3G:The Way Forward

Prashun Bhaumik |

One of the advantages of this new cellular technology is that it would allow the penetration of broadband to low income groups and rural areas which cannot afford a computer. Besides, handset prices will remain low due to competition.

By Ravi Visvesvaraya Prasad

At the International Telecommunication Union’s conference in Ankara, the Turkish telecom minister declared: “Excavations at Mount Ararat found copper pieces present. This proves that even at the time of Noah’s Ark, we Turks possessed the most advanced Asymmetric Digital Subscriber Line (ADSL) technologies.”

The Indian telecom minister immediately called up the Director General of the Archaeological Survey of India and asked him whether excavations at Indraprastha had unearthed any copper. “None whatsoever”, was the reply.

Next day, the Egyptian telecom minister declared: “Excavations at the Pyramid of Cheops found glass pieces present. This proves that even in 2500 BC, we Egyptians possessed the most advanced Dense Wavelength Division Multiplexing – Synchronous Optical Network (DWDM–SONET) technologies.”

The Indian telecom minister called up the Director General of the Archaeological Survey of India and asked him whether excavations at Dwarka had found any glass. “None whatsoever”, was the reply.

The third day, the Indian telecom minister declared: “Excavations at Indraprastha and Dwarka found neither copper nor glass. This proves that even at the time of the Mahabharata, we Indians possessed the most advanced third-generation (3G) cellular technologies.”

In reality, 3G has taken a long time to come to India, eight years after it was introduced in Europe, and when cellular operators worldwide are working on the introduction of 4G services in the next few years.

And the delay was mostly due to bickering between the Telecommunications Regulatory Authority of India and the Department of Telecommunica-tions, with additional ‘interference’ from the finance ministry, the Planning Commission, and the Prime Minister’s Office. Even though TRAI had begun work on its recommendations for 3G services over four years ago, it was only on 1 August 2008 that the government finally issued the guidelines. And it will probably be the end of 2009 before Indian consumers will begin to benefit. Meanwhile, even Bhutan and Sri Lanka launched 3G services.

Various factions in government differed vehemently on crucial issues: would the Indian subscriber be ready to pay premium prices for 3G, given that 3G services were a commercial failure in Europe due to high tariffs; should existing 2G service providers be automatically allowed to provide 3G services; should new players be allowed in; should foreign players be allowed in; should licences be auctioned or allotted on the existing first-come-first-served basis on a revenue-sharing basis; what should be the reserve price of an auction; how should existing users of the 3G spectral bands be made to vacate; etc.

In brokering the peace between various factions, the Prime Minister’s Office has done a superb job of balancing various interests. Each interest group has had some of its demands met, with others being rejected. No one group can claim a victory.

The finance ministry, as well as the Central Vigilance Commi-ssioner and the Comptroller and Auditor General, are happy that the 3G licences will be auctioned rather than allotted on the existing first-come-first-served basis.

The existing 2G licencees are glad that they do not have to apply for a separate 3G licence, and that the terms of their 2G licences have been extended to make them co-terminus with the 3G licences.

Foreign telecom operators, who wanted to enter the fastest-growing telecom market in the world, exerted heavy political pressure through their governments that they be allowed to provide 3G services. TRAI repeatedly recommended that only existing 2G service providers be allowed to provide 3G.

While both new and foreign operators have been permitted to bid, it has been made difficult in a practical sense for them to take part. Since only 5 MegaHertz of 3G spectrum will be allotted per operator, it will be difficult for a pure-play 3G operator, who does not have 2G operations, to roll out a network.

This is because 2G operators need only 5 MHz of 3G spectrum to start 3G services, whereas a fresh 3G operator will require at least 10 MHz of 3G spectrum in order to start operations. Existing 2G operators can use some of their 2G spectrum for back haul and infrastructure purposes. Also, they will migrate the 10 per cent or so of their high-end customers to 3G, and serve the remaining low-end customers with 2G. While prospective new entrants had lobbied hard for obtaining at least 10 MHz of 3G spectrum, the existing 2G operators had strongly advocated only 5 MHz per operator.

So, while appearing to accede to the demands of powerful foreign operators, the government has really favoured the existing Indian operators.

The Left parties and the unions have also been appeased in that both BSNL and MTNL have had one 3G slot reserved for them. They have to match the highest bid. BSNL has already announced the placing of orders on Ericsson, as well as an IPO.

It should have a head start over the private operators of 3-4 months. It is ironic that an Indian operator, Bharti Airtel, has launched 3G services abroad – in Seychelles, Jersey, Geurnsey, and shortly in Sri Lanka – before it can be permitted to operate in India.

The existing GSM operators, who were unhappy that they had only about 6–7 MHz of 2G spectrum each, against the international norm of 20–22 MHz, are gratified that 45 to 60 MHz of 3G spectrum will be available in most circles. This will permit 9 to 12 operators per circle. The increased competition will benefit subscribers.

Lobbying by Amar Singh on behalf of the Anil Ambani-led Reliance Communications has benefited existing CDMA operators over GSM ones. They can get EVDO in the 800 MHz and 450 MHz bands, besides being eligible to bid for 2.1 GHz as well. This partiality to CDMA operators to the detriment of GSM operators may lead to litigation.

In fact, 3G services may be far more successful in India than in Europe. First, the astronomical prices paid by European operators to secure 3G licences made them price their 3G services very high, with the result that only about 7 per cent of their subscribers opted for 3G. Second, the prices of handsets were very high a few years ago. Today, over 15 per cent of the handsets sold in India are 3G-enabled. The competition between Apple’s I-Phone (to be launched on August 22 by Bharti and Vodafone) and various Nokia models will keep 3G handset prices low.

3G would also allow the penetration of broadband to low income groups and rural areas which cannot afford a computer. I expect that about 15-20 per cent of Indian subscribers would opt for 3G, in contrast to the 7 per cent in Europe.