As per the Department of Telecommunication’s (DoT) existing guidelines, if spectrum is being shared between telcos, the spectrum usage charge (SUC) rate for each of the licensees post sharing increases by 0.5 per cent of their adjusted gross revenue (AGR). However, DoT has, in the past, received several representations from telcos requesting that this incremental SUC rate be applied only to the particular spectrum band in which sharing has taken place and not on the entire spectrum held by telcos.

DoT had, therefore, sought the Telecom Regulatory Authority of India’s (TRAI) views on whether the incremental SUC rate should be applied to only the specific band in which sharing is taking place, or to the overall weighted average rate of SUC that has been derived from all bands. TRAI has now released a consultation paper on “Methodology of applying SUC under the weighted average method of SUC assessment, in cases of spectrum sharing” and has solicited the views of industry stakeholders on the same.

Background

In February 2012, DoT had issued broad guidelines for the sharing of 2G spectrum in the 800/900/1800 MHz bands. For spectrum obtained through auction, the guidelines provided that spectrum sharing would be permitted only if the auction conditions permit the same. In the notice inviting applications for the spectrum auctions in November 2012, March 2013 and February 2014, it was stated that operators whose entire spectrum holding in a particular band (900 MHz/1800 MHz and 800 MHz) is/has been liberalised would be permitted to share spectrum without any additional one-time spectrum charge.

In 2014, when TRAI was finalising its guidelines on spectrum trading, telcos had requested the regulator to come out with comprehensive and elaborate guidelines for spectrum sharing too. Subsequently, TRAI submitted its recommendations on the “Guidelines on Spectrum Sharing” to DoT in July 2014, which were notified by DoT in September 2015.

In its recommendations in 2014, TRAI had, inter alia, mentioned that all access spectrum can be shared provided both licensees are having spectrum in the same band. It was also mentioned that the SUC rate of each of the licensees post sharing will increase by 0.5 per cent of the AGR. Considering that it is not possible to monitor the quantum of spectrum being shared at each site and segregate the AGR site-wise/area-wise, TRAI recommended that for the purpose of charging SUC, it will be considered that licensees are sharing the entire spectrum holding in the particular band in the entire licence service area (LSA).

DoT, in its reference to TRAI dated January 2020, had mentioned that it has been receiving representations from telcos that the incremental SUC rate should be applied only to the particular spectrum band in which sharing is taking place and not on the entire spectrum held by an operator. DoT has forwarded these representations to TRAI and asked for recommendations on whether the incremental SUC rate should be applied only on the specific band in which sharing is taking place or to the overall weighted average rate of SUC, which has been derived from all bands. The department also furnished a sample calculation sheet on the weighted average SUC rate applied post sharing wherein DoT has provided two scenarios, one where the SUC rate is incremented by 0.5 per cent in a particular band while computing weighted average SUC rate; and two, the overall weighted average SUC pre-sharing arrangement is incremented by 0.5 per cent.

Current practices

The prevailing rates of SUC vary with the methodology of spectrum allotment, that is, allotted administratively or allocated through auction. Further, SUC rates vary for the same spectrum band allocated through different auctions. The applicable differential SUC rates, weighted average SUC (subject to a minimum of 3 per cent) is applied to the overall AGR of the licensee for computation of the SUC payable.

The premise on which TRAI had earlier recommended an increase in the SUC rate by 0.5 per cent was that the pooling of spectrum would increase spectrum utilisation and additional capacity would generate more revenue. However, there are two issues that need to be considered from a telco’s standpoint, for which they had made the following representations:

One, the SUC is ideally an administrative charge, payable to the government towards the administrative cost for the management of spectrum. As telcos are already paying SUC for the spectrum allotted to them as a percentage of AGR, spectrum sharing may not necessarily justify an additional SUC burden on them.

Two, the revenue earned by a telecom operator depends on many factors such as competition, customer profile, affordability level, input costs and tariff. In the past couple of years, the number of telcos has reduced from 13 to 4 in a given LSA. The competition and low tariffs have also resulted in an overall reduction in the AGR earned by telcos. Any increment in the SUC rate upon sharing of spectrum would essentially result in an increase in telcos’ outgo (through SUC levy), irrespective of whether there is an increase in the revenue or not.

It may be noted that if the revenue of telcos increases as a result of spectrum sharing, the existing SUC rate will also result in an increase in the SUC payable, as the telcos involved in spectrum sharing are already paying SUC as a percentage of AGR on their respective spectrum holding.

Further, if the SUC rate is left unchanged post spectrum sharing, telcos would be more willing to use spectrum sharing to improve their network in areas having congestion and to also fix coverage issues. Therefore, it may be necessary to revisit the application and treatment of SUC, post sharing of the spectrum.

Issues for consultation

Given the background, TRAI has solicited views of industry stakeholders on the following:

  • Post sharing of spectrum, should the increment of 0.5 per cent on the SUC rate be applied on the spectrum holding in the specific band in which sharing is taking place or on the entire spectrum holding of a telecom service provider?
  • Is the SUC rate a deterrent for telcos to enter into spectrum sharing arrangements?
  • Will no increment in SUC rate post sharing of spectrum facilitate more sharing?
  • What other changes are required in the spectrum sharing guidelines to facilitate spectrum sharing?

Shared benefits

Spectrum sharing has a potential to increase coverage (due to lower cost) and mitigate congestion issues in the network. For optimising the cost of providing telecom services using latest technologies, telecom service providers across the world are resorting to various kinds of sharing mechanisms such as sharing of infrastructure, network and spectrum. Regulators are also promoting spectrum sharing by putting in place, enabling policies to facilitate spectrum sharing between operators.

In order to have policies that are future looking and support innovation, it is important to understand the necessity and advantage of spectrum sharing, in respect of the upcoming and new technologies. All over the world, 5G technology is either launched or will be launched soon. Spectrum availability is the first requirement to facilitate the launch of 5G by telcos. For the success of 5G, infrastructure sharing is one of the key requirements and spectrum sharing is not an exception. Therefore, to promote spectrum sharing there is a need to examine the issues being faced by telcos in entering into spectrum sharing arrangements.

TRAI has given time up to June 3, 2020 for the submission of written comments and June 17, 2020 for counter comments.

By Akanksha Mahajan Marwah