Editorial: Solving spectrum scarcity

By: | Published: June 4, 2015 12:39 AM

Must relook caps for sharing/trading norms to help

Though the government would have spared the telecom industry a lot of heartburn if it had come out with spectrum sharing/trading guidelines before the March 2015 auctions in which a spectrum-starved industry had to fork out a mammoth Rs 1.1 lakh crore, it is just as well that it is coming out with them now. As things stand, Indian telcos have a fraction of the spectrum that global operators do and that, not lack of capital investment by telcos, is the main reason behind the call drops that has the telecom minister so exercised—indeed, he would do well to try and not penalise the industry for something that is not really its fault. Allowing spectrum sharing/trading will put more spectrum in play since there are a large number of telcos, like MTNL and BSNL for instance, who are squatting on large amounts of spectrum but do not have the subscriber base to justify this—once the norms are in place, this can be given out to other telcos who are starved for spectrum. Indeed, once the guidelines are in place, cash-strapped telcos will find it easier to pay off their debts—richer telcos want spectrum, not the debt or the workforce of other telcos that they would have to take on in the case of an M&A deal.

There are, however, some caveats to sharing/trading that need to be kept in mind. For one, sharing cannot be done across bands—a telco that has 900MHz-band spectrum cannot share 1800MHz-band spectrum with another telco. So, if two firms have enough subscribers, they can pool their spectrum—this will add to the efficiency of the spectrum dramatically. If one firm, like MTNL, does not have enough subscribers, it can simply give away part of its spectrum—or trade it. Two, unless the spectrum is ‘liberalised’—that is, it was bought in an auction—its use will be restricted. MTNL’s 1800 MHz spectrum, for instance, cannot be used by Bharti Airtel—assuming they enter into a sharing arrangement—for delivering 3G services, it has to be used only for 2G services. Any spectrum that is being traded—sold actually—has to be ‘liberalised’. This is logical to prevent arbitrage. So, if MTNL wants to share its 1800 MHz spectrum with Bharti Airtel to use for 3G services, it has to pay the latest 1800 MHz auction price to ‘liberalise’ it.

There is a problem here that needs to be addressed for the new system to work. This is the caps that the government has put on spectrum holdings—no telco is allowed to hold more than 50% of the spectrum available in any frequency band (this is sensible) or more than 25% of the total spectrum held by any operator in that circle. So, if a Bharti Airtel or a Vodafone wants to enter into an arrangement with an MTNL, it will trip up on the 25% clause. In any case, with so many operators in each circle, and no evidence of cartelisation, there is no reason to have this restriction.

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