The past year has seen an amazing shift in the technology industry in favour of evolving mobile communication systems. Recent developments have demonstrated that third generation (3G) cellular phones will be the definitive point of convergence bringing together wide-band voice and data services such as video conferencing, mobile voice telephony, high-speed Internet access, mobile transacting and other services through a single handheld device.

As exciting as these services seem, actually bringing such a vision to fruition is a source of much anxiety to the concerned industry players. With a projected market of US $9.2 billion in 2005, companies involved in the development of third generation services have been racing against time to achieve a broad consensus on the mode and standards to be implemented at the time of deployment.

Considering the size of initial investment required to deploy these new systems (including network equipment, terminal subsidies and license fees), these players are naturally conscious of the tremendous risks involved in the proposed transition away from today's 2G cellular systems. These risks, inter alia, include investment risks, business risk, technology risk, marketing risk, intellectual property risk and last but not the least - legal or regulatory risk. In the case of 3G mobile systems, the legal issues concerning their regulation and deployment are particularly ponderous.

Licensing

Nearly all countries require a specific license for introducing a telecommunications service. National authorities usually prescribe certain terms and conditions (including the payment of fees) for grant of such a license. Countries, world over, have commenced developing licensing frameworks for the deployment of 3G mobile services in their territories. Overall, the issue of as many as 100 license awards, worldwide, is anticipated over the next one and a half years. The important question, however, is whether the existing regulatory framework for telecommunications in India would enable our national authority (DoT) to unravel a sufficiently comprehensive and enabling framework for the rollout of such services.

The legal basis for grant of any such licenses in India, would have flow from the statutory authority of the Indian Telegraph Act, 1855. In addition, the Indian Wireless Telegraphy Act, 1933, Telecom Regulatory Authority of India (TRAI) Act, 1997 and the Information Technology Act, 2000 (ITA) would also have considerable bearing on the regulation of services, so licensed. Under the present framework, DoT, falling under the Ministry of Communications (MoC) is the licensing authority for the operation of any telecommunications service; equipment used for the service has to be approved by the Telecom Engineering Centre (TEC) of DoT.

In addition, a licence in connection with the spectrum (for using a particular frequency or frequency band) must be obtained from the Wireless Planning and Co-ordination (WPC) Wing of DoT. Spectrum is particularly crucial to 3G systems and there are several controversies regarding the same. 3G services by specification are spectrum-hungry and spectrum, being a scarce resource, most countries have provided for only a limited number of 3G licenses. While Norway provided for 4 licenses, Japan narrowed the number of available licenses to 3 - thereby causing a spurt of consolidation in the industry.

In India the total amount of spectrum available for these new services under the National Frequency Allocation Plan would determine the number of licenses to be awarded. It would also depend on the 3G standard that is adopted by the Indian telecom administration - in the same way as GSM was chosen as the sole 2G standard for cellular services in India.

Given the limited number of licenses available, the criteria and mode for granting 3G licenses have been the subject of debate in a number of countries. The debate has so far centered around the choice between "auctions" (where licenses are based on a pure competitive process) and "beauty contests" (where the regulator grants licenses based on its evaluation of the most deserving applicants). The UK Government recently raised 22.5 billion pounds in auctions for 3G licenses in that country. Recent news reports suggest that the Department of Telecommunications (DoT) in India has also decided to auction licenses for 3G services. On the other hand, several European countries (including Finland, Norway, Denmark, France, Sweden and Spain) have opted for beauty contests.

Auctions are recognised as being transparent, easy to manage and may aid in tackling the problem of what the apt price for the frequencies should be. Beauty contests on the other hand are favoured by some countries where the coverage of services, their quality and uniform pricing throughout the country are of prime concern. However, while the argument against auctions has been the artificial increase in cost which would be passed on the by the licensee to the consumers, the argument against "beauty contests"has been the lack of objectivity and arbitrary license granting procedures. These are certain issues that the Government must bear in mind before formulating any licensing policy for 3G mobile services.

Considering India's earlier experiments in licensing telecommunication services - which varied from the licensing model for voice telephony services (based on limited competition and competitive bidding) to the more recent model for internet services (unlimited competition and fixed fees) - the authorities would do well to evolve a middle path, taking into consideration both the past experiences as well as factors unique to 3G services.

A positive beginning would be to adopt a "lightweight" regulatory regime as advocated by the Finnish authorities. Such a regime would not lay down any strict standards such as coverage, development of services et al. The 3G sector is extremely nascent and involves tremendous costs in the development of 3G networks. Such a regime - whereby tenders are invited and a re-assessment performed at a later stage - would therefore be advisable However, if the Government feels that a wide coverage is necessary, it is recommended that the development costs in unprofitable areas is subsidized which will give incentive to develop services in these areas.

Roaming and Seamless Services

As envisaged, 3G is not merely a step ahead of present cellular (2G) services. It is conceptually far more advanced in terms of reach, ease of use, quality and content. According to the IMT-2000 specifications (under the umbrella of the International Telecom Union (ITU)) 3G services would enable roaming between fixed, cellular and satellite services, seamlessly.

One of the key aspects of the 3G specifications is the concept of a personal unique identifier (PUI). Rather than different numbered addresses for fixed lines, mobile phones, satellite phones, etc., the end-user would be assigned a PUI which would enable any device based on physical proximity of the end-user. Thus, you - the end-user - would be able carry a single phone conversation (or video-conference) from your mobile phone to your fixed line instrument (at home) simply by moving within range of it. This would necessitate the co-operation of, and co-ordination with, the fixed line provider, usually a public monopoly service provider (in most of India) which is also the licensing authority.

Roaming between 3G and existing 2G networks during a transitional period leading up to the phasing out of 2G networks is an important component of the strategy for introducing 3G. The transitional period is particularly important because of legal and business issues that would arise due to differing interests of 2G and 3G operators. While existing 2G operators may be interested in 3G services, one cannot assume that these operators will corner the limited 3G licenses that will be offered. A scenario could arise where parallel services could be run by different operators in the 2G and 3G segments.

The opposite scenario too could lead to problems. If the 3G licenses are divided between some existing 2G operators and new operator(s), the post-license stage may see an uneven field, i.e. 2G operators without 3G licenses, 2G operators with 3G licenses and 3G operators without 2G licenses. While the latter scenario seems more likely, the only logical solution in sight to mandate interconnection (on commercial terms) between the networks.

Complexities in interconnection to the PSTN itself have been of concern to the private telecommunication operators. The eventual success of 3G systems in India would depend on the ease and transparence of interconnection facilities among various operators of the entire network.

Mobile Transacting

An important service offered by 3G mobile systems is mobile transacting or m-commerce. Authentication of these transactions and their confidentiality is of immense concern to the end-user.

The Information Technology Act, 2000 is quite specific and technology-biased insofar as it recognizes only one form of authentication i.e. hash encoded digital signatures. The draft rules released on August 15th prescribe, quite specifically, the IEEE standard for public key cryptography and the ANSI X.509 standard for digital signatures. However, mobile security protocols may not follow the same standards. This may have an adverse impact on the development of m-commerce especially when one considers the considerable efforts that are being made to develop other forms of authentication and security such as biometric identification.

As mentioned earlier, 3G services seem to be the point of convergence. The proposed framework for convergence contemplates licences under specific categories namely, network facilities, network services, application services and content application services. This would be extended to apply even in respect of a content provided via a 3G service. Actually, convergence legislation may be a condition-precedent for the effective introduction of 3G services.

The authors acknowledge the research inputs of their colleague Aashit Shah