A Simplified Policy for Cellular Services

The year 2001 starts with a new-year gift to cellular subscribers with the government issuing guidelines for the introduction of the fourth operator in both metros and circles. If things move according to the plan, licenses will be issued by mid of 2001 and one can see deployment of these networks in the 3^rd quarter of 2001 or by the end of the year. The new policy is a simplified one, as the government has learnt from the mistakes in the past. The much-awaited launch of Dolphin service of MTNL is scheduled this month or next month (both GSM and CDMA based). It is expected to bring a lot of cheer to consumers, in the form of low airtime costs and better packages. One could also see improvement in quality-of-service due to increase in competition.

The government has issued guidelines for 24 circles–four metro circles and 17 state circles, which includes the second operator in West Bengal and Andaman & Nicobar, where there is no operator. The bidding process is simplified and is based on multi-stage, informed ascending bidding with a pre-qualification and three rounds of bidding. With no cap on number of bidding, the existing cellular service provider has the privilege to bid for maximum circles to provide synergy to their existing operations. The new operator also has the privilege of entering India in a big way, as one can operate in metro and state circles simultaneously. To eliminate speculative bidding, the government has asked the bidder company to submit Financial Bank Guarantee (FBG) of amount equal to Rs 50 crore, Rs 25 crore, and Rs 15 crore for categories A, B, and C service areas respectively. They also have to submit a Performance Bank Guarantees (PBG) of amount equal to Rs 20 crore, Rs10 crore, and Rs 2 crore for categories A, B, and C circles respectively. The successful bidder will have to pay a one-time entry fee, based on the final bid plus 17 percent of the adjusted gross revenue per year.

The Technology

In terms of technology, the new guidelines are open as the service provider can choose any digital technology, which supports their business model. But, only those digital technologies are permissible that have been used for a customer base of one lakh or more for a continuous period of one year anywhere in the world. The frequency slots of 4.4 + 4.4 MHz will be allotted to the service provider in bands of 1710-1785 MHz paired with 1805-1880 MHz and for vacant slots of 890-915 MHz will be paired with 935-960 MHz. To avail more bandwidth, the service provider has to pay revenue sharing at the rate of 18 percent (11 percent in case of Andaman & Nicobar) to accommodate large number of subscribers and to provide a number of value-added services.

Implementation

The government has taken a cautious step based on past experiences so that the project is not delayed, due to operational problems. The cellular licensees will have to make their own arrangement for getting Right of Way (RoW) and the metro service providers have to rollout 90 percent of the service within one year of signing the license. The licensees are provided direct connectivity to all service providers in the service area, as per the mutual agreement between them, whereas, inter-circle or international long distance calls have to be routed through NLD (National Long Distance) service provider.

The issue of guidelines will result in bringing more operators in cellular services and can help in realizing the goals of NTP 1999, achieving a teledensity of seven by the year 2005 and 15 by the year 2010. The government guideline of not restricting the number of operators in cellular, will give a good impetus to provide connectivity to all regions and people in the country.

Brief

Total number of metro and telecom circles is 21.

Total number of cellular licenses to be issued is 24.

The bidder must be an Indian company with foreign equity not exceeding 49 percent.

The bidder can apply for any number of circles.

The bidder shall make its own arrangements for RoW.

Successful bidder will be required to pay one time entry-fee based on the final bid, plus 17 percent of adjusted gross revenue (10 percent in case of Andaman & Nicobar).