Given how crucial spectrum is to maintain the quality of telecom services and to roll out new services, there is an urgent need for quick decisions and an operator-political consensus on the prickly issue of spectrum allocation and pricing. Taking note of the situation, the government recently constituted a group of ministers (GoM) led by Defence Minister Pranab Mukherjee to settle the matter.
Of course, that is easier said than done. The GoM has a challenging mandate ?? determination of the quantum of additional spectrum requirement, identifying frequency bands for third-generation (3G) and next-generation network (NGN) services for major users, suggesting shortterm (less than one year) and mediumterm (less than five years) policies, drafting a pricing policy and examining the possibility of creating a spectrum relocation fund, and drafting guidelines for the operation of this fund.
Also, according to the terms of reference, the GoM is required to chalk out the transition path clearly. It would have to lay down the phasing and sequencing of steps in order to determine a feasible timeframe to enable step-by-step monitoring. The GoM’s role would also include negotiating with the defence forces to vacate some of these frequencies for GSM and CDMA players and move to other bands. For this, it would be estimating the quantum of funds required by the security forces to procure state-of-the-art equipment that is technologically appropriate for the assigned spectrum. It would also estimate the year-wise fund flow requirements to effect a smooth transition, apart from deliberating upon matters like enhancing efficiency in the usage of spectrum and suggesting a dispute resolution mechanism among the stakeholders.
This is not an easy task, especially considering that spectrum and related issues have been in the thick of controversy for over a year. No two parties ?? be it the Telecom Regulatory Authority of India (TRAI) and the Department of Telecommunications (DoT) or GSM and CDMabased mobile operators ?? see eye to eye on the issue.
In fact, the constitution of the GoM itself is against the wishes of the Ministry of Communications, which wanted the matter resolved by DoT in consultation with other operators and the defence forces. However, that did not happen. As one telecom analyst puts it, “DoT was unable to give it the due urgency it warranted. For 10 months it was talking to the defence agencies to vacate spectrum and did not reach anywhere.
The Prime Minister’s Office finally took the spectrum matter out of the hands of the specially constituted joint working group, which was to give its inputs by end2005, and gave it over to the Planning Commission. It in a way suggested that the matter was beyond the ability and scope of DoT and TRAI to settle, given the deep disagreements within the sector.
Meanwhile, the last few months of 2005 saw the quality of services drop further, according to TRAI’s performance indicators. Operators blamed it on the lack of spectrum to service the over 2.5 million mobile subscriber additions a month. They also claimed their inability to roll out 3G or telecom services to newer areas due to lack of spectrum. This worried the government. Given that telecom is a key thrust area, with the government setting a target of achieving 250 million subscribers by 2007, there was a growing urgency to resolve the spectrum issue.
End-2005, the Parliamentary Standing Committee on Information Technology stepped in and questioned each operator, DoT and TRAI. It blamed DoT for its haphazard planning and spectrum allocation policy, and for its failure to anticipate the demand.
It stated that the lack of planning on the part of the department had led to ad hoc and injudicious allocation of spectrum, which in turn had caused “nonavailability of this scarce resource to telecom operators when they needed it the most for faster expansion,” the committee stated in its report. It also criticised the Wireless Planning and Coordination (WPC) wing of DoT, stating that it was “deeply concerned by the defence ministry’s complaint that the WPC took between two and three years to give clearances for spectrum”.
The committee recommended that the government make all efforts to allot as much spectrum as possible in the 800/1900 MHz band to CDMA operators and the 900/1800 MHz band to GSM players for the expansion of telecom services.
This resulted in a fresh war between GSM and CDMA operators, with each accusing the other for misleading the government. The GSM operators claimed that release of 1900 MHz frequency to CDMA operators would mean giving them an immediate backdoor entry into 3G services and would be “grossly anti-competitive”. GSM operators also felt that the playing field had been skewed in favour of CDMA operators because the extra spectrum for GSM operators would be freed by the defence services much later.
In response, the Association of Unified Telecom Service Providers of India (AUSPI) retaliated claiming that the GSM lobby was misleading the committee through incorrect submissions, stating that there were no rollout criteria for CDMA operators. Also, it did not respond to the committee’s ruling that there was a discrimination against CDMA operators with regard to spectrum allocation.
AUSPI pointed out that even DoT, in its submission before the committee, had stated that contrary to the claims of GSM operators that 100 MHz spectrum was available to CDMA operators, only 20 MHz was actually available. It also stated that while CDMA operators were eligible to use the 1800 MHz frequency as they had migrated to the universal access service licence, it was yet to be allocated. Both lobbies also remained in disagreement over conflicting claims with regard to the availability of CDMA equipment in the 2.1 GHz frequency.
While both parties continued to slug it out, the standing committee raised the issue of the defence forces vacating spectrum for the use of mobile operators. The committee suggested that the government provide financial compensation and allocate alternative spectrum band to the defence forces so that they could release the additional spectrum needed by telecom companies. “Without a major reworking of the defence networks and applications involving major spectral and financial compensation and alternative spectrum, it may be very difficult to impart a sense of urgency to vacate additional spectrum.” The panel urged DoT to take up the matter at the appropriate level, and award financial compensation to the defence services, which has been pegged at Rs 12.35 billion, of which DoT has yet to pay up Rs 3.45 billion on account of spectrum vacated earlier.
Late January 2006, the defence ministry responded and said it would release additional spectrum in 1800 MHz band for GSM operators, but it would take 15 years ?? the period it would take to plan replacement of its existing equipment with spectrum-efficient machines. Given the large size of the armed forces and budgetary constraints, it would be impossible to modernise all the equipment at once. Refarming of spectrum would, therefore, have to be a slow process keeping the long-term perspective in mind. In other words, though the Department of Defence (DoD) would release some spectrum for commercial use, the release of 1900 MHz frequency as an additional band for CDMA operators or the 1800 MHz band for GSM operators would probably take 15 years.
To hasten the leisurely pace, the government took matters into its own hands and set up the GoM. The GoM would, based on the current occupation of spectrum, clearly delineate a transition path to enable users like the defence and paramilitary forces to migrate to more appropriate spectrum slots, keeping in mind technology upgradation, nature of usage and procurement procedures.
The GoM would also draft a pricing policy that would look at spectral efficiency, sectoral business viability and profitability models, which would be different in the case of voice, data/text and images. The spectrum pricing policy would, as far as possible, aim to generate revenues, fully offsetting the cost of vacating of spectrum by the defence forces.
Though the time-frame for its recommendations is not known, analysts believe it would be done speedily. According to Mahesh Uppal, telecom analyst, “Though decisions on spectrum-related issues are very critical and sensitive in nature and must be handled very carefully, such issues cannot be kept pending forever.” Analysts also believe that given the difference in thinking between DoT and TRAI, it is important that any workable solution should include a clear agreement on all crucial issues, including auctioning of spectrum.
