India on Wednesday approved the much-awaited norms for telecom companies to trade in radio frequency spectrum in a move that can go long way in consolidating this scarce resource, improve the quality of service and even fetch revenues for airwave-surplus companies.
"We have approved the spectrum trading norms. Now, telecom companies can trade in spectrum among themselves. For this they need not take government permission," Communications and IT Minister Ravi Shankar Prasad said after the approval at a meeting of the cabinet.
"Telecom companies only need to inform the government 45 days in advance before trading and they have to give an undertaking," he said, adding this policy was expected to resolve the problem of fragmented spectrum holding in India.
But the government did not take into account another industry demand of making this a free affair. A non-refundable transfer fee of 1 percent of the transactional amount or of the market price is to cover the "administrative charges" in servicing the trade. This will be paid by the buyer.
The move comes against the backdrop of another related decision taken last month -- on spectrum sharing. Under these guidelines, companies in an area with the same band of spectrum could pool this active infrastructure .
The need was expressed since India allows spectrum to be assigned for 20 years, during which some operators are able to acquire the requisite number of subscribers to justify their holding, while others are saddled with excess resource.
Under spectrum trading, the companies that have been allocated spectrum can transfer their rights and obligations to another party -- a move that will allow better usage as the idle spectrum from the hands of one service provider will get transferred to another facing a crunch.
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Prasad said that while the government needs to be only informed, if any failure to stick to this is found during sample checking, the government will take strong action and the companies shall not be allowed to trade in this resource.
"This is a revolutionary step," Prasad said: "Spectrum trading has been permitted in all bands."
The industry reaction was on expected lines -- both welcoming but also with some reservations on some of the conditions, notably on the cap on trading, applicability only for auctions of 2010 and a two year moratorium from the date of effective assignment.
"Overall, we are very thankful to the government for approving both spectrum sharing and trading norms. This will be very helpful to the industry," said Rajan S. Mathews, director general of the Cellular Operators Association of India.
"But, it's not a game changer. The spectrum cap will be a limiting factor," Mathews told IANS.
Mahesh Uppal, director of telecom consultancy firm Com First, also said the move will increase the flexibility in acquiring spectrum and will prove to be good news for the sector. "But it is difficult to quantify the benefit," he added.
"Some players with underutilised or idle spectrum will be able to monetise it. Therefore, any added flexibility in spectrum use is welcome, unless it comes with new riders," Uppal told IANS
According to the norms, spectrum trading will not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.
"The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer," as per the norms.
"A non-refundable transfer fee of one percent of the transactional amount or one percent of the prescribed market price, whichever is higher shall be imposed on all spectrum trade transactions, to cover the administrative charges incurred by government in servicing the trade," it said.
The guideline mentioned that the buyer should comply with the prescribed spectrum caps from time to time. The spectrum acquired through trading will also be counted towards the spectrum cap by adding to the such a holding of the buyer.
Arpita Pal Agrawal, leader of telecom sector with PwC, said this was a welcome move for spectrum-starved industry and that it should help alleviate to a significant extent the 'quality' issues being faced by Indian customers. Yet, she hoped the norms will be simplified enough.