The 3G mirage

Even going by India’s notoriety in missing deadlines, this one is a classic. In the latest of several missed target dates, the Union government wants to start auctions for third generation, or 3G, mobile phone services by January 2010. The first such deadline was set by erstwhile Telecom Minister Dayanidhi Maran, who visualised 3G phone networks running in the country before end-2007.

Can New Delhi meet the new deadline? Few in the telecom business are willing to stick their neck out to say that the cut-off will be missed but the task seems uphill for the government. The Department of Telecom (DOT) has just finalised its information memorandum that will set the tone for the rules of the auction. In such sell-offs worldwide, there are multiple rounds of pre-bid conferences that clear the air for potential bidders. Mock auctions follow to make sure the process is smooth. Then the auction process—a two-stage bidding is envisaged in India—has to be held.

All this at a time when some DOT officials directly responsible for the sell-offs are being investigated by the Central Bureau of Investigation for potential rule violations in licensing a new crop of phone operators in 2007. Telecom Minister Andimuthu Raja, too, is in the cross hairs of Opposition Bharatiya Janata Party that is alleging corruption in the decisions.

Even if the deadline is met, the process at best will be partial. The government does not have adequate spectrum to auction rights for CDMA (short for code division multiple access, a mobile telephony protocol) phone firms. The road ahead is clear only for rival (and more popular) GSM providers: the Army and other defence users have vacated some spectrum in 2100 MHz band that is used by this protocol for 3G services. “The main reason we wanted to start GSM services was because there was no clear path to 3G in CDMA,” says a spokesperson for Tata Teleservices, which earlier this year started offering GSM phone services with partner NTT DoCoMo.'

The situation is complicated by varying levels of spectrum available in different states because defence forces currently have rights over use of an inordinate amount of wireless frequencies. In states such as Rajasthan and Delhi, India’s most profitable phone circle, there is little spectrum left to spare and just one or two more players are likely to be accommodated in the 3G space.

Some believe New Delhi will hurry through auctions in a year with the highest-ever fiscal deficit (over Rs 4 lakh crore, or 6.8 per cent of the nation’s income) for the government. “I sincerely believe that the January deadline will be met, not least because the government needs the money,” says Manoj Kohli, Chief Executive Officer of Bharti Airtel.

Economists, meanwhile, predict that India’s low Internet penetration could be fixed by 3G services that promise online speeds better than today’s computer-accessed broadband throughput. While the number of active cellphone connections in the country is around 500 million (meaning one in two Indians have a phone), those using the Internet lags at 50 million. “If we can get even half the number of users that we have today on to 3G networks, the base will be set for an economic revolution empowered by data usage,” says Rajat Kathuria, professor at Indian Council for Research on International Economic Relations, adding: “The government wants a way to revitalise the economy; one answer is 3G auctions and I think the Finance Minister realises this.”

Still, there is a sobering development for India. LTE, or long-term evolution, of mobile technologies (commonly called 4G) is set for commercial deployment next year by global operators such as NTT DoCoMo, Verizon Wireless and TeliaSonera. In effect, by the time 3G gets rolled out as a service in India (if the auctions are held on time), the world would have moved to the next stage. Not quite a virtuous cycle.