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 Thursday, May 04, 2006

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Tata Wants Spectrum Policy Review

 

Rata Tata, Chairman of the Tata Group and an important player in the Telecommunication space, has appealed to Prime Minister Manmohan Singh to review the spectrum allocation plan that treats the scarce resource inefficiently. Tata was in the center of a report by the New Indian Express (NIE) which accused Telecommunications Minister Dayanidhi Maran of trying to arm-twist Tata for a piece of emerging Dish-To-Home (DTH) business by holding Tata Tele Ventures hostage. 

Tata's basic argument is that the National Frequency Allocation Plan (NFAP) disproportionately favors certain carriers, is based on self-proclaimed usage patterns, does not encourage network coverage, is not well defined or thought out, and the allocations are made haphazardly. He accused that there is no process in spectrum allocation saying, "The allocation of such as scarce resource would have evolved from a well-documented and detailed India Spectrum Policy which would provide the roadmap for spectrum allocation." This he says is required for "sustainable and equitable growth in the telecom sector for all users." He also said that there are no verifying mechanisms that validate subscriber user levels and arbitrary rules restrict operators on how they use the spectrums without consideration of their track record or experience.

 

He pointedly accused the Telecommunications Ministry by saying that by "design or coincidence" the rules restricting how many users can be added to a spectrum "singles out one pan-India provider" to be "ineligible for additional spectrum in the existing frequency band." He also highlighted that such an arbitrary cap and "no additional spectrum" allocation condemns them to "cap" their "growth and market share." He said that this "would be discriminatory and would not be in the public interest."

In a technology driven industry, he said that the Ministry's attempts to protect weaker GSM technology by handing out higher density spectrums to GSM operators "apparently on the ground that this newer technology (CDMA) is more spectrum efficient than the older GSM technology" is "irreconcilable." He lampooned this policy by the Ministry to an aviation policy requiring newer jets to fly slower and take fewer passengers to those operating turboprop jets can compete.

Tata revealed that he had written to Maran May 2005 and suggested a fee of USD 337 million as fees that providers will pay for each spectrum. Asserting that the cost will not be passed to the subscriber, Tata said the pricing is defined by competitive market prices. He further revealed that the Telecom Regulatory Authority of India (TRAI) had made similar recommendations but were spurned by the Ministry.

Meanwhile, GSM operators accused the Government of taking a "lenient approach" towards CDMA operators that setting up fewer cell-sites makes their operation less expensive while reaping the benefits of spectrum allocation. Refuting Tata's claim, the Cellular Operators Association of India said the spectrum allocation was well defined through the National Frequency Allocation Plan and in line with the standards of International Telecommunications Union. They also criticized Tata's fee based approach saying that a revenue sharing is better and will not drive the industry to bankruptcy.

While both sides have good arguments, there are serious questions that need to be answered:

-- Why did Maran not respond to the proposal from Tata and the TRAI?
-- Why did Maran not create a clear policy of spectrum allocation?
-- Why did the Standing Parliamentary Committee on Telecommunications criticize Maran's spectrum allocation policy? 
-- What was the comparative revenue projection between the fee-based and the revenue-sharing models? Why was one favored over the other?
-- Why did Maran take the extreme step of penalizing Tata Televentures? Is there a correlation between the NIE report accusing Maran of conflict of interest and his decision to penalize the Tata group?

With the escalation of this issue to the Prime Minister, Singh needs to answer these questions. He will also have to do something about the lack of confidence with Maran from an important segment of the industry.

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