Another Game Changer in India’s Telecom Sector

This come close on heals of the decision on spectrum sharing. The Union Cabinet chaired by the Prime Minister Narendra Modi, last week, approved a proposal of the Department of Telecommunications on guidelines for spectrum trading arising from the recommendations of the Telecom Regulatory Authority of India (Trai). Together with the earlier decision, this is expected to transform the spectrum usage in the telecom sector.

Historically, in most countries, the telecom sector was a highly regulated sector where the government used to decide the procedure for allocation of spectrum. Recognising the benefits of telecommunication facilities, over the past two decades, there has been growing consensus that because of significant increase in the demand for spectrum, the prevalent regulatory paradigm would prove inadequate to deal with the situation on hand. Licensed service providers need flexibility to respond quickly to changes in the market demand and technology.

Spectrum Regulation
In India too, attention has been drawn to new ways of spectrum regulation, with increasing emphasis on evolving more flexible and market oriented approach to increase opportunities for efficient spectrum usage, for better services to consumers.

In India, the spectrum assignment is made for a period of 20 years. During this period, some operators are able to acquire subscribers and grow at a faster rate as compared to other operators. This results in the spectrum lying unutilised with some of the players while other operators face spectrum crunch as spectrum is a scare resource. In India, unlike other countries, the availability of the spectrum is relatively small. Therefore, spectrum sharing and spectrum trading are necessary to make up the inadequacy. It will not only improve the quality of service and but also help address the issue of call drops.

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party. This allows better spectrum usages as the idle spectrum from the hands of one service provider gets transferred to the other service provider who is facing spectrum crunch. This also improves customer satisfaction and services of the service provider acquiring spectrum.

Some of the key points in the recent proposal are:

  • The spectrum trading would be allowed only between two access service providers. Only outright transfer of right to use the spectrum from the seller to the buyer would be permitted.
  • Spectrum trading would not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.
  • A telecom service provider would be allowed to sell the spectrum through trading only after two years from the date of its acquisition through auction or spectrum trading or administratively assigned spectrum converted to tradable spectrum. It was clarified that in case of administratively assigned spectrum converted to tradable spectrum after paying the prescribed market value, period of two years would be counted from the effective date of assignment of spectrum.
  • In December, 2013, the then government had approved in-principle the spectrum trading, however, the detailed guidelines were not issued and therefore this policy could not be implemented.

The issue was under consideration of the present government as this arrangement is expected to lead to greater competition; provide incentives for innovation; better data services, utilisation of state-of-art technologies, being available to consumers at cheaper tariffs; better choice to consumer, etc. This would also facilitate ease of doing business in India by allowing free play in the commercial decisions and leads to optimisation of resources.

One hopes that this would fulfil the present government’s commitment of ease of doing business apart from improving the spectral efficiency and quality of service which is very essential to fulfil the dream of Digital India.