Little demand for voice: Why DoT should prioritise 3G auctions over 2G

New Delhi: All eyes are trained on the next round of 2G spectrum auctions, slated for January next year, but it is an auction of 3G spectrum this Government should be prioritizing . It's simple really. 2G airwaves support just voice whereas 3G spectrum supports voice, data, video besides facilitating services like mobile banking, video streaming, internet banking etc. No wonder then that every telco now wants more bandwidth in the third generation (3G) spectrum.

Sector regulator Trai had earlier suggested that there be another round of 3G auctions in the current fiscal - this is obviously not happening now. Industry estimates suggest that the Government can raise $5-6 billion by auctioning three to four slots of 3G spectrum in 2.1 GHz band even at 50% of the last auction price (In 2010, one slot of 2x5 MHz went for $4 billion!). The demand for 2G airwaves in 1800 Mhz band is anyway questionable.

 Little demand for voice: Why DoT should prioritise 3G auctions over 2G

If telcos get more 3G spectrum, tariffs will fall and data transmission will become smoother. Reuters

Typical of the way we do things in India, the only round of 3G spectrum auctions held in 2010 did not manage to generate even a single telecom operator with pan-India spectrum except state-owned telcos BSNL and MTNL. So private telcos were forced to share spectrum in most circles, leading to an expensive and patchy data coverage. On top of this haphazard way of using 3G spectrum, the government later banned intra circle roaming for 3G, making operators' life even more difficult. Right now, the 3G spectrum map is riddled with holes, making smooth data transmission a challenge. Also, there is very little competition in the 3G market since there are only four players per circle. If telcos get more 3G spectrum, tariffs will fall and data transmission will become smoother. Moreover, 3G in 2.1 Ghz band has the best opportunity for enabling affordable devices for mass adoption (it being mature and spectrum is globally harmonized), compared with other options (LTE in 700/1800/2300), which are relatively new, will take a long time to mature and are not globally harmonized.

But the Department of Telecom (DoT) is still struggling with availability of enough 3G spectrum for another auction. It is faced with several issues:

1) Spectrum sharing/trading: It has yet to frame rules for spectrum sharing or spectrum trading. Even when these rules are framed, they may not encourage sharing of 3G spectrum.

2) M&A: Telcos may look to acquire more 3G spectrum through mergers and acquisitions now that these norms are being finalized. This can be an option, but since M&A will mean taking over the whole company with its spectrum as well as debt, it may not work out as a viable option in the end.

3) Swapping 1900 MHz spectrum with equal quantum of 2100 MHz from defense: Currently 3G services are being offered in the 2100 mhz spectrum band and to hold further 3G auctions, DoT wants more spectrum in this band. It has suggested that the Defence Ministry accept some spectrum in 1900 mhz band in lieu of 2100 mhz band. This could be the cleanest way of getting more 3G spectrum in sufficient quantity. By swapping, 3 slots of 2x5 MHz of 3G spectrum can be created. Though swapping is beneficial for defense as it enables larger blocks of contiguous spectrum, but Defence wants something in return too for vacating the necessary amount of 3G spectrum in 2100 mhz band.

DoT Secretary M F Farooqui recently had a meeting with his counterpart in defence where the latter said it wants things like proclamation of defense band etc before vacating necessary spectrum. DoT can easily meet these conditions set by Defence. If DoT's proposal is accepted by the Defence Ministry, it will free up 20 MHz additional 3G spectrum in the 2100 MHz band (capable of supporting 4 networks each of 2x5 MHz each).

According to a story in the Hindu Business Line recently, mobile companies in the US and Japan are able to offer video and live streaming of television channels on smartphones because they have 30-40 MHz of spectrum. In contrast a 3G operator in India has only 5 MHz. A recent study has revealed that 3G data consumption in India has gone up from 338 MB/month in December 2011 to 434 MB/month in December 2012. At this rate India's 3G networks will get congested by 2015. This will not only impact the quality of service but also the scope of applications available to consumers. Other options like LTE in 700 MHz band will take at least three to four years to take off and 1800 MHz band is highly fragmented.

So it's really 3G spectrum auctions the DoT should be focused on now.

Updated Date: Dec 21, 2014 00:07:08 IST