Opportunity to help sector lost in technicalities
Given the telecom sector’s biggest problem is the lack of sufficient spectrum to meet the needs of a rapidly growing data market, you would think the government and the regulator would be fully focused on fixing this. While telcos paid a king’s ransom in the February auctions, their data-related spectrum, essentially their 2100MHz bands, still have huge holes in them in the sense they don’t have spectrum in all circles across the country. Indeed, unless the government is able to get the defence forces to vacate spectrum in the 2100MHz band quickly, telcos will face a similar problem in the 900MHz auctions that need to be held by December—if firms don’t bid aggressively to retain the 900MHz spectrum which is expiring, there simply isn’t enough spectrum in the 1800MHz band for them to consider as a fall-back option. In other words, the auction will be a severely constrained one, leaving operators no choice but to bid exorbitant amounts and then follow up with hikes in tariff levels.
While getting the defence forces to vacate spectrum will take some doing, an immediate solution was to ensure the existing spectrum was used efficiently. Operators like BSNL and MTNL, for instance, are sitting on vast amounts of spectrum, but have relatively small number of subscribers. This is where the issue of spectrum sharing and spectrum trading come in. While Trai had given its recommendations on spectrum trading earlier this year, the DoT is yet to approve these. The DoT’s fear is that, were spectrum trading—a firm with unused spectrum sells it to another telco for the remaining period of the licence—to be allowed, this would lower the amounts telcos would bid in future auctions. Given the huge scarcity of spectrum, all that such trading would do would be to curb some part of the irrational bids.
If DoT is guilty of not acting upon Trai’s spectrum trading recommendations, the Trai’s spectrum sharing recommendations don’t address the real problem either. By putting a cap on sharing of spectrum, Trai has ensured spectrum-starved telcos like Bharti Airtel and Vodafone don’t get to use spectrum that is held by, say, a BSNL or an MTNL. A small telco, however, can share spectrum with another small one. But since the purpose of spectrum sharing was to ensure bigger players got more spectrum—they also use it the most efficiently—this means the purpose of the scheme has been defeated. For reasons best known to it, Trai has also hiked the annual spectrum usage charge for those sharing spectrum by 0.5 percentage points. Ostensibly this has been done to prevent a loss of revenue for the DoT; but given that the DoT will get more revenue, as more spectrum gets used and telcos get more subscribers, it is not clear how there would even have been a revenue loss to begin with. Since Trai has not allowed spectrum sharing unless telcos have spectrum in the same band in the same circle, this effectively suggests the regulator is not in favour of intra-circle roaming, the subject of hot debate in the DoT—while the appellate tribunal had come down on DoT for its restrictions on 3G intra-circle roaming, Trai could have provided DoT the ammunition it needs to challenge the tribunal’s decision in the Supreme Court. All told, a wasted opportunity.