since then, many telecom companies have used this rule to roll out services. So spectrum sharing is not unknown to the sector; it’s just that it’s called “roaming agreements”. Another reason the government’s argument is weak is that, when these companies bought 3G spectrum, it was not tied to any service. Indeed, at the time of the 3G auction, the DoT had explicitly clarified that roaming agreements are applicable to licences and not to spectrum bands. It had also said that roaming agreements between 2G and 3G services would be allowed, which means a 2G operator can roam on a 3G operator’s network. These questions were raised by telecom companies when they bid for spectrum. So, in a sense, what they have done now was actually built into their original business model. Why, then, this ruckus? And if it’s just the security angle, why should the monitoring modus operandi be any different from the one followed for non-3G inter- and intra-circle roaming agreements?