3G and WiMAX Spectrum Allocation

The allocation of 3G and WiMAX spectrum in India has reached a feverish pitch with the auctions likely to happen in August. The rollout of 3G services is expected by the beginning of 2009. Several issues such as the available carrier frequencies, reserve prices for 3G spectrum, and the inclusion of foreign bidders have delayed the auction for quite a few months but the Department of Telecommunications (DoT) and the Telecom Regulatory Authority of India (TRAI) are finally seeing eye-to-eye.

For 3G spectrum, five blocks of 2 x 5 MHz in the 2.1 GHz frequency band are available for auction and each successful bidder will be allocated only one block. In addition, two 1.25 MHz blocks in the 800 MHz band will be auctioned. The DoT has fixed the reserve price for each 2 x 5 MHz block at Rs. 2260 crore (~ 550 million USD) for a pan-India license. However, the operators feel that the reserve price is meaningless as the bids will far exceed the minimum reserve price. The allocation of spectrum for WiMAX services will likely be limited to just three players, which include the state-run BSNL. Three 10 MHz blocks in the 2.5 GHz band have been assigned for WiMAX services with the reserve price pegged at approximately Rs. 840 crore (~ 200 million USD). BSNL has already initiated efforts for the rollout of WiMAX.

After the DoT decided in favor of open auction over the traditional subscriber-linked allocation, one of the critical issues that has further plagued the auction process is whether international bidders without operations in India must be permitted. The TRAI had originally recommended that bidding should be restricted to operators within India in order to enable faster rollout of services and to keep the telecom tariffs low by avoiding a bidding war. However, the DoT and the finance ministry are of a different view and have decided to permit international telcos. This move will certainly add significant revenues to the exchequer. It is estimated that over 300 companies will participate in the bidding process.

Indian subscribers can now confidently look forward to using data services on their mobile phones by 2009. Given the high reserve prices and global bidding for 3G, it will be interesting to wait and observe whether India will continue to remain as the market with the lowest tariffs in the world.