The Union Cabinet on Wednesday cleared the swapping of 15 MHz of the 2,100-MHz spectrum band (needed for third-generation, or 3G, telecom services) available with the defence ministry in return for an equivalent amount in the 1,900-MHz band owned by the department of telecommunications (DoT).
However, in a dampener for telecom companies DoT said it would take a year to "harmonise" the 15-MHz spectrum, so that this would not be sold in the February auction, a major demand of the sector. A DoT official said harmonisation could take even longer.
The decision is also contrary to the Telecom Regulatory Authority of India (Trai)'s recommendations - that the 15 MHz given up by the forces be auctioned simultaneously, failing which spectrum prices would zoom.
Telcos have said prices of 2,100-MHz spectrum would hit the roof as only five MHz, enough to accommodate only one company, would be up for auction along with the 800-MHz, 900-MHz and 1,800-MHz spectrum on February 25.
Nevertheless, the Centre's decision ends an eight-year battle between the telecom and defence ministries on what would constitute the "defence band" as well as the swap. The Cabinet on Wednesday cleared what spectrum would constitute the "defence band" as well as decided to earmark as defence interest zones 50 km around border areas.
"The issue was pending for the last eight years. It has been resolved today [Wednesday] with identification of the entire defence band," Ravi Shankar Prasad, minister for communications and information technology, said after the Cabinet meeting.
Prasad, however, said a decision on the price of the 2,100-MHz spectrum would be taken up later by the Cabinet. DoT has recommended Rs 3,705 crore for one MHz in the 2,100-MHz band. The Centre expects to get about Rs 18,000 crore from the sale of a block of spectrum in the 2,100 MHz.
The sector is peeved at the Cabinet decision. Said Rajan Mathews, director-general, Cellular Operators Association of India: "The decision will lead to 2,100-MHz price hitting the roof, as there will be three to four players for just one slot. The government has gone for maximisation of revenue rather than pushing for a 'digital India'." He added the government could have easily auctioned the 15 MHz in February, as they already have it in their possession, and could have given the spectrum nine to 10 months later, as they did with the 1,800-MHz spectrum that was auctioned last February. "This would have ensured enough spectrum, but now what they will do now is use this high price as the base for the next auction of 15 MHz and get more revenues," said Mathews.
On harmonisation Mathews said that DoT's argument that it would take over a year for harmonisation is a "red herring". "The spectrum is not being used by defence at all, so it cannot take so much time," he said.
The Cabinet has earmarked 49 slots for defence in the 3 MHz-40 GHz band. Of this, nine will be for defence only, while 31 will be for the use of the forces along with other agencies in sectors such including space, broadcasting and aviation.
For the remaining nine, a group has been formed to sort out issues between various ministries.
In the defence interest zones, Prasad said, the spectrum would be used by telecom operators during peace time but during war/hostility the area would come under the jurisdiction of defence (during this time it would impact telecom services).
Telecom Secretary Rakesh Garg said, "Within one year, ministries will have to harmonise spectrum and identify a timeline by when they will be able to vacate spectrum not marked for them. In four-five years, everyone will have to free spectrum not marked for them." In 2009-10, the defence ministry and DoT had signed a pact with the former agreeing to vacate 25 MHz of 3G (2,100 MHz) spectrum and 20 MHz of 2G in phases in return of DoT setting up an exclusive defence network.
The defence ministry had vacated 20 MHz of 3G spectrum, auctioned in 2010. It had also vacated 15 MHz of 2G spectrum, allocated to new operators in 2008. Under the pact, the remaining spectrum - 5 MHz of 3G and 5MHz of 2G - was to be vacated only after the alternative communication network was completed. Though that alternative network is yet to be completed, it has agreed to provide five MHz of 3G spectrum for the February auction.