Cross Talk on Spectrum Refarming-TRAI asked to give its View
2G services and spectrum bands
The 2G GSM mobile services in India are provided by the telecom operators utilizing the two spectrum bands 900 MHz band and 1800 MHz bands allotted to them. While the early entrants in the business (who were issued license before 2001) - Airtel, Vodafone, Idea, BSNL and MTNL were issued 2G spectrum at first in 900 MHz band and thereafter in 1800 MHz band and hence got spectrum in both these bands, the later entrants like Tata, Reliance in GSM 2G services business were allotted spectrum only in 1800 MHz band since the 900 MHz band spectrum was allotted fully to the earlier entrants and hence not available.
900 MHz band more efficient than 1800 MHz band
But the 900 MHz band spectrum is efficient and superior compared to 1800 MHz band. Because the 900 MHz band has lesser wabe length, it will travel more distance and the signals transimitted on 900 MHz band are more potent for indoor coverage. 900 MHz band is 30-40 per cent better in coverage compared to 1800 MHz. Since the wave length is more in 1800 MHz band spectrum, its coverage is not as effective as 900 MHz band. Therefore more number of BTSs are required for the same area for 1800 MHz band spectrum compared to 900 MHz band spectrum. Thus 900 MHz band spectrum is cost effective since less number of BTSs is required.
The 900 MHz band is superior to 1800 MHz band on another count. Since the 900 MHz band is in use worldwide for the last 20 years, technology developed for operating the services utilising that band has become standardised and more developed. Even 4G broadband services also can be provided on 900 MHz band spectrum with less cost equipment. But the existing license condition is preventing the provision of 4G services on 900 MHz band since as per the license condition only 2G GSM services are to be provided on this band. Once the license is renewed after the expiry of the present license or any new operator enters afresh with a new license and in case the Company with the renewed/new license has this 900 MHz band spectrum, it can provide 4G services also utilizing it.
Decision of the TRAI on Spectrum Refarming
Hence the Companies having 900 MHz band are demanding that they should be allowed to retain their 900 MHz band spectrum as it is on renewal of their license after the expiry of the present license period. They are ready to pay the market discovered price for this 900 MHz band spectrum for thir renewed license period. Market discovered price is the price found in the auction of the spectrum band. Airtel and Vodafone are having the 900 MHz band spectrum and their present license period will be over by 2014/15. They want that on the expiry of their license period, the 900 MHz band spectrum should not be taken away from them and they should be allowed to retain it for the next 20 years of their renewed license period starting with 2014/15. They are willing to pay the market price for it.
But the Telecom Commission recently in its meeting held on 19-10-2012 has decided that on the expiry of their license period in 2014/15 for the telecom operators like Airtel and Vodafone, the following will happen to the 900 MHz band and 1800 MHz band spectrum held by them:
(a) 900 MHz band spectrum will entirely be taken away from the telecom operators and if they want to have it in their next license period starting with 2014/15, they have to get it by purchasing it by participating in the auction to be held for selling the 900 MHz band. Thus on expiry of their license period, if they renew their license once again for another 20 years, they have to get 900 MHz band spectrum by participating in the auction. Otherwise they cannot have the 900 MHz band spectrum.
(b) They can retain their existing 1800 MHz band spectrum fully without participating in the auction, by paying the market price for it.
(c) If they are unable to get the 900 MHz band spectrum in the auction, then they will be allotted 1800 MHz band spectrum in the place of the 900 MHz band spectrum held by them earlier. They have to pay the market price for the 1800 MHz band spectrum.
(d) This process of taking away the 900 MHz band spectrum from the operators having it on expiry of their license period and reallotting it on the basis of auction and replacing the 900 MHz band spectrum with 1800 MHz band spectrum in case the operator is not able to get back the 900 MHz band spectrum, is named as “Spectrum Refarming”.
Cross Talk due to clash of interests
But the Airtel and Vodafone are saying that if they have to replace their 900 MHz band spectrum with 1800 MHz band spectrum on expiry of their present license period, they have to replace their entire network built up for the 900 MHz band spectrum with a new network for 1800 MHz band spectrum and it will cost around Rs 1,00,000 crore for them. They are also arguing that in case they ahve to get 900 MHz band spectrum afresh for their renewed license period of 20 years starting with 2014/15, they have to pay around Rs 1,50,000 crore for it. They are saying both options are costly and it will lead to a huge increase in tariffs for the customers. Hence they are demanding that they should be allowed to retain thee 900 MHz band spectrum held by them at present, even for the renewed license period, so that they need not replace their present networks built up for 900 MHz band spectrum. They are willing to pay the market price for the 900 MHz band spectrum for the next license period.
This argument of Airtel, Vodafone etc is opposed by Tata, Reliance Com who are not having 900 MHz band spectrum. They are arguing that the Airtel and Vodafone are provided with the efficient 900 MHz band spectrum whereas they are deprived of the same and hence there is discrimination. They demand that there should be equality and level playing ground among all the players. Therefore thee decision of the Telecom Commission for taking away the entire 900 MHz band spectrum held by Airtel, Vodafone etc on expiry of their license period in 2014/15 and selling it in auction is correct since it gives equal opportunity to all to get the 900 MHz band spectrum by participating in the aauction. They are arguing that the Airtel and Vodafone cannot have a perpetual right on the highly efficient 900 MHz band spectrum.
