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In its recommendations to the government, the Telecom Regulatory Authority of India (Trai) has made it clear that holding an auction in February without adequate spectrum could spell doom for the industry and consumers. But the Telecom Commission has rejected the possibility of getting additional airwaves from defence services and sent the suggestions back to the regulator for reconsideration. A formal reference from the department of telecommunications (DoT) is awaited but Trai chairman Rahul Khullar makes it clear the tussle between defence services and DoT cannot be ended at the bureaucratic level; a political call has to be taken. In a candid interview with Surajeet Das Gupta & Sounak Mitra, he says a botched auction could have serious consequences, and suggests the way out. Edited excerpts:
The Telecom Commission has quashed earlier recommendations and referred those back to Trai. How realistic are its points?
Officially, we have not yet received a back-reference from DoT. When we do, we will respond. Like in 2010, it is likely to be a supply-constrained auction this time as well. So, we need to increase the availability of 900-MHz and 1,800-MHz spectrum. Also, the auction should be extended to 2,100-MHz or 700-MHz and 2,500-MHz bands. If the government cannot presently release spectrum for commercial use, it should give a clear road map for 700-MHz and 2,500-MHz bands, for the future.
Without 2,100-MHz, the pressure will come on the 900-MHz band. Operators are rolling out 3G services on 900-MHz spectrum. There will not be a mad rush if 2,100-MHz is made available. If we proceed with a supply-constrained auction, it will be another bloody battle; prices will shoot up because of short supply. Eventually, that will hit the telecom industry hard and there will also be a spillover effect on other sectors.
But a shortage of spectrum cannot be mitigated till defence services vacate 2,100-MHz spectrum for commercial use...
If the aim is to deliver on broadband and 'Digital India', the government has to make more spectrum available for commercial use. The objectives cannot be achieved without that. If a country like the US can ask its Defence to free up spectrum for commercial use, why can't we?
Globally, the total quantum of spectrum is the same for all countries. What is required is a proper mapping for allocation. With better mapping, there could be much more for commercial use.
Defence services have spectrum sitting idle. That can easily be vacated for commercial use, after considering security concerns. The Defence might need that in border areas but surely not across the country. In that case, why let the spectrum sit idle? This will be a political decision.
What do you think can resolve the DoT-Defence tussle?
The Defence-DoT tussle needs political resolution. Certain things can only be settled at that level, and not by bureaucrats. The way things are moving, the industry might be heading for serious issues; this inter-ministerial impasse cannot be allowed to continue.
In the previous auction, some operators picked up spectrum in the 1,800-MHz band. But that is mainly for long-term evolution (LTE) services, and partly a back-up option for a situation where they fail to retain 900-MHz on renewal.
The health of the industry should surely be on the government's mind. After all, the industry is the source of recurring revenues. Besides the spectrum auction price, the government also gets the licence fee, spectrum usage charges, corporation taxes and service tax. By comparison, with spectrum sitting idle, the government actually loses money.
If the government decides to go ahead with the auction without resolving the spectrum crunch issue, what could be the result?
If the incumbent operators, after having invested years in building infrastructure, fail to retain their current spectrum holding, they will have to shut shop. This will disrupt the entire ecosystem - consumers, business entities, lenders (bankers).
Then why is the government not resolving the issue?
I am sure the government is concerned about the health of an industry that is, essentially, the backbone for building 'Digital India'. This is what the government has been talking about. With a shortage of spectrum, the government's 'Digital India' agenda will fail. To realise the objective, we need to take hard decisions for making airwaves available.
Should the planned auction be put off till there is enough spectrum to offer? If operators and consumers, as you say, are likely to be affected - as the operators might not be able to win back spectrum - why did you not recommend extension of licences. There would have been no disruption and they could have been asked to pay market price without losing spectrum?
Postponing the auction was never on Trai's agenda. In fact, extending licences could have been very dangerous.
How would you decide a market-determined price for spectrum if you extend licences and do not auction spectrum? And, if you ensure availability of spectrum to incumbents, what will you auction?
Is there an alternative to resolve the crisis?
Globally, apart from auctions, there are a few other models as well. While auctioning is done in some countries like the US, Japan has never taken that route. In several other countries, the number of operators is capped and the licences are renewed from time to time. And, the belief that all spectrum should be auctioned is changing. Some regulators are moving away from that position. The government could look at those alternatives.
Are Trai and the government heading for a policy impasse?
Like it happened last year, the government will take a final decision after response to back-references. But, an impasse is unlikely.
As we said earlier, if Trai's idea of reserve pricing is not acceptable, DoT could devise its own methodology. The problem is that nobody wants to take a decision. When you can fire from someone else's shoulder, what is a better shoulder than the regulator's?
DoT has also rejected the proposal for an extended-GSM band. It has also said it cannot take back spectrum from BSNL because that is not legally tenable.
The extended-GSM band is only one way of increasing spectrum that is equivalent to 900-MHz. What is the problem in getting back 900-MHz spectrum from BSNL? The government owns the company. BSNL has not paid for the spectrum to boot. We have suggested taking back part of the spectrum it holds in the 900-MHz band and giving some 1,800-MHz spectrum instead. This is a policy issue, not a legal one.
