All about banning 3G roaming pacts

The government canceled the 3G intra-circle roaming pacts among Airtel, Vodafone and Idea. When 3G spectrum was auctioned last year, no company could win the rights to operate in every circle. So, all agreed that they would share some of the others' radio waves in circles where they didn't own a slice of spectrum. The government was asked and it approved of this arrangement at the time. Today, under a different minister, it would be wrong for the government to revoke spectrum sharing, even if on the advice of the law ministry and regulator Trai. The term intra-circle roaming is misleading. Roaming happens when a customer registered in one circle travels in another, possibly with the same operator; in this case, what happens is that a player, say Airtel, with no 3G spectrum in a particular circle makes use of, say, Vodafone's spectrum to acquire customers in that circle. The government's argument in this case is that since in that circle, Airtel did not pay for any 3G spectrum, it should not be allowed to acquire customers in that circle. It says that these arrangements are causing a revenue loss to the government, because in that circle, Airtel paid no money to acquire spectrum.

This argument is specious, because the government's own auction rules limited the number of players in each circle to two. State-owned BSNL was given 3G spectrum for free earlier, and it was the first player to start intracircle roaming. By limiting the number of players in each circle, the government created a scarcity and raised the price: the government raised nearly $13 billion from the 3G auction alone. The revenue loss it refers to now would easily be offset by the scarcity premium it has earned earlier. The revocation move will also aggravate the wasteful use of spectrum, a scarce natural resource. If one player has spare capacity to rent in one circle, it should be allowed to do so, thereby maximising usage. Can the government afford to return the $13 billion if 3G players surrender the spectrum they bought earlier? It's a pity that fear of ill-informed criticism forces the government to embrace suboptimal, anti-consumer policy. 

Mobile companies like Vodafone, Bharti Airtel slam government for banning 3G roaming pacts

 Open warfare has broken out in the country's telecom sector once again, with a clutch of top mobile operators taking on the government and accusing it of reneging on promises with "retrograde", "irrational" and "illegal" decisions.

A day after the department of telecom (DoT) declared 3G roaming pacts between mobile operators illegal and ordered them to stop them within 24 hours, the country's top mobile phone companies hit back at the government, terming its actions as harmful to customers and to the cause of investments in the sector.

"This decision is tantamount to reneging on a promise," Bharti Airtel, the country's biggest mobile operator, said in an uncharacteristically harsh statement on Friday evening. The company said it was 'shocked' at the 'retrograde' decision and warned that it will take "appropriate recourse to protect its rights".

Vodafone India termed the telecom department's actions as "completely unreasonable" and "totally irrational".

Idea Cellular said it was dismayed and shocked by the government's decision, which it said would adversely impact investor sentiment. Officials said Airtel, Vodafone India and Idea Cellular had approached the Telecom Dispute Settlement & Appellate Tribunal (TDSAT) to stay the telecom department's order. The case will be heard on Saturday.

The outbreak of open hostilities risks plunging the sector, once viewed as a poster child of the success of liberalisation and now riven by internecine warfare, into further chaos. The sector is already at the centre of the political discourse in the country.

The 2G spectrum sale of 2008 has snowballed into a huge scandal that has jailed a former telecom minister, top officials and embarrassed the government.

Earlier this year, operators, such as Bharti, Idea, Vodafone, Tata Teleservices and Aircel, entered into 3G roaming deals, enabling them to sign up 3G customers across the country even in areas where they did not have third-generation spectrum.

These pacts allowed them to use each others' airwaves and offer 3G services, such as video calling and high-speed Internet, on phones seamlessly across the country. Bharti, Idea and Vodafone entered into one agreement while Tata and Aircel forged another.

But the telecom department and sector regulator Trai viewed these pacts as illegal, a position that received the backing of the law ministry. Various sections of the DoT warned that such agreements could have negative revenue implications for the government.

On Thursday, DoT moved to strike down these pacts saying companies could not offer 3G services to subscribers in service areas where they do not have licences and ordered them to stop offering roaming within 24 hours.

This will mean that an operator like Bharti Airtel will not be able to 3G services to customers outside the 13 service areas where it has 3G spectrum.

The DoT's action came despite vigorous opposition from industry bigwigs. Last month, Airtel boss Sunil Mittal, Idea chief Kumar Mangalam Birla, Vodafone's global CEO Vittorio Colao and a raft of other senior industry officials met Prime Minister Manmohan Singh to plead for an endto policy flip-flops and a stable regime.

Mobile operators, none of whom were able to secure all-India 3G licences in auctions in 2010 and were therefore banking on using each other's network to plug in the gaps in networks, were particularly scathing of the DoT's order to discontinue roaming in 24 hours. 

"It is going to affect millions of our customers adversely," Vodafone said. A Bharti statement added: "To add to our and customer's dismay compliance is being forced within 24 hours without stating why this haste! ... Customers have to be informed and their financial commitment towards the service has to be protected."

Operators said they had entered into these roaming deals with the full knowledge and blessings of the DoT, which they said had allowed such pacts before the auction of 3G airwaves.

"The 3G roaming agreements... are in complete compliance with all government rules and regulations and this issue was specifically clarified by the DoT before the 3G auction was held-...Based on this clarification, we went into the auction in good faith," Vodafone said. Independent experts sided with the operators.

Prashant Singhal of Ernst & Young said the agreements were not illegal as the government had told operators before the 3G spectrum auction that roaming agreements would be allowed.

"It's a lose-lose situation for customers and telecom companies," he said, adding the decision would create doubt and uncertainty in the minds of investors and "goes against the government's policy of providing broadband to millions".

Mobile industry body Cellular Operators Association of India (COAI) called the government's decision a "major setback" and said "the huge investments and tremendous efforts of the operators in rolling out and provisioning 3G services to subscribers" was at stake.

"The unfavorable policy decisions of the regulators and the DoT, scarcity of funds from lending institutions... are all leading to further delays and difficulties for service operators. This is putting at serious risk the ambitious plans of the government itself to close the digital divide in India," COAI President Rajan Mathews said.