SETTING TARGETS

New Delhi, July 23: The Congress-led government is planning to announce a policy on second generation (2G) spectrum allocation and pricing as well as auction guidelines for third generation (3G) services by next month.

Considerable differences of opinion exist among ministries, politicians and operators over the issues of allocation and pricing of 2G and 3G spectrum. In 2G spectrum, CDMA operators had suggested that GSM firms should pay for additional spectrum beyond the start-up radiowaves (spectrum).

Last week, the Prime Minister’s Office had forwarded a letter by Samajwadi Party leader Amar Singh to the telecom ministry in which Singh had demanded that GSM operators be charged an one-time fee in line with the market rate for spectrum held by them beyond 6.2 megahertz (Mhz). This is likely to be accepted, though the hike may not be as high as proposed by the Telecom Regulatory Authority of India (Trai).

Moreover, the department of telecom is also looking at the possibility of auctioning additional 2G spectrum to existing players.

At present, on paying a licence fee, GSM and CDMA operators get 4.4 Mhz and 2.5 Mhz, respectively, of spectrum per circle to launch operations. Licence conditions also provide for the allotment of GSM spectrum up to 6.2 Mhz on achieving a certain number of subscribers.

Officials said the government was also likely to open 3G auctioning to global players.

While the telecom and finance ministries are keen to open the 3G auction to all, Trai wants it to be restricted to domestic players.

The opening up of 3G auction will provide entry to global telecom players who do not have a presence in the world’s fastest growing telecom market. Analysts claim competition in the 3G space will also lead to a reduction in the cost of telecom services.

“Financial bids for 3G spectrum will be invited by the end of next month and the process is likely to be completed by October this year enabling the players to start rolling out networks by the end of 2008,” said officials.

A global auction of spectrum will also add to the government’s kitty as it can receive licence fees in excess of Rs 21,400 crore in the very first year, analysts estimate.

3G spectrum can be used for both voice and high-speed data applications. So, any new player who wins a bid can also enter the traditional voice and SMS market. At present, all telecom services in India are offered on 2G.

However, the spectrum needed for 3G services is yet to be vacated by the defence forces.