Given how critical large chunks of spectrum are for efficiency of use in providing voice telephony and, in the case of data, for dramatically increasing access speeds, it is not surprising Bharti group chief Sunil Mittal should talk of big network companies (NC) owning large amounts of spectrum that companies like his could simply rent and use. Indeed, this is the model being used for telecom towers which, instead of telcos, are now owned by independent tower companies. But if large spectrum chunks are so important, the logical question is why existing telcos aren’t pooling their spectrum in the manner RJio and RCom are in the 800MHz band, even if an NC has not come up. The answer is that the law makes it difficult. If telco A buys spectrum from B, the money gets added to B’s revenues on which a large licence fee has to be paid; if they share spectrum, each has to pay a hefty 0.5 ppt more license fee each year. So, till there is clarity on how license fees are to be paid—will users pay apart from what the NC pays?—no NC can come up. Also, since the law doesn’t allow spectrum sharing if both telcos don’t have spectrum in a particular band, this prevents optimal sharing.
Most important, with the sector in deep financial trouble, why will an NC invest in buying very expensive spectrum? Which brings you to the more important point of the need to scrap the licence fee regime if the telecom sector is to be saved. When spectrum was given out for free, it made sense to charge an annual license fee. Today, when telcos are bidding tens of thousand crore rupees each year, the burden—40% of turnover, Mittal told The Economic Times goes to the exchequer—is killing. It also penalises efficient telcos as they end up paying a lot more license fee than, say, a BSNL which may have more spectrum but fewer customers.
If the spectrum-holding caps were more realistic and the licence-fee-regime scrapped, it wouldn’t really matter if an NC came since existing telcos would buy as much spectrum as they needed to be really efficient. Indeed, till the government stops killing its golden goose, the new plan to have annual spectrum auctions will also flop since the industry will be too bankrupt to participate in any serious manner. And this is without taking into account the impact of very poor regulation by Trai that several telcos are challenging in court.