Endangering the survival of BSNL and MTNL
BSNL and MTNL are also having 900 MHz band spectrum. But their present license period is upto 2020 and 2017 respectively. Hence immediately there is no problem for them. But those who will get 900 MHz band spectrum afresh or on renewal of their present license on its expiry, which will happen in 2014/15, will be able to provide 4G services using the 900 MHz band spectrum. But BSNL and MTNL will not be able to provide 4G services inspite of having 900 MHz band spectrum since the present license condition prevents providing services other than 2G services on 900 MHz band. If other operators start providing 4G services in a big way using 900 MHz band spectrum and BSNL and MTNL are not able to provide the 4G services, then they cannot survive in the competition. If BSNL and MTNL want to provide 4G services along with other operators in 2014/15, they have to surrender their 900 MHz band spectrum before the expiry of their license period and get it afresh in the auction, by the year 2014. Both these options, that is,(a) continuing with the 900 MHz band spectrum until the expiry of present license period in 2020/20117 without the eligibility for providing 4G services on 900 MHz band or (b) surrendering the 900 MHz band spectrum and get it back by pauying a huge amount (more than Rs 20000 crores) in the auction so as to be able to provide 4G services, are suicidal for BSNL and MTNL since they cannot withstand the competition without providing 4G services and at the same time they are not in a position to pay the huge amount of money required to get 900 MHz band spectrum afresh to be able to provide 4 G services, because of their continuous and increasing losses.
Lobbying by the two groups of the Private Operators
The Airtel, Vodafone etc are lobbying against the decision of the Telecom Commission on spectrum reefarming and mounting pressure on the Government . They demanded that they should be allowed to retain the 900 MHz band spectrum for the next term of their license period also, by paying the market price. They are lobbying for their point, in the name of COAI(Cellular Operators Association of India).
On the other hand the Tata and Relaince are lobbying in the name of AUSPI(Association of Unified Services Providers of India. They are supporting the Telecom Commission’s decision that the 900 MHz band spectrum should eb fully taken away from Airtel, Vodafone etc on expiry of their license period and it should be put on auction so that they get equal chance for participating in the auction. They also are pressurising the Prime Minister and others.
Enter Sri Ahluwalia
Meanwhile, the Deputy Chairman of the Planning Commission, Sri Montek Singh Ahluwalia, wrote a letter to the Finance Minister P.Chidambaram against the decision of the Telecom Commission on spectrum refarming. He demanded that the issue be referred to TRAI for its reconsideration since there is no clear road map for the spectrum refarming. This is in support of the COAI (Airtel, Vodafone etc).
Finance Ministry for more money in spectrum auction
Adding to this controversy, Sri Arvind Mayaram, the Secretary, Department of Economic Affairs in the Finance Ministry wrote a letter to the Department of Telecom suggesting that on expiry of the license period, not only the 900 MHz band, but also the 1800 MHz band spectrum should be taken back by the Government fully from the concerned telecom operators and both bands should be put up for auction and who ever is successful, will get these bands. No Company should be given the perpetual right to hold the spectrum in any band, whether in 900 or 1800 MHz. Therefore the Telecom Commission’s decision for taking away the 900 MHz band spectrum only while retaining the 1800 MHz band spectrum with the operators whose present license period expires, is not correct and should be reviewed. He debunked the argument that the replacement of the network built up for 900 MHz band spectrum with tne network for 1800 MHz band spectrum for those not able to get 900 MHz band spectrum in the auction will impose heavy cost. He told that in any case, due to constant technological upgradations, the networks are frequently replaced in telecom sector and hence there is no point in the argument regarding the cost of replacing the network for 900 MHz band with network for 1800 MHz band.
DoT dials TRAI for a solution
After getting bombarded with all these arguments and facing all these pressures, the DoT asked the TRAI to give its view afresh on various options regarding this process of refarming, including the issue whether any part of the spectrum can be allowed to be retained by the operator on expiry of the license period, for the next term of the license. DoT asked TRAI to give its view before the next meeting of the EGoM(Empowered Group of Ministers) where a decision has to be taken finally.
What about the fate of BSNL and MTNL
But what ever is the recommendation of the TRAI and the decision of the EGoM regarding private operators, it is necessary to allow spectrum in any band, whether 900 Mhz band or 1800 Mhz band, free of cost, without any payment, to BSNL and MTNL along with liberalization for the use of these spectrum bands, to provide 4G services or any service with any technology. Otherwise the BSNL and MTNL cannot survive by paying such huge amounts for spectrum. This is justified since the BSNL and MTNL, as PSUs are carrying out several social obligations, even by facing huge losses. For example, by maintaining the huge, but necessarily loss making landline network, the BSNL and MTNL are providing fixed wireline broadband services throughout the country and without them, the broadband services development to the present level would have been impossible, since the private operators are not interested in installing and maintaining pan India landline network for providing broadband services, since it is loss making. Also, the BSNL and MTNL are the “State” as per the Constitution and hence the State can exempt itself from such payments for spectrum, while imposing the payments on the privatee operators. The argument of level playing ground between the private operators and Public Sector Operators is not valid since the purpose of their existence is entirely different. The private operators are for profit whereas the PSUs are not merely for profit, they are there to serve the society even by incurring losses.
Nationalization real solution
Spectrum is a scare natural resource. There cannot be any real level playing ground in allotting the spectrum in view of the constantly changing technological upgradations since equality cannot be maintained in all respects in its allocation among the telecom operators. It will create serious struggles, corrupt practices, and preventing full usage of thee spectrum for the benefit of society. The only way for the full utilization for the benefit of society is to nationalize telecom services so that only the PSU operators are there with spectrum allotted to them free of cost by the Government, so that the services can be provided at less cost to the people.