ManagementMoving on 3G
Business Standard / New Delhi August 31, 2009, 0:44 IST
After nearly a year of waiting, mobile phone subscribers can hope to get some serious browsing capabilities. Now that the Empowered Group of Ministers (EGoM) has finally cleared the reserve price for 3G licences (Rs 3,500 crore) and for Broadband Wireless Access (Rs 1,750 crore), prospective customers can expect to have these services up and ready in another nine months, at least in the metros. Both 3G and BWA will allow users to get, on their mobile devices, browsing speeds that are equivalent or faster than what is currently available on fixed broadband lines. The benefits will be many, like telemedicine, video-conferencing, and farmers being able to know in which market to sell their produce. According to an estimate by Ficci and the telecom consulting firm BDA, 410 million mobile phones will get added in the next five years and the total number of broadband-speed internet connections will rise from the current 5 million (all fixed line, and all installed in the last five years) to 46 million through 3G modems, broadband wireless access and fixed lines. Couple this with another estimate, by the research organisation Icrier, which says that beyond a threshold penetration level of 25 per cent, a 10 per cent hike in mobile phone penetration leads to a 1.2 percentage point hike in GDP growth rates.
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The auction process represents other breakthroughs. It re-establishes the importance of auctions to determine pricing. The last time this was done was in 2001; ever since, the government has handed out spectrum either for free or based on the 2001 price. Indeed, after the latest round of handing out 2G telecom licences to a chosen few firms (at the 2001 prices!) and a few of them selling off part of their equity, a rough calculation showed that the government had lost around $10 billion in revenue. Now that 3G spectrum is going to be auctioned, it will be difficult not to enforce the same principle for 2G spectrum whenever it is given out — and if the minister continues to dole out spectrum for free, the value of this largesse will be pretty clear. Indeed, based on the prices that are bid in the 3G auction, the government plans to charge existing mobile phone players who have got extra 2G spectrum beyond the 6.2MHz promised in their licences.
The policy has its drawbacks. BWA prices have been kept at a fourth those of 3G — each BWA licence will have double the spectrum a 3G licence gets, while the reserve price is half. But new technology will make it possible in a year or so to do 3G services — voice and data — in the BWA bands as well. There is regulatory arbitrage play here. Within BWA, the government has also said certain bands can be used only for one type of wireless internet technology — at a time when the government should be technology-neutral, it is trying to back certain types of technology.