INDIA will finally, by next year, be moving into the 3G (third generation mobile technology) era, with the Telecommunications Regulatory Authority of India (TRAI), last week giving its recommendations to the government.

The TRAI, in its controversial recommendations, has suggested the auctioning of 3G spectrum to telecommunications companies, saying that the government could easily pick up a cool Rs14 billion as base price. The telecommunications industry regulator recommended a maximum base price of Rs800 million for allocation of 3G spectrum in the two profitable ‘A’ circles, of Mumbai and Delhi.

The suggested base price for circle ‘B’ – cities like Chennai and Kolkata – is Rs400 million, and for category ‘C’ circle, it is Rs150 million. Telecommunications operators will have to bid for additional spectrum that will be auctioned by the government. The base price alone will fetch the government about Rs14 billion.

There is an acute shortage of operating frequencies, as the defence services account for a significant chunk of the space. The government is thus in a position to auction off this scarce commodity to the highest bidders, as has happened in many countries, including in the US and Europe.

But India has had a bad experience with ‘auctioning,’ both of telecommunications and FM radio licences. When the telecommunications sector was opened up, private companies bid fancy prices, hoping to capture a major part of the market. But in the process consumers suffered, as talk time charges remained high – in the beginning it cost almost Rs20 for a minute’s conversation. Today, the average price is down to around Rs1 a minute, and mobile phone usage has flared.

Similarly, many players rushed in when FM radio licences were auctioned; later the industry negotiated a way out of a looming crisis, successfully pleading with the government for a revenue-share scheme. Likewise, in telecommunications, auctions have assumed a negative connotation.

One section of the telecommunications industry – the Cellular Operators Association of India (COAI), which represents the interests of GSM operators – has criticised the TRAI for once again reverting to the auction route.

According to T.V. Ramchandran, director-general, COAI, the high reserve price and the auction route would be harmful to the industry, and the average citizen would be deprived of access to 3G technology.

By imposing a high fee initially, the government would discourage 3G usage; instead, it should ensure that the technology becomes cheap and popular, which would result in higher revenue, both for operators and the government. The COAI also feels that the TRAI recommendations favour the CDMA mobile operators.

The association is also worried that the TRAI would ultimately promote 3G as a standalone service, requiring operators to go in for a separate service licence. It feels that the entire question had been resolved earlier, when it was agreed that 3G would be viewed as an extension of existing 2G services. The Unified Access Services Licence also allows them to offer 3G services, the telecom operators argue.

The Department of Telecommunications (DoT) has to now take a call on the TRAI recommendations. According to government sources, operators may have to pay a separate spectrum charge for operating 3G services, unlike in the past (for 2G and 2.5G services). This is because for 3G services, they will need a completely different band of spectrum

According to the TRAI, the government would have to allocate spectrum in the 450 MHz, 800 MHz and 2.1 GHz for 3G services. In each circle, operators will bid for blocks, and the highest bidder gets the frequency with the widest reach.

The present availability would ensure nearly half a dozen service providers in each circle, even after the auctioning of the spectrum. The TRAI has also recommended the setting up of a national frequency management board to handle the contentious aspect of allocating spectrum.

THE government expects 3G services to roll out by the second half of 2007. According to Dayanidhi Maran, the federal communications and information technology minister, 3G services would provide users access to broadband connectivity on their mobile phones, besides a wide range of other services, including tele-medicine and e-education.

3G services would also ensure wider coverage in rural areas, the minister feels. India has lagged behind other Asian countries, notably Japan and South Korea, in the roll-out of 3G services. Any further delay in the allocation of spectrum for 3G services would have hurt the country’s competitiveness.

India has emerged as the fastest growing cellular market in the world; in August, nearly six million new mobile phone subscribers were signed in, and for the first time new users in India exceeded those of China.

India currently has 165 million telephone subscribers (including over a 100 million cell phone users). According to Maran, there will be 250 million phone users in India by 2007, and 500 million by 2010. India has a tele-density of just 14.8; this is expected to go to 22 by next year, and 30 by 2010.

Though mobile phones are hugely popular in the cities, there is poor coverage in the rural areas. The government plans to rollout 2G services to cover all villages with a population of over 5,000, and by next year, it would cover all villages with a population of over 1,000.

The dramatic changes in the telecommunications sector have forced the government to dump its plans for a comprehensive telecom policy. The DoT has decided to tackle issues as they come up, by initiating policies. Thus, there is a policy on spectrum allocation, and there could be others on internet protocol television, etc.

WHILE the mobile phone industry has zoomed ahead in India, the country has a dismal track record in broadband connectivity. The government had set a target of nine million broadband subscribers by the end of 2007, but the figure is languishing at around 1.7 million.

Even though India features among the world’s top-five mobile telephony market, it is insignificant in the broadband area, where other Asian countries, including South Korea, Hong Kong, Singapore and Japan have overtaken it.

The government has been pushing state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) to roll-out their broadband connections. However, both the companies have failed to meet targets, though they have succeeded in hammering down the prices.

Determined not to be left behind in the broadband race, the federal government last fortnight decided to establish 100,000 common services centres (CSCs) covering 600,000 villages in the country. The objective is to bridge ‘the digital divide’ and provide a wide range of government services on an ‘anytime, anywhere’ basis.

The CSCs will be broadband-enabled (256 kbps connectivity) and offer government-to-citizen and business-to-customer services to the vast rural markets. They will offer high-quality and cost-effective video, voice and data content and services to consumers.

The project is expected to cost about Rs60 billion, and the federal and state governments will contribute about a fourth of it. The rest is to come from the private sector. The centres are also likely to generate about 100,000 direct jobs, and about a quarter million indirect ones.

Private sector companies, including international ones, are also planning to set up similar centres. Microsoft Corporation and Hughes Corporation, for instance, announced last week that they would set up 5,000, broadband-enabled kiosks in 200 small towns and rural areas across the country.

The kiosks would be run by franchisees, who would be provided adequate training by the software giant. It would enable people in rural areas to use technology for e-commerce, education and even for e-governance. The project is part of Microsoft’s ‘Project Saksham.’