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Inside the high-stakes game for 3G roaming

The new draft telecom policy is expected to be finalised by 2012

Surajeet Das Gupta  |  New Delhi 

Telecom incumbents are using to offer services without having paid for spectrum—the legality of which is being scrutinised. Surajeet Das Gupta reveals why what happens here can shape rules for the next big battle in telecom.

On 30th November, the country’s top five telecom chiefs, in an unusual show of solidarity, trooped into the offices of the country’s key policy makers, including prime minister They were Sunil Mittal, chairman of Bharti Airtel; Kumaramangalam Birla, head of Idea Cellular; Vittorio Colao, CEO of plc; Anil Ambani, chairman of Reliance ADAG group and Ishaat Hussain, a director of Tata Sons representing Tata Teleservices. A key part of their agenda was to impress the government’s top brass that the roaming agreements that some of them had signed with each other were legal. (Here, 'roaming' means being able to offer 3G services to customers in a circle where you don't have spectrum, by using someone else's in a commercial agreement).

After all, it was this agreement that had enabled Vodafone, and to offer pan India 3G services without having spectrum in many of the circles where they are operating. The Tatas and Reliance Communications had decided to wait and watch rather than plunge into offering services. Yet, the regulator, the law ministry as well as an internal cell of the Department of Telecommunications (DOT) had earlier stated—unambiguously—that these services cannot be allowed and are tantamount to spectrum-trading . So, after a gruelling meeting of the Telecom Commission last Friday, R Chandrasekhar, the affable secretary in the department said that they were thinking of taking some action against the three players. Yet, a top executive was quick to point out, as he had to the company’s international analysts who had been flown into India a few days ago, that would have no option but to approach Telecom Disputes Settlement & Appellate Tribunal (TDSAT)—the quasi judicial court for telecom disputes.

On the surface of it, all this looks like yet another contentious telecom battle which may just end up in the courts. What is surprising is the extent of the hoopla that has been created around what seemingly looks like an innocuous roaming pact.

The reason for the uproar is simple: the legality or otherwise of this agreement will determine the rules of the next big battle in telecom—services—which offers data speeds that are five to ten times faster than your current mobile phones. It would enable consumers to download videos in seconds, see full-fledged movies without any interruption and make interactive TV a reality.

On one side of this battle are the big incumbent telcos like Airtel, Aircel and Vodafone amongst others And this time they will take on an equally tough and cash rich fighter—Reliance Industries (RIL), which has already bought a majority stake in Mahendra Nahata-promoted Infotel Broadband, to become the only pan India broadband wireless (BWA) access, or player, in the country. It also marks Mukesh Ambani’s second coming into the telecom business after he gave away Reliance Communications to his estranged brother in a family settlement some years ago .

Why is allowing roaming agreements so important for the big telecom operators? . Bharti Airtel, for instance, has won BWA spectrum only in four circles but is intent on offering pan India services through a roaming agreement. Mittal is aware that data is the next big thing. “Our 3G experience shows that the data space is flying. We have four circles in which we have BWA licenses and our networks are LTE ready. Also, all of us will have roaming networks on LTE with other operators and offer services from to LTE,” said in an interview with Business Standard many months ago. Bharti however declined to make any comments on the high stakes battle or the roaming agreements. RIL did not reply to queries either.

Aircel also has BWA spectrum in eight circles and would love to become a pan India player by roaming with other partners. While Vodafone does not have any presence in BWA spectrum, it has said that it would acquire some later. However, if roaming is permitted, it could tie up with one or more of the BWA players who have spectrum in various circles and offer this service too without having to fork out more money to buy spectrum. Says a Vodafone senior executive who does not want to be names : “As we have an UASL license, there is nothing stopping us from offering 4G services through a roaming agreement. It is allowed as far as we are concerned in the license terms”.

