India plans to start auctioning 3G spectrum on Jan. 16, with both Indian and foreign bidders allowed to participate in the online auction.

However, winning foreign bidders will have to set up a joint venture with an Indian partner to start operations, the country's Department of Telecommunications (DOT) said on Friday.

The foreign bidder can hold up to 74 percent of the equity in the company providing the 3G (third-generation) service. If the foreign equity in the joint venture is more than 49 percent, the joint venture will also require clearance from the country's Foreign Investment Promotion Board (FIPB).

Similar rules already apply to foreign investment in telecommunications services companies in the country.

The last day for submission of applications is Jan. 5, according to the final guidelines for the 3G auction released by DOT on Friday. The government had announced the broad guidelines for the auction in August.

Besides spectrum for 3G, the government also plans to auction spectrum for broadband wireless access (BWA) two days after the completion of the 3G auction.

Although foreign bidders are allowed to bid for BWA spectrum, they will have to set up joint ventures to offer services, in which foreign equity will be limited to 74 percent, the DOT said.

The government is auctioning blocks of spectrum in the 2.1 GHz band for 3G services, and in the 2.3 GHz and 2.5 GHz bands for BWA, in a number of service areas across the country.

However one block of spectrum in each of the service areas has already been reserved for use by two government controlled telecommunications companies -- Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL). The government said that these companies would, however, have to pay a license fee for the spectrum at the highest bid in each service area.

MTNL launched 3G services in parts of Delhi on Thursday.

The government has thrown open the 3G bid to current mobile service providers holding an Unified Access Service License (UASL) or Cellular Mobile Telephone Service (CMTS) license, and to bidders that have experience in 3G services and undertake to obtain a UASL license before starting operations. Internet service providers can also bid for a BWA license.

A bidder will be allotted a maximum of one block of 3G spectrum and one block of BWA spectrum in any service area, according to the DOT.

The IDG News Service is a Network World affiliate.