Does the spectrum policy need a rehaul?

With the spectrum about to be made available a lot less than the demand from new and existing players, the debate has a new urgency.

T V RAMCHANDRAN,
Director General, COAI

Private GSM firms have paid Rs 1,500 cr extra for the spectrum "" no other method would generate more revenue for the state

In most countries, spectrum for mobile services is given upfront when the license is awarded. In India, however, this approach was not possible due to legacy reasons. Thus, when mobile services were first introduced in 1994-95, the initial spectrum allotment was only 4.4 MHz, which was sufficient only to roll out the network and commence provision of services.

The genesis of the subscriber-linkage policy can be traced back to early 2002 when the government decided that additional spectrum would be given to operators once they reached a subscriber base of 5 lakh in the service area. It was also decided that this would attract a higher usage charge. This approach was further developed in 2003 when the government examined spectrum utilisation practices, and so on, of GSM operators and laid down a roadmap for upto 12.4 MHz with a provision for the allotment of upto 15 MHz per GSM operator. In March 2006, the criteria was further fine-tuned with a tightening of subscriber linkages, introduction of the VLR concept and extension of subscriber linkages upto 15 MHz per GSM operator. It may also be noted that in the case of GSM operators, each additional tranche of spectrum attracts a higher usage charge and it is not that the spectrum is being given away free.

In fact, it is estimated that private GSM operators have, till date, paid around Rs 1,500 crore for this additional spectrum, that is, over and above the usage charge of 2 per cent of AGR payable for the initial allotment. It may also be noted that the payments on this account will continue to increase as the revenues of the operators grow and the government would earn far more through this approach than if the spectrum were to be allotted through any other method including auctions.

The subscriber-linked spectrum allotment approach is a unique solution to a unique problem. Admittedly, in India, spectrum has always been in short supply. Thus, there was a need for the government to design a fair, transparent and equitable system whereby this resource could be allotted. License provisions require that additional spectrum be made available after ensuring optimal and efficient utilisation of existing allotments. It may be noted that spectrum is needed to serve subscribers; if an operator does not have enough subscribers, he has no need for any additional spectrum. Therefore, it is eminently logical that the allotment of additional spectrum be linked to the subscriber base of the operator.

The subscriber-linked spectrum policy has worked very well for the industry in the last five years, ensuring dispensation of a scarce resource only on the basis of usage, need and justification, thus efficiently supporting the explosive growth of mobiles in India. Spectrum-grabbing without usage-based need and consequential hoarding are not possible with the current policy. Maybe that's why some vested interests are clamouring for a change.

B B ANAND,
Vice-President, Reliance Communications

A host of technical solutions allow much better spectrum use "" the current usage norms are too liberal and need a review

India currently serves nearly 175 million customers, with monthly additions of over 7 million. While achieving a mobile teledensity of 17 per cent in 12 years is no small achievement, a long journey still needs to be travelled in order to reach developed country levels. With the national target of 500 million subscribers by 2010, all input resources, particularly spectrum "" a finite resource "" need to be managed and used efficiently.

There are many technological innovations now available in both GSM and CDMA for spectral efficiency. Adaptive Multirate (AMR) is one of them. Erlang per sector improves three times as AMR penetration hits 100 per cent. Single Antenna Smart Solution is another innovation, where the technology is getting deployed and the capacity gains are expected to be similar to AMR. We must be able to appreciate that these innovations are available to India and our policy can keep this in mind to attain spectral efficiency objectives.

When compared with China, even though both countries are different in geographical spread and the number of operators, China serves 2.5 times the number of subscribers per MHz. If we consider dense urban areas in India such as the metros (Delhi, Mumbai, Chennai and Kolkata), operators are serving two-three times the prescribed number of subscribers in the allocated spectrum. This has been possible on account of the technological innovations currently available and there is definitely room to add many more subscribers without addition of spectrum.

It is a total misrepresentation that quality of service (QoS) has been impacted and operators are attempting spectrum hoarding using QoS as an excuse. If we look at TRAI QoS for the Jan-Mar'07 quarter on various aspects like call set up time, service access delay, congestion, call drops and good quality connections, over 96 per cent of the operators have met these benchmarks. This indicates that not a single operator has failed to meet the required benchmarks. The two areas where operators have not met the TRAI benchmarks and need to work on are Point-of-Interconnection congestion and response time at helplines. One of these is related to physical connectivity and neither is related to spectrum.

The scale and size of the Indian market have made it one of the most profitable in the world despite low average revenue per user (ARPU). The EBITDA margin in wireless Indian telecom, as per a Merrill Lynch report, is 38 per cent, which is higher than that in any other developed economy including the UK, US, France, Germany, Australia, Japan and Korea.

The unique characteristics of the Indian market, in terms of the growth potential, demographics, technological innovations as well as current spectrum usage patterns, is a clear indicator that spectrum allocation guidelines require a quick review where efficient use of spectrum needs to be the focal point.