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Satellite spectrum wars: No auction, foreign companies likely to benefit

Despite domestic telcos' insistence, earlier legal judgements have only called auction 'preferable' in the case of natural resources

In July this year, a curious situation emerged in the telecom auctions. There was no bid for the spectrum band commonly referred to as millimetre wave (MM wave).
Representative Picture
Subhomoy Bhattacharjee New Delhi
7 min read Last Updated : Oct 23 2024 | 10:31 PM IST
In July this year, a curious situation emerged in the telecom auctions. There was no bid for the spectrum band commonly referred to as millimetre wave (MM wave).
 
Interestingly, though there was no bid, domestic telecom service providers such as Reliance Jio and Bharti Airtel asked the sector regulator, Telecom Regulatory Authority of India (Trai), to make more mm waves available for auction.
 
The mm waves spectrum band helps to clear the traffic when airwaves get congested. Fifth generation (5G) networks are therefore veering towards this band in the approximately 30 GHz wavelength. The auction was for the adjacent 26 GHz band.
 
These wavelengths are also the same as those projected to be offered as satellite space spectrum by the government. Those services will be largely for fixed line services, unlike the 5G services for mobile devices.
 
This has been noted by the Trai, which recently issued a consultation paper which discusses how these waves can be productively used to offer satellite-based telecom services in the country.
 
Based on its recommendations, the Department of Telecommunications (DoT) has decided that there will be no auctions for these new categories of services. Instead, the government will allocate those, but at a price.
 
Telecom Minister Jyotiraditya Scindia has said satellite spectrum would be allocated administratively. His rationale is clear.
 
“Satellite spectrum across the world is allocated administratively. India is not doing anything different from the rest of the world. If you do decide on auctioning, then you will be doing something that is different from the rest of the world,” the minister said at an industry event this month.
 
He made it clear that there will be a price, but that the allocation rules will be set administratively by the Trai.
 
For foreign companies such as Elon Musk’s Starlink and Amazon’s Project Kuiper, this is good news. In a post on social media platform X, Musk said: “Much appreciated! We will do our best to serve the people of India with Starlink.” 
 
Consequently, after a long period of stasis, the telecom sector in India is now in the thick of public policy arguments, with large interest groups ranged on both sides. 
 
Business opportunity 
 
As things stand, for a similar set of waves, technology offers the prospect of offering two types of services – fixed and mobile. Indian telecom service providers have bet on offering the latter as 5G services and have settled on the auction route. 
 
Their revenue will come from mostly urban areas.
 
Their competitors plan on offering fixed satellite services, whose uptake will be mostly in the semi-urban and rural areas, although it will be available to all users.
 
“These waves can be used as shared services. This is not the case in the conventional terrestrial mobile services where operators need a specific part of the spectrum for exclusive use. So auctioning shareable spectrum is illogical. It risks raising prices and reducing competition,” says Mahesh Uppal, telecommunications consultant and director, ComFirst (India).
 
Reliance Jio, for instance, has written to the TRAI that “...further availability of 5G spectrum will aid in the proliferation of the 5G network”. Airtel has concurred, saying: “The availability of these new bands which are also classified as mm wave spectrum… will enable the further expansion of 5G/FWA services in the country.”
 
Both companies, smelling the business opportunity, are hungry for the mm waves. They are keen that spectrum in the 40-42.5 GHz range should also be put up for auction. If the price is right and adequate band waves are available, they will bid.
 
The discovered price for mm wave was Rs 14,700 crore for the 26 GHz band in the 2022 auction, a conservative price by global standards. As the United States government’s GSA report notes, in 2021, six mm wave auctions designed to support 5G deployment were completed in Chile, Slovenia, Denmark, Australia, Croatia, and Brazil. “In 2022, there has only been one such auction so far, in India for the 26 GHz range. This brings the total number of countries to have licensed millimetre-wave spectrum to 24,” it says.
 
Domestic telecom companies, having bought bare minimum spectrum in the 2022 auction, will not want to see low spectrum prices in an administrative allocation that would benefit their rivals.
 
New investors, that is foreign companies, however, would love the low prices, given the puny market size of 35 million or so fixed line users (Trai data).
 
“Even with the best of estimates of revenue per user (ARPUs), the growth multiple for these companies will be limited. Once one adds on telecom levies like spectrum usage charges (SUC) and licence fees, the appetite to pay large upfront fees through auction will be muted,” says Parag Kar, who specialises in strategies for spectrum management.
 
Kar’s estimate of the satellite broadband market reaching a business size of about $1.2 billion by 2032 is conservative. A Deloitte forecast says India’s satellite broadband market will expand at an annual rate of 36 per cent, potentially reaching a business size of $1.9 billion by 2030. 
 
What the law says 
 
Beyond the numbers, in deciding on the administrative route, the government may have the law on its side. Since the so-called ‘2G scam’ of 2012, India has preferred the safety of auctions in handing out telecom bands. The scam was about the alleged loss to the exchequer of  Rs 30,984 crore and a presumptive loss of  Rs 1.76 trillion in the allocation of 122-odd 2G licences given to telecom service companies.
 
Deepak Maheshwari, senior policy advisor at the Centre for Social and Economic Progress, points out that use of satellite for internet access has been allowed all along since the 1998 ISP (internet service provider) policy. So, the government had the leeway to decide how to allocate spectrum to use the space-based services. 
 
On usage of satellites, Maheshwari points out that “(the) telecom policy only mandated that spectrum allocation should follow the rules and principles of the International Telecommunications Union”. The policy also required telecommunications companies in India to pay SUC to the government and allowed spectrum users, that is, telecom companies, to use the spectrum for any mobile service.
 
“If anything, the government has the option to set a low administrative price for satellite spectrum without playing favourites. This will benefit large swathes of our geography where the benefits of digital services like UPI are thin due to patchy bandwidth in those areas. Satellite-based commercial services are the right option to expand access there. The government has a unique opportunity to support their delivery”, Uppal adds.
 
Maheshwari points out that spectrum allocation for satellite communication is non-exclusive, unlike that for, say, mobile communication. “Even in the 2G case verdict, the Supreme Court did not say that auctions were the only route. In response to a specific Presidential reference following the case, the Supreme Court clarified that auctions were not the only method for allocation of spectrum, only a preferred one,” he says. 
Why mm wave matters
 
Millimetre wavelength: To deliver fast multimedia services. High-quality audio-video and real-time services to a large body of consumers create traffic jams on the available bandwidths. 5G networks use millimetre wavelength to resolve the jams, the signals operate between 30 and 300 GHz.
 
Currently, the Indian satellite broadband industry is in its early stages. Its growth and business potential are expected to become more evident after several years. Therefore, says the Trai consultation paper, the current pricing exercise should consider the present state of the satellite industry while providing predictive insight into its future development.

Topics :SatellitesSpectrum Auctiontelecom servicesTelecom industry

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