The Department of Telecommunications is considering a proposal to allocate spectrum, the radio frequencies that enable wireless communications, for third-generation or 3G services to state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd [Get Quote] ahead of other operators.

The move is expected to frustrate private players since this will give BSNL and MTNL a head-start in rolling out high-value 3G services that offer video calls, music downloads and games.

The proposal to consider priority allocation is significant because the government had accepted the Telecom Regulatory Authority of India recommendations late last year to allot five players 5 MHz of spectrum each for 3G services on the basis of an e-auction.

The state-owned corporations will, however, have to match the price of the highest bidder for this preferential allocation.

BSNL, which operates all-India telecom services, and MTNL, which operates in Delhi and Mumbai, had sought spectrum for 3G services on priority. A meeting in early April between DoT officials and top executives of the two state-owned companies reportedly assured them of this.

"We have been assured by the government that BSNL will be given priority in allocation of spectrum," a senior official of BSNL said.

MTNL and BSNL will be provided 5 MHz spectrum each in the 2.1 GHz band. DoT has also assigned frequency for indoor demonstration of 3G services under 2.1 GHz in certain circles, they added.

DoT, which also allocates telecom licences, is currently waiting for the defence services to free up 3G spectrum, which is due towards the end of this year.

Last year, the government had allocated additional spectrum in 2G or the current generation of services on priority to the state-owned corporations even as requests by private players for additional allocation of spectrum based on higher subscriber numbers were stuck for several months.

Private players led by the Cellular Operators Association of India have, in fact, protested against the special treatment meted out to state-owned companies in the allocation of additional spectrum.

In a separate development, BSNL has also been assigned 2G CDMA spectrum across all 23 circles in the country. In the Kerala circle, the company has been assigned 3.75 MHz, while for the rest of the country the DoT has allocated 2.5 MHz (equivalent of 4.4 MHz in GSM).

First callers

• Early April meeting between DoT and BSNL, MTNL reportedly assures state-owned players priority spectrum allocation for 3G
• BSNL, MTNL to get 3G spectrum of 5 MHz in 2.1 GHz band
• Private players, who will be subject to an e-auction, have been clamouring for a level playing field