Private telcos see intra-circle roaming agreements as a way to provide pan-India 3G service to customers. But TRAI, BSNL believe such deals violate license conditions.
3G Auction Summary:
In May 2010, when licenses for 3G spectrum were awarded through auction by the Government of India, it was decided that in each telecom circle of the country (there are 22 circles in all) three or four private carriers would be allowed to bid for spectrum, and one of the two government carriers - BSNL, by and large, and MTNL in Mumbai and Delhi - would be an additional choice available to customers.
At the end of the auction, BSNL/MTNL, which got spectrum in all circles without having to bid but at bid-determined prices, emerged as the largest 3G operation in the country. The state-run operators were also allowed a head start of six months over their private competitors in launching their 3G operations. On the other hand, no single private carrier bid for all-India spectrum. The major private telcos - Bharti Airtel, Vodafone Essar, Idea, Aircel, Tata Teleservices, Reliance - ended up with between 9 and 13 circles each, which meant they could not offer pan-India services.
Now, a dispute has broken out between the private telecom operators and BSNL, with the Department of Telecommunications also weighing in favour of the state-run carrier. The reason - private companies are entering into intra-circle roaming agreements with each other, which would allow them to offer 3G services even in circles for which they had not bid and won spectrum, using the facilities of their partners in such agreements. BSNL has objected to this, saying it is a violation of license permit conditions.
Earlier this year, Vodafone, Airtel and Idea announced a series of Intra Circle Roaming Agreements (ICRAs) that allow the three companies to offer pan-India 3G service (Orissa excluded, as none of the three operators hold a 3G license for this circle). Along similar lines, under an agreement with Tata Telesevices, Aircel has begun offering services in Maharashtra, Madhya Pradesh, Haryana, Gujarat, and western UP circles although it does not hold licenses for those circles.
The Auction itself was Infernal:
It focused on maximising returns for the government, not on maximising consumer benefit. As a result, we have operators with only 5 MHz of spectrum each, split across telecom circles so that none has pan-India coverage, and they have all been forced to pay exorbitant amounts for a land-grab of spectrum that doesn’t quite work to their advantage. The fact that some of them have chosen to tie up and share spectrum shows that they don’t view 3G as a competitive advantage and it was only a defensive move to take part in the auction.
The meantime, the government policy focused on maximising profit and creating artificial scarcity and boundaries has resulted in some consumers being effectively denied access to high speed spectrum just because their preferred telecom operator did not win spectrum in that circle. The government policy on the 3G auction has been out of sync with consumer needs and the state of the telecom industry, looking only at financing its own fiscal deficit. If you want consumer benefit, telecom operators should be allowed to share spectrum – whether 2G or 3G – and focus on maximising ubiquitous availability of affordable consumer services. Right now you have some telecom operators with more consumers and less spectrum, leading to poor quality of service, and others hoarding spectrum with not enough consumers, leading to wastage of spectrum utilization.
Why TRAI didn't considered such ICRA's as an outcome of split Auction?
These ‘Roaming arrangements’ don’t appear to be in line with government policy, but was the TRAI asleep when the arrangement was first made public in June? What has led to them sending this letter a full four months after the services became active. What this delay has meant is that there is little chance of a roll back of the service because customers would (we assume) already have signed up for the service. This way, the TRAI has given enough time for them to build a consumer base so the roaming arrangement is unlikely to be revoked, and fines will probably be imposed. How convenient and/or incompetent. This is not dissimilar to the issues around the 2G scam, where the government ignored the situation until the criticism blew up big.
Did DoT previously okay ICRAs?
All of this raises a basic question, namely, did the Government and the DoT, as well as the private operators not anticipate that operators would get into agreements among themselves to provide pan-India coverage?
The inevitable result of limiting each circle to three or four private carriers was that each of the bidders was forced concentrate its bid of specific circles that it cared the most about. And in the process, they ended up with the rights to provide 3G service only in those circles. That much is clear. What is not clear is whether anyone bothered to ask and answer the question: considering that customers of the telcos travel all over India, would they not want to be online through their 3G service wherever they are, regardless of whether their service provider held a license to offer 3G in that circle?
Private operators reply that this question was asked and answered at the time of bidding itself; the COAI statement alludes to this. The specific questions pertaining to intra-circle 3G roaming in circles where they do not hold licenses were put before the DoT at the time of the spectrum allocation itself, they say. And the Department had at that time indicated that the kind of roaming agreements they are entering into now would be permitted. Some operators also claimed that they had notified DoT about their ICRAs before signing them, suggesting that the Department had not previously found anything wrong with such agreements.
