The Cellular Operators Association of India (COAI) held a press conference to discuss the Telecom Regulatory Authority of India?s (TRAI) recommendations on the Auction of Spectrum.
The main point of discussion at the event was the likely impact of the recommendations.
Thereafter, COAI released a statement saying, ?The TRAI recommendations on Spectrum Auction have come at a time when the industry is reeling under heavy financial burden and there is a strong decline in investor confidence. It is therefore surprising to the industry, that being fully conversant of the present conditions; the TRAI has come out with a highly retrograde set of proposals/recommendations on spectrum auctions that militate against National Telecom Policies, harms consumers, jeopardises rural connectivity and is certain to further harm the financial health of the industry.?
The impact on consumers includes:
a. The high reserve prices are estimated to increase retail prices by approximately 30 per cent or higher as the exorbitant investments thereafter will get passed on to the consumers. In fact, a preliminary estimate shows that the impact of spectrum fee to be paid at the time of extension of license for Delhi Circle alone would result in an increased cost of around 40 per cent for the customers.
b. As a result, affordability of telecommunication services, especially in the rural areas of the country, will be severely hampered.
c. The consumer uptake of data and VAS services will also be affected adversely due to increased costs of service.
d. The artificial scarcity of spectrum, created by holding back 80 per cent of the resource, will lead to coverage and connectivity issues as the Quality of Service will deteriorate.
e. The refarming process will attract huge investments from the operators and the consumers again will have to bear the brunt of increased costs.
The impact on the nation, the economy and NTP 2012:
a. It is an established fact that a 10 per cent increase in teledensity leads to an increase of 1.4 per cent increase in GDP
b. The high auction prices will lead to apparent decrease in the funds of the operators and they will be unable to invest further to expand or even sustain their services. This will constrict the pace of growth in teledensity, especially in the rural areas, hampering the growth of GDP in turn
c. The Government?s primary objectives as evident in the draft NTP 2012- affordable mobile services, 100 per cent rural penetration, broadband for all, developed communication infrastructure; stress on e-governance, e-health, e-banking, etc. will suffer a severe setback
d. In fact, the proposed steps are likely to push back the industry by several years, thus compromising both the connectivity as well as the broadband agenda of the country
e. As many companies will not be able to sustain/expand their business/services due to the high prices and low spectrum availability, there will be significant job losses in the market and further employment opportunities will also diminish
f. India?s incredible growth story in telecommunications will be curbed and it will fall behind other nations in terms of socio-economic development (as teledensity is considered a measure for socio-economic growth and an index of national competitive advantage)
3. The impact on the industry includes:
a. The industry, already in tatters, will suffer further deterioration in its financial health
b. With limited capacity and avenues for raising funds, the investments will also take a severe beating
c. Write-offs necessitated by refarming will deteriorate balance sheets further and make borrowing impossible
d. Capex of operators to increase as infrastructure needs to be doubled for the 1800 MHz band which would be extremely challenging after the expenses incurred in acquiring spectrum
e. Overall CAPEX and OPEX expenses will drastically rise even for present 2G services offered making it unviable for players providing vanilla voice services
4. Impact of the high reserve price:
a. The reserve prices recommended by TRAI for different bands of spectrum are exorbitantly high and unrealistic
b. There is no rationale provided by TRAI for this significant increase in the reserve price
c. Rather, the TRAI has displayed some inconsistency in its proposals, having come out with two different prices for the 1800 MHz spectrum in the last two years
d. Liberalisation, as is being postulated by TRAI is totally inconsistent with the policy of technology neutrality and license conditions. The provision of ?liberalization?, as being referred to, is completely untenable since we are in an acknowledged technology-neutral environment since September 1999
e. Supporting eco-system for ?Liberalised Spectrum? is non-existent at present and at least five years away. Less than 5 per cent of the present customers use 3G and the handsets for 4G are hardly available. In fact for LTE-TDD, the voice standards are yet to be defined
5. Limited Spectrum Availability:
a. The TRAI has recommended placing only a 5MHz block of spectrum for auction presently out of the 110 MHz it has earmarked for auction while the available spectrum in the 1800 MHz bandwidth is 581 MHz
b. Creating ?artificial scarcity? by holding back almost 80 per cent of the available spectrum and deliberately extorting a higher auction price from the industry will eventually hurt the end consumers as the expenses would be passed on to them
c. Coverage and connectivity issues will arise as the Quality of Service will deteriorate
d. Limiting spectrum to 5 MHz suggests the end of new operators whose licenses stand quashed as less spectrum will prove insufficient
e. Holding spectrum idle will lead to loss in revenues for the government and also deprive the people of better quality of services
6. Spectrum Refarming:
a. The proposed activity by TRAI is ?eviction? and ?redistribution?, rather than ?refarming? of spectrum
b. The recommendations disregard international best practice in spectrum policy and is not supported internationally
c. Will lead to massive write-offs in balance sheets
d. Highly questionable legal basis leading to threat of litigation
e. Not mandated as per the Supreme Court?s ruling
7. Roll-out Obligations:
a. Once market driven forces are used to derive the pricing of spectrum, the same market factors should determine recouping of revenues through the rollout of the network
b. Operators are already contributing towards USO fund earmarked for rural penetration therefore any additional mandates for rural rollout is tantamount to a double levy
c. Social policy imperatives for rural penetration and coverage should be driven by government initiatives such as government subsidies, grants from the USO Fund, etc.
8. Non-level Playing Field with Dual Spectrum Operators:
a. TRAI seems to legitimise the illegitimate grant of 3G spectrum to dual spectrum players as The Supreme Court order dated February 2, 2012 clearly observed all decisions taken pursuant to the government?s press release dated January 2008 and during September 2007 ? March 2008 to be arbitrary, rendering them illegal
b. Dual spectrum players will continue to hold the same GSM spectrum at ten times lower price, while new bidders and operators pay a heavy sum for the same
c. The GSM spectrum (1800 MHz) wrongfully allocated to the dual spectrum operators and which have been excluded from the proposed auction; further narrows the available spectrum for auction
d. Dual spectrum operators offering EVDO services in their existing spectrum without paying auction prices as determined by the 3G auction- have already enjoyed commercial benefits
e. Dual spectrum operators allowed to pay separate spectrum usage charges in 800 MHz (for CDMA) and 1800 MHz (for GSM) respectively. This is despite TRAI itself having recommended earlier that the spectrum should have been clubbed for the purpose of paying spectrum usage charges.
What the industry wants:
- All available spectrum be auctioned
- Reduce the reserve price by at least 80 per cent
- Allow market to discover the true spectrum price
- Respect the already available technology-neutrality, and reject the TRAI recommendations for ?refarming?
- Dispense with rollout obligations for auctioned spectrum
- Level playing field versus dual spectrum operators
