In stark contrast with the Telecom Regulatory Authority of India (Trai) recommendation that only Unified Access Service Licence (UASL) licence-holders should participate in 3G auctions, Communications Minister A Raja today suggested that foreign telecom companies, too, would be permitted to bid for 3G spectrum.
The UASL allows a company to offer triple-play services -- voice, data and video -- over a single broadband connection. 3G or third-generation services refers to communication standards and devices that will improve the speed and quality of services on mobiles.
Speaking to reporters on the sidelines of an Assocham summit, Raja said: "Either way, foreign players will be allowed. We have a 74 per cent foreign direct investment limit in the telecom sector. Whether there is common auction or open auction, there will be no bar on foreign players."
Trai's suggestion meant that only current mobile operators and new players like Unitech and Datacom Solutions, which recently procured licences, should be allowed to bid for 3G spectrum.
Raja's announcement, on the other hand, would pave the way for many international players like AT&T, Orascom and Qtel that have been keen to enter the country and could now do so by participating in the 3G auction.
Experts, however, caution that while this may lead to more competition in the 3G space, it might also force operators to overbid (like in Europe), forcing them to charge high tariffs and leading to unviable businesses.
However, the thinking within the department of telecommunications (DoT) is that while the price of the 2G licence has been kept low (companies have to pay Rs 1,580 crore for a pan-Indian licence) because it is meant for the masses, 3G
Meanwhile, Raja said the policy would be announced in June and the draft has already been referred to the law ministry. He expects 3G services to be launched sometime at the end of this year or by January 2009.
Trai had recommended that with around 25 MHz of 3G spectrum available, there would be scope for around five players.
In discussions within the government it was decided that at least one chunk of 5 MHz would be reserved for state-owned companies like BSNL and MTNL while the others would be thrown open for auction, for which a base price has been fixed by the regulator.
With 10 to11 operators already in the market, the regulator felt there was already enough competition for auctioning 3G services as only four would eventually get a licence.
The regulator's contention was based on the fact that even after the defence services vacate spectrum, the total spectrum available in 2G will not be enough for even the 11 players.
But a new 3G operator has to be given a UASL licence, which comes bundled with 6.2 MHz of 2G spectrum. With shortage of spectrum the government will not have enough to offer the new player 2G spectrum.