Sunday, January 03, 2010

Spectrum Sharing

Vasu Reddy from Chicago

Another year and another month are up on us, and the growth of Indian telecom users continues unabated. The delays with 3 G licensing continue, as they continue to get postponed. The political issues between telecommunications and armed forces continue and many meetings have been organized without any definitive outcome. The CDMA and GSM operators continue to have their differences and no end in sight for a unified telecom forum. MTNL and BSNL are enjoying the 3 G spectrum but have nothing to show for the usage, as no user base to show for the expensive and limited resource granted to them, and they continue to lose market share to private operators. On the global front countries are launching 4 G networks, while India grapples with 2 G technology issues and 3 G auctions, which have been forthcoming for at least 3 years.

The good news about the whole charade is that the users don’t seem to care about the politics of spectrum and technology. They continue to grow in numbers and benefit from the ability to communicate. Perhaps the shareholders of the networks may have had some settling down in the returns, while the price per minute is continuing to be pleasantly appealing to the users.

The quality of service remains good with the networks and normal issues of crowding in the major markets is not yet an inhibitor to users. With 100% plus penetration in some major markets the services are stable with minimal disruptions to users.

There are a dozen or so operators in each circle and even if we don’t add new operators, there will no limiting the services offerings. Perhaps it is time for some radical thinking to manage the available spectrum, while allowing industry consolidation and new investments.

India has the engineering abilities to be ingenious in maximizing the utility of the available spectrum, while catering to the needs of mobile subscribers. For instance two scenarios can be contemplated as the continued delay in 3 G will only make the networks obsolete before they are launched.

(There is absolutely no scientific or engineering proof of what is being suggested, but it is not incomprehensive to imagine the scenarios for India)

Firstly, BSNL and MTNL already have the 3 G spectrum nationwide, and quickly construct the network. They can lease per user based space to all network to have their own registered 3 G subscribers to have the utility of a nationwide network, and come-up with a revenue sharing scheme similar to paying roaming costs to each other. All the operators can immediately start selling the services and retain their own user base, while offering the high speed wireless services. With the poor customer relationship effects of BSNL and MTNL, this may be a hard sell but if the pressure of private networks is added to the management of government controlled networks, there is bound to be some improvement in the areas of customer service. In reality the government networks are built quiet well and have good quality of service. This will immediately start to provide much needed 3 G services to private network operators, while eliminating the entry cost of the spectrum, and also eliminates the uncertainty of winning a block of spectrum.

Secondly, if there is resistance to BSNL and MTNL names, then scrap all the existing 3 G licenses and create one pan India network co-owned by all players who are interested in being a part of the consortium. Essentially the government creates a block of spectrum that is frozen (for example 50 MHZ total to all 3 G services) and all interested companies can pay an initial fee and join the consortium. Each operator identifies their own subscribers and the services are common to all users. In India this can be a socialistic network run by a consortium of people and a majority of the shares can be held by the market and disallow a single person or family to control the network. Limiting the maximum ownership to 5% to any one party can bring some sensibility to decision making and the government itself can be a stakeholder by providing spectrum for its share of the 5% stake. All players can provide towers and have technology decision made by majority. It will not be difficult o organize in a country that is run by coalition governments, but will be a novel concept of public-private enterprise with a common network while different networks owning their own subscribers in 3 G space. Long behold if this works, there will be uniform pricing and little room for subscriber churn in 3 G as there will be no reason to move to another network because of quality of service or service offerings.

Revenues to DOT and to the operators are still generated by the current mechanism, and there will be no impact on alternative spectrum sharing scenarios. It can be a huge 30 MHZ shared network in either scenario, which will be able to meet the demands of both the users and operators, and will have enough capacity to deliver the promise of high speed wireless.

Trying something radical and out of the box will solve many issues for Indian telecom market. The Indian market has the size and strength to have manufacturers devise efficiencies to deliver better services to its users. As outrageous as it sounds there is some merit to a massive shared network with all operators as stakeholders and all users are beneficiaries.

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