The following is based on facts and figures reported in the latest report of the Telecom Regulatory Authority of India and the India Infrastructure Report 2008.
Recent findings suggest that Indian Telecom is the fastest growing telecom sector in the world, ahead of even China. In terms of user base, India is now third behind China and the US. India has a total user base of around 300 million as of quarter ending March 2008. The total wireless subscriber base is 261.07 million as of 31st March 2008. The wire line segment subscriber base stood at 39.25 million in quarter ending March 2008. There are 11.09 million internet subscribers as of March 2008. Besides this, there are 66.09 million wireless data subscribers at the end of March 2008 who are capable of accessing data services including internet through mobile handsets. Total broadband connections in the country have reached 3.87 million by March-end.
Given the pace of growth and reaching the target of 250 million Telecom users by the end of 2007, the government has set a target of 500 million subscribers by 2010.
What appears to be a stumbling block for even more rapid progress in terms of growing the user base and services is the availability of spectrum or radio frequency.
3G technology services will allow simultaneous transfer of both voice data (a telephone call) and non-voice data (such as downloading information). Almost all telecom majors such as Bharati Airtel, BSNL, Vodafone-Essar, Reliance Communications, and Tata Teleservices have carried out trial runs of 3G applications and services. The pilots included testing of all high-speed internet applications, next generation gaming, video, and wireless streaming. They also have processes in place for seamless migration of all value-added services to the 3G space from the current 2G networks.
All are awaiting the allotment of radio frequency (also called spectrum) from the government to launch 3G services in India. And why does this seem to be a problem? The reason that the rollout of 3G services is an issue seems to be owing to the scarcity of spectrum availability amidst the many users who need the spectrum. In addition, allocation of spectrum for 3G carries several trade policy and international bilateral implications and this involves a long political process. An additional controversy has centered on whether global companies should be allowed to bid or not.
The use of new technologies can increase the efficiency of spectrum usage four to five times. TRAI’s new criteria indicate that even with the initial allocation of 6.2 MHz in GSM and 3.75 MHz in CDMA, the addressable subscriber base can be doubled across all service areas. GSM players maintain that the scarcity of spectrum cannot sustain and the application of new technology will adversely affect existing investments, hence the incumbent service providers would like to delay it as long as possible.
Then there is the question of vacation of radio spectrum for mobile services. Sharp differences have arisen across ministries over vacation of radio spectrum for mobile services. As per the proposal worked out by the Wireless Planning and Co-ordination (WPC), defence forces are expected to release 42.5 MHz once the first phase of optical fibre cable project is completed. The Group of Ministers, which was set up for the vacation of spectrum from the defence services for the need of mobile operators, is of the opinion that at present the spectrum for the growth of existing 2G services is more important than the planned 3G services. The defence services and the DoT have been looking at vacation of around 25 MHz of 2G spectrum as well as well as around 15 MHz of 3G spectrum for the mobile operators. In addition the Department of Telecom and the Defence Ministry are working out a compromise formula that would make available additional spectrum of up to 55 MHz in three phases by mid 2008. As part of the deal being worked out by the two sides, the DoT will agree to lay an optical fibre cable for the army and navy also at its own cost. Earlier, the DoT had made plans to set up a cable system only for the Air Force. WPC is also negotiating with the Department of Space for vacating radio frequency for broadband services.
State owned telecom firms, BSNL, and MTNL, will get 3G spectrum quota as per the recommendations of an internal committee of Dot. What seems unlikely is that DoT will invite overseas companies to bid for 3G license just yet. This could be because the foreign players have deep pockets and they can bid very high for the 3G spectrum.
The telecom sector at present has to put up with various taxes, charges and fees. The government has decided to constitute a committee to design a unified and single levy for the telecom sector. Telecom operators have been urging the Department of Telecom to bring down all levies imposed by the central government on the operators to 6 per cent of their annual revenues. Currently, telecom operators pay between 6 and 10 percent of their annual revenues as licence fees. Besides this, they also pay spectrum charges, service tax, and other local taxes such as octroi and stamp duties to various state governments. While the levies charged by the state government may not be tampered with, the operators want that all levies and duties being charged by the Central Government should be replaced by a single levy that is not more than 6 per cent of their annual revenues. If this is done, then even if the charges were brought down to 6 per cent, the government would not lose any revenue due to growth in the operator’s revenues.
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