Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

Towards a spectrum solution

Jan 05 2013, 00:59 IST
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SummaryThe concept of pooled spectrum has been examined for long.

The question about spectrum we need to answer is whether we want it to remain a resource like land, best allocated through property rights that can be bought and sold, or should it be like the sea—so vast it does not need to be parceled out

The concept of pooled spectrum has been examined for long. The issue first came into prominence when The Economist published an article in February 2003, along with a new concept of spectrum pricing, and becomes more relevant today with the possibility of pooled spectrum being introduced.

The article wrote: “What is the best analogy for radio spectrum? Is it, as most people intuitively believe, a palpable resource like land, best allocated through property rights that can be bought and sold? Or is it, thanks to technological progress, more like the sea, so vast that it does not need to be parceled out (at least for shipping traffic), in which case general rules on how boats should behave are enough to ensure that it is used efficiently.” And today, thanks to technologists, we are gradually moving to spectrum being more akin to the sea, hence the pricing of the resource is not necessary. Let me give another example. Air is another resource. It is not priced since it is used by everyone, and is abundantly available. If spectrum can be a similar commodity, thanks to abundant availability, spectrum pricing and consequently available to everyone, it need not be priced, and only usage charges determined, if at all.

Until 2011, global mobile data doubled every year for four years. Mobile devices are 5 billion today, and devices connected to the communication networks are 35 billion. There are likely to be 50 billion mobiles by 2020, and devices connected to the network will number 1 trillion by 2050. By that time, only wireless technologies are expected to contribute $4.5 trillion to the global economy, through the expansion of existing business and the creation of new opportunities. Should or can India be left behind in encashing this opportunity on the communications network? We were at the forefront in encashing such new opportunities in the last century when India entered the worldwide network, and this led to an increase in our GDP. We can be at the forefront again, but we have to efficiently deal with the unprecedented demand for commercial access to wireless networks and, consequently, increasing demand for spectrum. The need for federal spectrum is also rising. Aerial systems, surveillance and reconnaissance needs around the world and in India are leading to far greater demand than before. Hence, we need far more spectrum than earlier. Is it possible to give this spectrum viably with the present user wise allocation/auction method of this resource, so far treated akin to land, or do we need to explore other options for allocation of additional spectrum?

There are already two different regulatory models prevalent on the networks. On one hand, telecom companies have already spent billions in acquiring allocated 2G, 3G and 4G spectrum, and are under severe financial pressure, putting pressure on tariffs, which will put these services beyond the reach of the neediest, or make reach to the neediest subservient to inefficient government subsidies. On the other hand, there are already models of free spectrum on networks—such as the Wi-Fi spectrum, which operates as unlicensed spectrum, and is growing at a phenomenal pace. We have such spectrum in household phones too—the pooled spectrum for cordless phones. If the additional spectrum can be interference-free between users, we move to the model of spectrum being like the sea—turning scarcity into abundance. This expansion can be done in a way that it will not result in loss of revenue to the central government, but result in new revenues either from enhanced economic growth and innovation or from modest increases in leasing fees. Empirical studies in the US show that the availability of spectrum in such a model increases by 1,000 times. Again, the empirical studies in the US show that about 1,000 Mhz of government spectrum can be considered for commercial use, involving, of course, a lot of refarming of spectrum, an expensive job for the government. But this would lead to far greater benefits in the long run, and put India again at the forefront. “The essential element of this new federal spectrum architecture is that the norm for spectrum use should be sharing, not exclusivity. Technological innovations of recent years make this transformation eminently possible” (2012 report of the US). Spectrum would then be managed not by fragmenting, but by specifying large frequency bands that can accommodate a wide variety of compatible uses and new technologies that are more efficient with large blocks of spectrum. The US report recently submitted clearly specifies the roadmap.

In the world today, more devices are connected to the internet than there are people in the world. As internet usage grows, these devices are supposed to grow too, and it will become as simple to use them as the TV. However, the use of internet for video-streaming, movies, social networking (Facebook,Twitter and the like), Web 3.0, etc, is increasing the demand for bandwidth. It has to be understood that the internet was not initially designed for all these usages, but only for surfing, and the new usage would lead to a changed internet design. Currently, the multiple formats, devices and protocols limit the quality of visual experience. Let’s take movies. They are bandwidth hungry, and the way internet works is different from TV. Every time somebody watches a movie, there is a computer somewhere that sends it. If the movie is in higher quality, it might have 10 times as many tracks. In TV, you send your TV show to the satellite, which beams it down and it does not matter how many watch it, the cost is the same. It does not matter what bandwidth they have at home, it works. On the internet, every different device costs money. The last-mile bandwidth is not the same everywhere. You have to code in different formats and every additional user costs money. Entrepreneurs can find the most viable route for such activities if we move to converged/unified licensing, and coordinate routing on TV broadcasting/ broadband use.

People expect a mobile device to work just as fast as their laptop. That is not going to be easy because the cellular networks were not built for the internet; they were built for voice, and voice has very low bandwidth. A typical web page today requires much more than 10 times the bandwidth, and viewers expect to see it faster. That is very, very hard to do because there is not much capacity in the networks. All websites are about three times slower on cellular devices. The time it takes to download a page on mobiles is like what it took back in the dark ages of the internet in 2001. Our goal on mobile is instant access. This would require enormous work, new logarithms and sharing norms, etc.

The future is exciting if we move to pooled spectrum/converged or unified licences.

The author is former disinvestment secretary, power, and chairman, Trai

This concludes the two-part series

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