Indian DoT, Defence Ministry Reach Agreement on 3G Spectrum Allocation, Further Delays on 3G Licensing Likely

According to the Economic Times, the Department of Telecommunications (DoT) has agreed that the Indian defence forces will have the exclusive rights to 10% of all radio spectrum that can be used for commercial telecoms services and broadcast services. In addition, the armed forces will also obtain 70% of all spectrum in the non-communication bands within 50 km of the international boundary, and 30% in the rest of the country. The exclusive spectrum assigned to the armed forces will all be classified into the "defence spectrum band". In addition, the settlement involves the DoT providing an alternative fibre network for the armed forces by December 2012. The armed forces will move a bulk of their communication requirements to this network, thus freeing up spectrum for commercial telephony. In return, the Defence Ministry has agreed to release 10 MHz of the spectrum required for the planned 3G auction immediately, with a further 15 MHz of 3G spectrum to be released over the next three years. The defence forces will also immediately free up some of the 2G spectrum, which will be allocated by the DoT to 2G operators.

Outlook and Implications

• Vacation of Spectrum by Defence: The agreement is part of the final settlement between the defence and communications ministries to end their lengthy negotiations on vacation of spectrum by the armed forces for provision of commercial telecoms services. The two parties had entered into a Memorandum of Understanding (MoU) earlier this year, under which the defence forces agreed to release up to 45 MHz of radio spectrum over a three-year period, of which 25 MHz would be for 3G services and the rest for 2G (see India: 8 June 2009: Indian Defence Ministry to Free 45 MHz of Spectrum for Mobile Services—Report). The new agreement is aimed at helping speed up the process with some of the spectrum to be released immediately. The DoT had earlier planned to start the action in December this year, but rescheduled this to 14 January next year, as the defence forces had not yet vacated the 3G spectrum currently occupied for military usage (see India: 26 October 2009: Indian Government Postpones 3G Auction to January 2010).

• Uncertainty over 3G Auction: Despite the new arrangement, further delays in 3G spectrum allocation cannot be ruled out, with growing speculation that the planned auction may be delayed yet again until February or even March next year. Furthermore, the DoT may still not have enough spectrum for allocation, with the Economic Times reporting that the department may now reduce the number of 3G winners in each circle from four to three. Furthermore, only one winner could be awarded 3G spectrum immediately after the auction while other winners may be forced to wait up till September 2010. If this is the case, successful bidders of 3G spectrum may have to pay only 25 % of the bid amount initially and pay the remaining amount when they receive the spectrum, according to the Economic Times. The government had earlier announced that it would auction four slots of 3G spectrum to private operators in all circles while adding that the full payments would have to be made within 15 days after the completion of the auction.