Sources said the regulator is now busy tackling the issue of spectrum in view of the fact that it is a limited natural resource. Spectrum is currently managed and assigned by the wireless planning division of the Department of Telecommunications (DoT). Being a government department, which is also responsible for policy making, DoT has not been able to efficiently manage spectrum.

If DoT is able to announce in advance the availability of spectrum for at least a year, it may help in issuing new licences. However, the biggest problem is that while assigning spectrum, no differentiation is made between a metropolitan city and a small town. For instance, there may be a spectrum crunch in Bangalore but not in other parts of Karnataka, where the population density is low. DoT, however, assigns spectrum for the whole of a state. As a result, operators inefficiently use spectrum outside big cities.

At presently, there are five operators that have a pan India presence — Airtel, Reliance, Hutch, Tata and BSNL/ MTNL. They say that new operators should not be permitted as they will become financially unviable if competition is increased. They also argue that since spectrum is limited, no new licences should be given.

In its consultation paper, Trai has pointed out that Indian operators are earning much higher profit margins (EBITDA margins) and return on capital employed (ROCE) than operators in many other countries. Even with a reduction of tariff in recent years, EBIDTA margins of listed Indian telecom operators have increased from 34 per cent to 40 per cent. Indian telecom operators also have the highest valuations in the world.

The Competition Commission, too, had opposed putting a cap on the number of operators. In a letter to the regulator, Competition Commission member Vinod Dhall had said that some of the issues in the consultation paper were at variance with the Competition Act 2002.

“The consultation paper, in a number of places, makes mention of certain thrusholds or caps such as 67 per cent marketshare, a cap on the number of service providers in a service area, and a minimum of three service providers in an area. In light of the provisions of the Competition Act and the current state of telecom markets, it is not clear whether such thresholds/ caps are relevant,” noted Dhall.

Experts also feel that instead of restricting competition in telecom services, the government should focus on spectrum management. Quick induction of 3G services in 2.1 GHz and 450 MHz to temporarily relieve pressure on the 800-900 MHz and 1,800 MHz, WiMax services in the 3.3 and 3.5 GHz ranges, incentivising the use of fixed-mobile convergence for picking up in-building traffic on optic fibre cables, and greater deployment of in-building low power BTSs are some of the ways for better spectrum management.

Watchdog’s worries

• Big cellular mobile service providers opposed to licences for new service providers

• Indian operators earning higher profit margins

• Competition Commission had opposed ceiling on number of operators

•Operators using spectrum inefficiently at many places

• DoT not able to manage spectrum properly