1. Spectrum sharing rules: A missed opportunity

Spectrum sharing rules: A missed opportunity

The recently announced guidelines are disappointing; the telecom minister’s indication of a review of cap rules is welcome

By: | Published: August 25, 2015 12:29 AM
In the new sharing rules, the government has stipulated a further increase of 0.5% on the sharing operators.

In the new sharing rules, the government has stipulated a further increase of 0.5% on the sharing operators.

That Indian mobile operators have only about a third of the spectrum that global operators have is an indisputable fact—authenticated by no less an authority than Trai, our independent regulator. Experts know that this is the root cause of many of our challenges—poor quality of services (call drops etc), inability to achieve adequate penetration, and low usage of mobile internet and broadband. We are, thus, at a very low digital development status in the ITU world rankings.

Against this background, it is no surprise that operators were eagerly awaiting the announcement of spectrum sharing since a good set of sharing rules could have significantly alleviated the suffering of both customers and operators, and helped improve India’s global ranking through a more optimal use of the available limited spectrum.

However, this was not to be, and the announced guidelines are a disappointment; in fact, they represent a missed opportunity.

The first disappointment concerns the prohibition of inter-band sharing; for example, if an operator A doesn’t have 2100 MHz spectrum but there is another operator B who has spare 2100 MHz and would like to share this with A in exchange for, say, 900 MHz or 1800 MHz which he needs, it is not currently possible. This sort of sharing is a dire need in India because of the serious shortfall in spectrum per operator. But, again using the above example, both operators (hence customers and the government too) have lost out under the new and restrictive rules.

It may also be noted that technology advancement today, to a large extent, is about “carrier aggregation”—i.e. getting frequencies in different bands to work harmoniously in tandem. The government has regrettably not kept this in view for achieving optimal spectrum use in India.

The second unfortunate part is about sharing of “liberalised” and “unliberalised” (administratively allocated) spectrum. The former category is defined by the government as spectrum bought in an auction of 2010 or later. The sharing rule is that any unliberalised spectrum has to be converted through payment of the stipulated amount to place it on a par with auction spectrum, before it can be shared with liberalised spectrum. This appears reasonable on the face of it, although the question arises why exclude spectrum from prior auctions? In July 2001, there was a full-blooded auction for the fourth cellular licence after extensively consulting Trai. How can we exclude these? Even if we temporarily disregard this aspect and look at all the “administratively-allocated” spectrum, it is noticed that these are mostly in fragments or small bits and pieces of spectrum and not in contiguous 5 MHz blocks as generally required for new generation technologies such as 3G, 4G, 5G. So, why spend big money when usage cannot be upgraded to higher technology, especially when the demand for lower technology voice service is still quite high?

Another nail in the coffin for “liberating” spectrum for sharing is the fact that all the “unliberalised” spectrum would anyway complete their first term of 20 years in another five years or so and would have to be renewed. Where is the financial justification when only 25% of licence term is left?

The third blow to sharing is from the “spectrum cap” rule in the guidelines. First, individual operators anyway have to be within the set cap before sharing. Why then bring in further cap restrictions post sharing? This is retrograde. A cap is basically there to address the possible concerns of competition. However, in the Indian scenario, of the nine or more operators including a government operator—as against only three or four operators in most countries—there is no cap warranted even for a non-sharing individual operator. In a sharing scenario, the number of operators does not change at all, nor is there ownership change in spectrum. Hence, there is no justification placing a more restrictive cap on the operators who wish to share. If there is some concern at any time regarding competition aspects, there is anyway an expert competition authority that could look into it; why shackle the highly competitive market with a cap?

We are, however, a bit relieved to hear that the minister has indicated he would review the cap rule. Last but not the least, one needs to note yet another disincentive to sharing. Before dealing with that, it should first be appreciated that shared spectrum provides more efficiency of usage and higher quality of service. Therefore, it would lead to more customers being served and enhanced revenues. The standard spectrum usage charge of 5% would itself lead to higher incomes for the government because of the larger base.

However, in the new sharing rules, the government has stipulated a further increase of 0.5% on the sharing operators. On top of the earlier-explained three difficulties, wouldn’t this last item represent a huge disincentive to embark on sharing?

One is saddened by the turn of events. We have a huge legacy handicap (no fault of the present government) of too little spectrum per operator, which is a big hurdle to the progress in broadband and for ensuring adequate quality of service without call drops. Under these conditions, the optimal use of available spectrum is of highest priority and a suitable spectrum sharing policy could definitely have helped.

The author is a consultant and honorary fellow of the Institution of Engineering & Technology, London.

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