Whether intra-circle roaming was specifically permitted in the license conditions, therefore, is to be resolved. Meanwhile, the action is hotting up on several fronts. TRAI has served notices on the companies, questioning the legality of their 3G intra-circle roaming agreements. The Central Vigilance Commission has also sought the DoT's opinion on the matter. And inevitably, there is also a legal element, with a Public Interest Litigation now brought before the Supreme Court seeking its intervention in the matter.
Implications of Cancelling Wireless 3G Intra Circle Roaming Agreements:
3G Service providers are struggling to survive with poor take-off and adding to their woes is Headless Government’s stand to cancel Roaming arrangements.
For Consumers – If 3G Roaming is scrapped, 3G tariffs may rise over time owing to lower competitive intensity (in this sense, the roaming agreements are definitely pro-consumer).
Note: Already in 3G Poll, 67% of Subscribers are complaining of High 3G Tariffs for not subscribing to the same
If 3G roaming is scrapped, then we believe some churn will happen as non-3G telcos in any circle will try to gain 2G subscribers to replace the revenue lost owing to the 3G subscriber churn.
Again churn will happen where Telcos may lose pure 2G subscribers in circles without 3G spectrum, they will also gain in circles with 3G Spectrum.
TRAI mentions that some telcos are paying 2G spectrum charges in their non-3G circles. Telcos have added 3G subscribers/ provided 3G services without paying the 1% additional spectrum charges on 3G spectrum.
Theoretically Reliance Communications would benefit from cancellation of 3G ICRs. It is the only major telco other than BSNL/MTNL that has a pan-India 3G spectrum and has not entered into 3G roaming agreements.
3G ICRA's: A Win-Win situation for Operator and Subscriber
Those who argue that private telcos are violating license conditions say 'roaming' is a temporary service available to subscribers as they travel between circles, whereas the way the agreements are being used now is quite different. Armed with ICRAs, operators without a local license are providing full service 3G to customers’ resident within a circle using a 'roaming' agreement with a local license holder. This says the regulatory body Telecom Regulatory Authority of India (TRAI) amounts to 'spectrum-sharing' or a 'Mobile Virtual Network Operation - a kind of 'reseller' operation that is usually carried on by smaller companies that buy bandwidth from license holders. Spectrum-sharing and MVNOs are both not allowed under the terms of mobile permits.
The Telecom Enforcement, Resource and Monitoring (TERM) Cell of the Department of Telecommunications (DoT) has also stepped into the middle of the debate with its views. The Cell, which is responsible for ensuring that no one without a license operates telecom service in the country, recently opined that the agreement between Airtel, Idea and Vodafone is illegal, and has asked DoT to take action against them.
TRAI, in its letter to the Secretary, DoT has suggested that license norms are being violated, and companies are offering 3G services in areas where they had not even bid for spectrum. It is also concerned about possible overloading of the limited spectrum available, as operators compete for customers.
State-owned BSNL, which earlier this year failed in its attempt to enter into ICRAs with private companies to use its pan-India spectrum, is anxious that it should not be exposed to more competition than it had planned for, as a result of the new deals between its competitors. But if BSNL now believes that ICRAs violate license terms, then it is not clear how it could have itself proposed to enter into ICRAs with the private telcos earlier (it is another matter that those talks failed).
Private companies, defending themselves, insist they are complying fully with license conditions. The Cellular Operators' Association of India, the lobbying arm of the major GSM telecom players in the private sector recently represented before the Minister for Telecommunications that ICRAs do not violate the license conditions for 3G services. According to a COAI press statement, "The 3G Intra-Circle Roaming is not an infringement of the licence conditions but is well within the ambit of Licence as clarified by DoT at various forays."
Operators Pitch on Govt Stand:
Tata Teleservices and Aircel have scrapped their agreement for offering services in each other's circles. This comes after the DoT termed such agreements as illegal on grounds that it is tantamount to spectrum sharing
Bharti Airtel, Vodafone and Idea Cellular are seeking Prime Minister Manmohan Singh’s intervention in the 3G ICR issue. The companies want a refund of the 3G license fees they have paid if the roaming pact between them is considered illegal.
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