Govt is throttling spectrum supply

Making 700 MHz almost twice as expensive as 800 MHz will put huge burden on the debt-laden telecom industry

The Telecom Regulatory Authority of India, or Trai, has stirred up a hornet's nest with its recommendation that the reserve price for spectrum in the prized 700 MHz band should be four times the price at which spectrum was sold in the 1800 MHz band in 2015. Since this band is proposed to be auctioned for the first time, there were no benchmarks available; hence this formula. Bharti Airtel, the country's largest operator of telecom services, has said that it will not bid for 700 MHz in the forthcoming auctions because the proposed base price has rendered it unaffordable. Other telecom companies too have said it is too expensive, though nobody else has categorically stated that they will not take part in the auctions.

The companies' argument is that for all other new bands, Trai has gone by propagation characteristics to discover their reserve price. However, in the case of 700 MHz, the regulator has settled for international comparison: the prices of 700 MHz and 1800 MHz spectrums auctioned in a handful of countries in 2010-11. There, Trai observed, the price of 700 MHz was four times that of 1800 MHz. That is how in 2012 it felt that it was the right ratio for India too. In its latest recommendations, Trai has fallen back on that observation. Some analysts have said that in the Trai calculation, barring Germany, which had a ratio of 28.5 because of the low price of 1800 MHz spectrum, all other countries had a ratio of below four. So, in India too, the ratio ought to be below that. Industry has also argued that the propagation characteristics of 700 MHz are very similar to those of 800 MHz, and therefore, spectrum in the two bands should be similarly priced. In their calculation, Trai's recommendation will make 700 MHz almost twice as expensive as 800 MHz and impose a huge financial burden on the debt-laden telecom industry. It so happens that 700 MHz is a highly efficient band, and gives great signal inside homes and offices. As telecom companies migrate to 4G-LTE services, possession of this spectrum will hold the key.

Now that the days of government allocating inexpensive spectrum are over, as the target of universal telecom coverage has more or less been met, the government cannot really be faulted for trying to maximise its revenue from spectrum auction. It can, however, be faulted for artificially throttling the supply of spectrum. True, those who cannot afford 700 MHz spectrum can settle for what is available in the 800 MHz and 900 MHz bands - except that there just aren't enough airwaves available in those bands in the forthcoming auctions. There is some spectrum available in 1800 MHz, but it is fragmented - which makes it unsuitable for 4G-LTE services, which being data-heavy require airwaves in lots of five MHz. There is thus a pressing need to harmonise this spectrum so that blocks of five MHz can be carved out. Also, the matter with the armed forces to vacate the band needs to be sorted out as early as possible. The telecom regulator and the government should both examine far-reaching suggestions that spectrum be pooled, and some form of metered access permitted. In the absence of cheaper and more efficient alternatives, telecom services may continue to suffer.