New Delhi: India will allow telecom companies to share spectrum by the end of the month, following up on a change announced in the National Telecom Policy, 2012, in a move that will enable more efficient use of scarce radio waves, although experts aren’t convinced there’s enough in the policy to encourage its adoption.
According to a draft of the order, reviewed by Mint, telcos will have to get specific permission to share their spectrum. This permission will be valid for five years. The telcos sharing spectrum will have to pay for the combined quantum of spectrum and will only be allowed to share air waves once they have paid the contentious one-time fee levied on companies holding more than the so-called start-up spectrum that came with the licences they were issued.
“The operators will have to go back to the drawing board and decide whether there is a business case for sharing spectrum after paying the one-time fee and the combined spectrum usage charge,” said Ashok Sud, secretary general at the Association of Unified Telecom Service Providers of India, an industry body that represents the interests of companies such as Reliance Communications Ltd and Tata Teleservices Ltd.
“The devil is in the details, and unless you know what the department of telecomunications (DoT) expects in the commercial agreements between the operators, it’s difficult to say anything. It’s a very good move as the operators will be allowed to trunk spectrum, which significantly increases the efficiency,” he said.
It wasn’t immediately clear whether DoT would frame guidelines for such agreements.
Trunking refers to combining of spectrum slots in a band; two adjacent blocks of spectrum are far more efficient than two separate blocks in the same band.
The move to allow telcos to share spectrum wouldn’t change much, said one expert. “There will be some impact, but not a dramatic one as operators have far bigger issues to deal with,” said Mahesh Uppal, a telecom policy expert and director at telecom consultancy Com First India Pvt. Ltd. “There isn’t enough incentive to do it and there are several barriers. The operators will have to decide between the efficiency and commercial implications of the move.”
Indeed, the biggest barrier is the one-time fee.
In November, the cabinet approved a proposal to impose a one-time fee on telcos for spectrum they hold above the start-up or contracted amounts. This has two parts: the telcos pay for all spectrum above 4.4 megahertz, or MHz, (start-up) for the remaining period of their licences prospectively; and they pay retrospectively for spectrum held above the contracted 6.2MHz from July 2008 till December 2012 based on the market-determined price indexing the 2001 spectrum auction prices to the interest rate offered by State Bank of India to its preferred customers.
The fee is estimated at around Rs.25,000 crore for the sector combined. This includes around Rs.12,000 crore owed by state-run Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd, which the government will pay. Telcos have approached various courts in the country to contest the fee.
It also wasn’t immediately clear whether telcos would be allowed to share spectrum if they have a licence to operate in a circle, but have not been allocated frequencies yet. Tata Teleservices has been waiting for spectrum in the lucrative Delhi circle for a number of years now. If it is allowed to share spectrum with BSNL, which has spare capacity, there are chances that such an agreement could run afoul of DoT rules. The department tried to clamp down on similar 3G roaming agreements (within the same circle) among some telcos. That case is now being heard in the Supreme Court.
While the sharing of spectrum could benefit BSNL, it won’t be easy for it to share spectrum with a private sector telco, said Uppal.