Aircel however also decided to keep quiet on the 4G battlefront spilling over from the 3G dispute and Sundeep Das, Malaysia based Maxis Communications CEO which controls majority stake in Aircel, merely said: “We will comply with the stipulated conditions that prevail at the point of time”. Also, Qualcomm—which has BWA spectrum in four circles, including in the lucrative Mumbai and Delhi markets—has made it clear that it would like to partner with telcos and has had a few aborted talks with Bharti, which both sides decline to talk about.

For Bharti, entering the BWA space will give them a huge advantage—they would be one of the first players who will be able to offer consumers seamless pan India connectivity from 2G, 3G and 4G. And with Qualcomm and other companies building chipsets which will make it possible to use mobile phone seamlessly and move in between any of these networks, could become a potent instrument with which Bharti can maintain its numero uno position in the Indian market.

Last year, the government had auctioned two slots of BWA spectrum—and while RIL has bagged one slot across the country, there are other telcos, like Aircel, who share the second slot. With 20 MHz of spectrum in BWA, operators can handle about four to five times more calls than that of a 3G spectrum (where only 5Mhz was doled out). This simply means that if roaming agreements are allowed in 3G, BWA spectrum, holders in a circle are not constrained by the availability of spectrum-and they can go in for multiple tie ups .

The stakes are very high. Bharti’s or Aircel’s strategy would not only falter if the agreements were declared illegal, but 4G will be a non-starter as well, putting RIL in the driver’s seat—it would be the only pan India player and can offer pan India services which no one else can match. It would have to contend with only one competitor in each circle, instead of multiple players if roaming was allowed.

Many analysts, however, say that the spectre of limited mobility which hit the telecom industry in 2003 is now haunting RIL—only this time it is the aggrieved party. After a bitter court battle challenging CDMA players offering full mobile services in the garb of limited mobility, GSM operators eventually decided to make peace. The Government legalised limited mobility services into full mobile services by asking players like RIL and Tatas to pay a fine.

This time around, allowing roaming would deprive RIL of a level playing field, say many analysts, as it has spent a lot of money .amidst tough, open and transparent auctioning to buy a pan India BWA licence.

And if they have paid a hefty sum , it was based on their calculation, analysts say, that competitors also have to participate in the auction to operate 4G services— a plan that can be easily torpedoed if the current 3G scenario—where incumbents are paying zero for spectrum by roaming —is declared legal. Says a senior telecom analyst who does not want to be named: “RIL was able to spot the potential of BWA as it realised that with voice becoming a commodity, the future was in data—and they want to provide both mobile as well as broadband at homes by offering TV, internet and voice. Incumbent operators had no option but to go for 3G or loose their current customers but got only limited spectrum. But they have also realised that 4G is the next big thing and you cannot allow RIL to take a march.”

The new draft telecom policy has clearly allowed spectrum sharing between operators and is expected to be finalised by the beginning of next year. If that happens it would mean that roaming agreements will no longer be illegal under the new policy. Telcos who are planning to take the matter to court say they hope that they will get a stay. “One possibility could be that they have to pay a fine and the agreements will be legalised under the new telecom policy as had happened during limited mobility ” says a senior executive of a leading telco. Another option which incumbents have is to bid for auction of another block of 20 Mhz of BWA spectrum sometimes next year when the defence services vacate spectrum from all circles. The auction which was supposed to happen this year has been already postponed to the next financial year.

Also in 2012-13 the government is expected to auction spectrum in the 700 Mhz band where about six to eight new operators can be accommodated. But the has put in a dampener for the incumbents : it has recommended that in the first phase of the 700-MHz auctions, incumbents who have spectrum in the more efficient 900 mhz band should be kept out. These include the two big boys and Vodafone in many places. The reason: this will provide a level playing field to newer operators who are on the not-so-efficient 1800 Mhz band.

For now, though, the action is in 3G. How the roaming battle pans out and how quickly the new telecom policy is kicked off by the Government will determine the ground rules for the next, even greater telecom battle in 4G.

First Published: Fri, December 16 2011. 00:36 IST