News Details  :

“It is precisely in places where no infrastructure exists, that wireless can be particularly effective, helping countries to leapfrog generations of telecommunications technology and infrastructure and empower its people (Kofi Annan – as quoted in TRAI recommendations on Spectrum in May 2005)”

ISPAI, as an apex body of Internet/Broadband service providers, which includes both standalone and integrated ISP’s in India is deeply distressed with the recent guidelines of DoT dated 1.8.08 for BWA spectrum. According to us the aforesaid guidelines are inconsistent with the principles and objectives of Government's own Broadband Policy of 2004, and will severely hinder and deter any equitable growth of broadband services which is already at the bottom of the ladder compared to most other countries.

ISPAI, after careful deliberations, urges the Government to kindly consider the following points and recommendations:

1. The stated Guidelines seek to license only four Operators for BWA services, creating monoliths that will dominate the entire BWA market and will limit the competition and competitive advantage for the consumer. This needs to be changed. None of the standalone ISPs will be in a position to bid or participate in the auction by paying the expectedly huge spectrum cost. (As per 25% of the base price of 3G)

2. We need to go back to pre NTP 99 period, when mobile services were not taking off. The government with due inputs from the telecom industry, decided to waive and forego the committed huge fixed license fee estimated anywhere between Rs 20-50 thousand crores. Revenue share regime was brought in, both in terms of license fee and Spectrum fee. It is an established fact that the reduction of huge entry and license fee led to momentous growth of mobile services, availability of affordable services and much higher revenues for the Government. The same principle is still being repeated for the telecom players, whereas new UASL licenses have been given out at the 2001 pricing with the argument that increase in license fee burden and other levy’s hurt the interests of growth and customer benefit.

3. On the other hand, strangely, despite Broadband/Internet not taking off and missing all targets, by a huge margin, the government has gone on to find ways to levy additional licenses, keeping scope of services limited and the ISP industry have learnt to come to terms with this fact till now, whereas in comparison, UASL licenses have not only seen reduction of license fee, but simultaneous amendments to increase their scope of service within their licenses.

4. The Guidelines have opened the allocation and auction process for those who are providing mobile services pre-dominantly. The mobile sector has already been sufficiently served with the recently announced plans for frequency allocation in 2.1 and 1.9 GHz bands amongst others.

5. The mobile industry operates on a scale of spectrum valuation which is of magnitude higher than those for broadband wireless access services. In order to have clarity as well as reasonable valuation of the BWA spectrum, it is felt necessary that the term BWA services should be clearly defined including its scope in line with the ISP license before auction.

6. It should be appreciated that UASL and ISPs are two different types of service licenses with different business models and cost structures which makes the task of getting BWA spectrum easier for UASL operators. On the contrary, for ISPs the stipulated reserved price is not commensurate with the financial models of standalone ISPs.

7. ISPs were at the forefront of introducing Broadband Internet and related Services to help grow and educate the users and expand the market among both the enterprise as well as individual customer levels, like VPN, Internet Telephony Services etc. They will also be pioneers in introducing Broadband Internet in the rural and underserved regions of the country, if appropriately incentivized and facilitated.

8. It is also pertinent to note that the Broadband Policy 2004 facilitated a lot of investments in our member companies. Lots of investors have shown interest in investing in our member companies based on the Policy and more particularly since the allotment was made of the 2.5 GHz spectrum to our members. Attempts by the government to take back the allotted spectrum from our members will adversely affect the investors’ sentiments. We strongly urge that instead of asking the ISPs to vacate the allotted spectrum in 2.5 GHz, they should have the first right of refusal to vacate, which should be only if these ISPs who cannot meet the final price arrived at, after due auction.

9. We also would like to make the following recommendations for the benefit of Internet services sector -

a) Frequency bands from 5.15 to 5.35 GHz & 5.725 to 5.825GHz should be completely de-licensed on a technology neutral, non-exclusive basis.

b) 3.3 - 3.4 Ghz frequency is not part of IMT band. This band is already being used by the existing operators (ISPs) and as such this band should be completely de-linked from the process.

c). In order to have regulatory certainty and clarity the term BWA services should be clearly defined to include its scope in line with the ISP license conditions.

CAPACITY RESERVATION:

d) Reserve sufficient capacity of BWA spectrum for dedicated ISPs, who shall apply under their independent ISP licenses and have no direct stake in the telecom business through any UASL license. This is in line with reservation of 3G spectrum reserved for GSM/CDMA licensees. The slots that should be reserved are indicated as under:

I) 2 Blocks of 4 x 5 MHz each in the Band 2.3 to 2.4 GHz.

II) 3 Blocks of 4 x 5 MHz each in the band 2.5 to 2.69 GHz.

III) 4 Blocks of 4 x 5 MHz each in the Band 3.4 to 3.6 GHz as and when it becomes available.

Hence we are seeking a total of only 9 Blocks of 4 x 5 MHz out of 23 possible Blocks in the 3 Bands to be reserved for dedicated ISPs, for all the reasons given above. In the proposed auction, we recommend that reservation be made on 2 Blocks in 2.5GHz band that are being sought to be vacated, only for those ISPs who have been asked to or already vacated the bands based on January 2008 instructions of the DoT.

e) Bidder could be of CAT A, B or C ISP with the condition that the bidder can bid only for their current service areas as allotted under their respective ISP licenses.

* For the sake of clarity, we would like to state categorically that out of possible 23 Blocks of spectrum bands, integrated (UASL) operators with ISP business and who are also members of ISPAI, shall still have 14 Blocks available to them for bidding, in the said BWA Bands and they may bid as per guidelines applicable and accepted by them.

* For the sake of ensuring parity and equity between independent ISPs and Integrated Operators, we recommend that Independent ISPs may not bid for the 14 Blocks mentioned above. Likewise integrated operators with UASL licenses should not bid for spectrum in the 9 blocks recommended for reservation for independent/standalone ISPs.

* We recommend that to distinguish between independent ISPs and integrated ISPs, the later can be identified as those operators or companies that have acquired or are in the process of acquiring UASL licenses.

RESERVE PRICING:

f) The reserve Price for the bidding per 5 MHz is recommended to be as per the ratio of entry fee applicable to respective ISP and UASL licenses in order to maintain the principles of Equitability and Level Playing field. Hence the reserve price per Telecom circle category is recommended as below:

I. 2 Lakhs for Category A Circles.

II. 1 lakh for Category B Circles.

III. 0.5 lakh for Category C Circles.

The above reserve price will result in a maximum reserve price of Rs. 25.25 Lakhs for All India spectrum. Annual charges in terms of percentage of AGR sharing will be in addition, as per the applicable norms.

g) Since category C ISPs only has an SSA as their licensed service area, we recommend that they be allowed to bid in the recommended reserve 9 Blocks and allowed to migrate to B or A category License automatically, in the event of their being successful in the Auction.

Sir, we are certain that the recommendations given by us on treating the dedicated ISPs, from the point of Capacity Reservation of specific Frequency Bands, and the Pricing Mechanism, will be given due consideration and we, therefore seek an opportunity to present our views on the above matter, to yourself, at the earliest, before initiating any Auction process.