|Monday, 30 April 2012 00:00|
Half our spectrum is to be kept vacant for 5-10 years
Apart from the sharp increase in telecom tariffs that will emanate from the Trai proposal to hike one-time spectrum entry costs by 10-11 times over what they are today, another serious issue is that the recommendations will result in around half of India’s spectrum being kept vacant for 5-10 years—that’s a bad idea at most times, but ill-advised when India has the kind of spectrum shortage it has right now.
Under Trai’s proposal, all spectrum allocated to existing telcos in the 800MHz and 900MHz bands is to be taken back, with the telcos to be given spectrum in the 1900MHz and 1800MHz bands instead, which they can use to meet the needs of their existing customers. Since 800/900MHz is more efficient, it will be re-auctioned for use in, say, 3G and 4G services — ‘re-farmed’in jargon. Theoretically, the idea is to generate a level-playing field, to give everyone the chance to use the more efficient spectrum. This has larger implications for rural telephony (No more phones for Bharat, FE, April 26 “http://goo.gl/VqtFu”) because 1800MHz spectrum requires a lot more telecom towers to service the same number of subscribers—in other words, the ‘re-farming’ may make the rural telephony business unviable.
Equally important is the implication for future telecom growth. In order to give spectrum for re-farming, the government will have to keep spectrum vacant in the 1800MHz and 1900MHz bands. A total of 230MHz will have to be kept in the 1900MHz band for those telcos who have 800MHz spectrum at the moment. Another 432MHz will have to be kept vacant in the 1800MHz band to accommodate those telcos whose spectrum is to be re-farmed from the 900MHz band. In the 800MHz band, the largest chunk of 20 licences come up for renewal in 2020—which is when they can be ‘re-farmed’. Another 22 licences come up for renewal in 2021 and 13 in 2024. In the 900MHz band, 7 licences come up for renewal in 2014, 25 in 2015 and 20 in 2020. Since the total spectrum India has allocated in all radio-bands for 2G services is 1160MHz, this means we’re keeping vacant an amount of spectrum that equals to around half what has been allocated at the moment — if spectrum wasn’t to be ‘re-farmed’, this 1800/1900 MHz spectrum could be auctioned immediately. While looking at the costs associated with ‘re-farming’, and with the high base prices fixed by Trai, the government would do well to keep in mind the cost of keeping spectrum vacant for so long. Government revenues from license/spectrum fees will get reduced, and the quality of telecom services will continue to remain poor as telcos remain starved of spectrum.