Within a month of the government referring the contentious spectrum issue to the Telecom Regulatory Authority of India (TRAI), the regulator has released a consultation paper on the subject. The paper, “Allocation and Pricing of Spectrum for 3G Services and Broadband Wireless Access”, has been drafted to encourage further discussion among the stakeholders on various relevant issues.
In May last year, TRAI had undertaken a similar exercise and forwarded its recommendations on spectrum to the government. However, these ran into problems with both GSM and CDMAbased mobile operators differing in their views on how spectrum ought to be allocated and priced. With the defence services now agreeing to release spectrum in specific bands, TRAI has again been consulted for its views on spectrum.
TRAI’s main objective is to ensure that service providers have adequate and appropriate spectrum to deploy high quality advanced wireless networks. The paper is expected to facilitate an informed discussion on how to ensure spectrum availability for 3G services in an equitable and transparent manner.
According to the paper, 3G or IMT2000 services will facilitate high speed data transfer, mobile internet access and entertainment such as games, music and video programmes using images, video and sound for mobile users. Since the number of players in India is far more than in other countries, allocating spectrum for 3G services has become a complex issue. The consultation paper, therefore, addresses three major issues. First, the identification of preferred bands for IMT-2000. Second, the possible methods of allocating spectrum given the present and future needs of a growing and competitive market. Fair and equitable spectrum allocation will ensure telecom growth and high quality of service for both CDMA and GSM operators. Third, spectrum pricing. Since spectrum is a scarce resource, pricing mechanisms need to be put in place so that it is efficiently used.
Spectrum allocation for 3G services
The ITU has identified various frequency bands for IMT-2000 services. For instance, the World Administrative Radiocommunication Conference-1992 identified the 1885-2025 MHz and 2110-2200 MHz bands. And the World Radiocommunication Conference-2000 identified the 806-960 MHz, 1710-1885 MHz and 2500-2690 MHz bands.
In its earlier recommendations, TRAI had suggested 2 GHz spectrum allocation for both GSM and CDMA operators for offering 3G services. If that is agreed upon, each existing operator would be given 2×5 MHz in the IMT-2000 2 GHz band.
One option for allocation, as per TRAI, could be that spectrum allocated in IMT-2000 bands is treated as an altogether separate service, as has been done in several countries. Another option could be that the IMT-2000 band is allocated to the existing operators as a continuation of 2G mobile services based on specific criteria as decided by the government. The internAtional practice for the allocation of 3G spectrum, in the UK, for example, was to allow new operators to enter the market to offer 3G services in addition to the exis ing operators. In some other countries like Malaysia, all the existing operators were not offered 3G spectrum initially. This raised the question of whether allocation of 3G spectrum should be treated differently from that of 2G spectrum.
With the availability of in-band 3G equipment, TRAI points out that it would be difficult to link the spectrum to 2G or 3G services. For example, in the 800 MHz band, a CDMA operator can offer both 2G and 3G services. Similarly, in future, if GSM operators opt for WCDMA, which can offer 3G services in the 900/1800 MHz frequency band, should it be treated differently and called 3G spectrum just because a service offers high speed voice/data service?
The following questions have been raised for discussions with stakeholders.
- What principles and criteria should be taken into consideration for identification of specific bands for 3G services in India?
- Should spectrum in 2 GHz be given to all operators?
- What should be the quantum of spectrum allocated to each operator?
- Should the spectrum in 2 GHz be allocated only after ensuring that at least 2×5 MHz is available to all operators in a service area?
- If the available spectrum is less than the demand, what should be the criteria for allocation of spectrum to existing mobile operators in the 2 GHz band?
- Should the present spectrum allocation criteria be modified so that the available spectrum is immediately allocated?
- Should rollout obligations be specified for IMT-2000 (3G) services?
- Should allocation of spectrum in the IMT-2000 band be linked to infrastructure sharing?
- Keeping in mind the requirement of IMT-2000 and Wi-Max, what should be the criteria for allocation of spectrum in the 2500-2690 MHz band?
Spectrum pricing
Under the existing licensing framework, a licensee is required to pay a one-time entry fee, which includes fees for spectrum usage. The structure also includes annual spectrum charges, which are on a revenuesharing basis as a percentage of the adjusTed gross revenue (AGR).
The two components of spectrum pricing could be entry fee (one-time) and annual spectrum charges. Keeping in view the fact that spectrum is a scarce resource, the issue for consideration is whether operators who are allocated IMT-2000 (3G) spectrum should be charged a onetime entry fee or not. One view is that there should be a pricing policy, especially in light of the revenue potential from the sale of spectrum. However, TRAI believes that if a very high cost is imposed on 3G spectrum, service providers will have no other alternative but to pass on the cost to consumers. Affordability then becomes a key question. If the service is not affordable, it will not have any takers and volumes will not grow, resulting in a further hike in its cost.
Therefore, various spectrum pricing alternatives have been discussed. These include auctions, cost recovery and market-based benchmarks. One of the options suggested for determining the annual spectrum charges for IMT-2000 spectrum allocation to existing operators is that the quantum of IMT-2000 spectrum assigned is added to the spectrum already available to the operator in the 800/900 MHz and 1800 MHz bands.
Another option could be to charge the annual spectrum fees separately for both existing and 3G services. However, in this case, if the annual spectrum fee is levied as a percentage of the AGR, the segregation of 2G and 3G revenues would be difficult. The third option could be to levy a fixed amount as annual 3G spectrum charges.
The questions for discussion are:
Revenue to the government and requirement of funds for refarming.
Spectrum for wireless broadband services
In addition to 3G spectrum allocation and pricing issues, the paper also discusses issues related to spectrum for broadband wireless access as these technologies hold huge potential for rapid and comparatively inexpensive deployment of broadband services, especially in rural India.
TRAI estimates that rural broadband access may require a data rate of 10 Mbps per cell whereas business centres in bigger cities may need data rates beyond 20 Mbps per cell. With the assignment of 7 MHz using 16 QAM modulation with coding rate of half, an operator can achieve a data rate of 10 Mbps, which may be sufficient for the rural areas. As there are a large number of service providers wanting to provide broadband access throughout the country, the demand for spectrum for deployment of Wi-Max is likely to be more than what is being presently assigned. Suitable spectrum allocation criteria need to be developed keeping in view the limited spectrum available.
In India, mobile operators are allocaTed spectrum on the basis of service area. To allocate more spectrum, the pricing issue once again crops up. The issues to be discussed in this regard are:
- What should be the ideal frequency band for Wi-Max for India?
- Is it possible to indicate any hierarchy of preference for frequency bands in the context of availability of spectrum and global manufacturing plans?
- What should be the optimum/minimum quantum of spectrum to be assigned per operator for Wi-Max for efficient network deployment and business viability?
- How should spectrum allocation for Wi-Max deployment be done if sufficient spectrum is not available?
- Should the existing pricing formula for Wi-Max deployments continue or does it need to be modified? What should be the alternative pricing methodology?
The TRAI consultation paper recognises the importance of 3G and wireless broadband technologies for the rapid deployment of these services in both urban and rural India. It has asked the stakeholders to respond within a month so that it can take its recommendations forward.
