India has over 970 million wireless subscribers and over 300 million internet subscribers today. We have a proactive government at the Centre that has laid an ambitious roadmap for a digital future. And wireless service is still at the core of all subscriber growth. It is imperative that adequate and rationally-priced spectrum is made available to the sector.
Against this background, the government’s decision of allowing spectrum sharing is a welcome move. This comes at a time when the debates around call-drops, quality of service, consumer experience, and spectrum availability have become more pronounced. Thus, it is the opportune time to examine how spectrum sharing will contribute to the future of seamless wireless connectivity in India, as well as a reality check on the benefits these guidelines are likely to accrue for all players in the ecosystem.
India and its telecom market are both truly unique behemoths. Many global parallels do not hold true in the Indian context, spectrum ‘sharing’ being one of them. For conceptual clarity: ‘Sharing’, as has been permitted in India calls for ‘telcos to pool together their spectrum holdings for efficiency and throughput gains’. This type of sharing has witnessed limited use cases globally and is bereft of major success stories. However, given the paucity of spectrum with Indian operators, the move is likely to bring some relief to the industry.
On the global front, however, telcos are allowed to share spectrum freely through well-established leasing mechanisms, which enables efficient, market-driven allocation. This type of sharing has been termed as ‘spectrum trading’ in India and has not yet been permitted.
Further, different models of spectrum sharing are being explored globally. Shared use of spectrum—which calls for spectrum held by non-telco incumbents to be shared with additional users—is being increasingly evaluated by regulators. Shared use is becoming an increasingly important tool in managing demand for spectrum, as there is a limit to the amount that can be repurposed for mobile operators.
In the US, spectrum sharing is featuring as part of the debate on how best to repurpose government-held spectrum for mobile use. In April 2015, Federal Communications Commission (FCC) voted to allow 150 MHz of spectrum in the 3.5 GHz band for use in mobile broadband and other commercial uses on a shared basis. This is spectrum which was previously held by US Department of Defense. Similarly, the European Union has strongly advocated the use of 2300 MHz for license shared access to support the growth of mobile broadband.
Having said that, operator networks in India are currently strained for capacity, and this situation is likely to further aggravate as consumer demand for data services grow. According to Nokia’s MBit study, in 2014, 3G data traffic in India grew 114%, while 2G data traffic increased 41%. This has resulted in network saturation and poor data speeds for users.
At the same time, there has been a sharp increase in the number of call-drops and a sharp deterioration in QoS parameters. As per the DoT, there has been a seven-fold jump in call-drops and a 65% fall in quality of 3G service in the quarter ending March 2015!
Moreover, given that spectrum holding of operators in India remains significantly low (at ~18 MHz), against the global average of ~50 MHz, spectrum sharing provides telcos an alternative to entering into high-voltage spectrum for supplementing their existing holdings. This enables operators to effectively cater to the growing consumer demand for data services, and will also aid in network decongestion. This in turn helps reduce the problem of call-drops and allows for better consumer experience.
Pooling spectrum also allows operators to bring together their fragmented spectrum holdings, resulting in better spectral efficiency and higher throughput. Trai guidelines for spectrum sharing outline a non-linear gain in spectral efficiency with increase in quantum of spectrum available. As an example, 5 MHz of paired spectrum allow GSM operators to carry 33.03 Erlang traffic, while, with a block of 10MHz spectrum the capacity goes up to 138.6 Erlang.
As the demand for data services increases, deployment of LTE is expected to be critical. The cost of deploying LTE services increases with the declining block size of contiguous spectrum. Thus, spectral contiguity will be an imperative for deployment of next-gen services. It is estimated that LTE networks in 2×10 MHz spectrum channels cost twice as much to deploy as services in 2×20 MHz channels.
The industry benefits of spectrum sharing remain a debated issue. The government guidelines, in their present form, dissuade a number of effective-use cases. For instance, they permit two operators to share holdings if both hold spectrum in the same frequency band. This constrains an operator from sharing capacity with a peer who might have unutilised capacity in a band where the first telco does not own spectrum. Similarly, the guidelines do not allow telcos to expand their geographical footprint to circles where they do not own spectrum.
The prescribed spectrum caps, 25% of the total assigned in a circle and 50% in a band, may prove to be conservative and are likely to prevent sharing of spectrum between leading incumbents. Another concern is that the government’s decision to restrict the sharing of liberalised and un-liberalised spectrum. Also, as the spectrum usage charge (SUC) for operators would increase by 0.5% post sharing, operators would need to balance the potential benefits of sharing against the cost outlay from additional SUC.
The introduction of these guidelines is a step in the right direction for the industry. The policy will have a critical role to play in developing benefits of the digital economy given India’s ambitious ‘Digital India’ initiative and plans for 100 smart cities. Also, with 3G gaining traction and large scale 4G launches on the anvil, additional spectrum will help operators in increasing indoor coverage and provide additional capacity in saturated locations.
The current policies call for increased collaboration between the government and service providers. There is a pressing need for a complementary policy on spectrum trading, which provides operators with exit options and allows them to sell their spectrum holdings in line with their business needs.
All told, the government has laid down another brick towards building a more enabling environment in the sector. The ball is now firmly in operators’ court to see how they utilise the ensuing benefits of these guidelines to drive better spectrum utilisation.
The author is global telecommunications leader, EY. Views are personal