3G to become a realty by Sep 2010

Mobile phone users will finally be able to access advanced data transfer and high-speed internet on their handsets through 3G technology and broadband wireless access (BWA), post-September 2010. The department of telecom (DoT) has set September as the timeline when successful bidders will be allowed to use the allotted airwaves for commercial operation.

The government on Thursday issued the notice inviting bids from private telecom players to participate in the auction of 3G airwaves, allowing three private players each in 17 circles, including Delhi, Mumbai, Kolkata and four in the remaining five circles including Punjab, West Bengal and Bihar. The number of slots up for auction excludes those already allotted to the state-run Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL). It has also invited bids for BWA auction, which is scheduled to happen two days after the 3G auction closes.

“We look forward to the entire process being completed within the given timeframe. This will put India on the fast track as 4G is being introduced in many parts of the world,” Tata Teleservices managing director Anil Sardana said. Other telecom operators, including Bharti Airtel, Vodafone Essar and RCom, which have expressed their keenness to bid for the next generation technology declined to comment on Thursday’s development.

The auction of 3G spectrum has been postponed for over two years now due to unavailability of spectrum, indecisiveness on bid price and on number of players to be allowed in each circle.

The DoT was locked in a long battle with the defence ministry over the latter’s reluctance to vacate 3G airwaves occupied by it. The government has now released a definite timeline for auctions. As per the document released by DoT, the last date for submission of applications for the operators is March 19. The mock auction will take place on April 5 and 6, which will be followed by 3G auction on April 9, 2010.

The successful bidders would be required to cover at least 90% of the service area with 3G technology within five years from the date they start 3G services. “The operator shall ensure that at least 50% of the District Headquarters (DHQ) in each service area should be covered, out of which at least 15% of the DHQs should be in rural areas, within five years of the effective date,” the document states.

In case the rollout obligations are not met by the fifth year, the operator would be allowed an extension of one year to do so with a financial penalty. It would have to release 2.5% of the final bid amount per quarter. If the operator does not complete its rollout obligations even within the extended period of one year, the spectrum allotted would be withdrawn while the bid price paid would be forfeited. The reserve price for a pan-India 3G spectrum has been set at Rs 3,500 crore and Rs 1,750 crore for WiMax.

“3G will provide an impetus to broadband growth in the country. We wish there would have been equal number of slots in each circle, but the government is doing its best since spectrum is scarce. But it will definitely help ease the pressure on 2G,” Cellular Operators Association of India (COAI) secretary general, TR Dua, said. COAI is the representative body for the GSM operators. The Association of Unified Telecom Service Providers of India (AUSPI) secretary general, SC Khanna, said, “It’s a positive move for the GSM space. But the government has not specified any growth path for the CDMA space. I request the government to auction spectrum in 800 MHz soon.”

The government will also levy a spectrum usage charge on the operator, over and above the spectrum auction price and the applicable licence fee, as a percentage of the annual revenue. While the GSM and CDMA operators would be required to pay between 3-8% of their revenue as spectrum usage fees, based on how much spectrum they hold, internet service providers (ISP) using BWA spectrum would pay a fixed 1% of their revenue.

The spectrum usage fee for 3G spectrum will be charged on total revenue of 2G and 3G services taken together. However, the government has said the spectrum usage charge would not apply for stand-alone 3G players for a year. This move would particularly benefit foreign players who will need to form, or acquire, an Indian company, to obtain a licence here to be able to provide services, which will take up their initial costs.