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Ministerial panel dilutes spectrum refarming proposal

EGoM allows older telcos to retain some spectrum in 900MHz band, but fails to cheer affected companies
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First Published: Thu, Nov 01 2012. 08 34 PM IST
The panel said telcos including Bharti Airtel, Vodafone and Idea Cellular could retain 2.5MHz in the 900MHz band, considered more efficient. Photo: Priyanka Parashar/Mint
The panel said telcos including Bharti Airtel, Vodafone and Idea Cellular could retain 2.5MHz in the 900MHz band, considered more efficient. Photo: Priyanka Parashar/Mint
Updated: Fri, Nov 02 2012. 02 09 PM IST
New Delhi: India’s efforts to arrive at a transparent and equitable way to allot spectrum to telcos and to delink these radio waves from licences to offer services moved a step closer to fruition, with a ministerial panel deciding to allow older telcos to retain some spectrum in the 900 megahertz (MHz) frequency band, while returning the rest to the government for re-auctioning.
The decision by the so-called empowered group of ministers (eGoM) diluted a recommendation by the Telecom Commission, but still didn’t cheer the affected companies.
The panel said telcos including Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd could retain 2.5MHz in the 900MHz band, considered more efficient (the lower the frequency of a radio wave band, the higher the signal strength and reach, which means fewer base stations and towers are needed).
An operator that retains 2.5MHz of 900MHz spectrum will only be allowed to bid for another 2.5MHz in the 900MHz band.
The telcos, among the earlier ones to start offering mobile telephony services in India, have up to 8MHz in the 900MHGz band of spectrum in this band.
“The refarming decision does not need cabinet approval,” Kapil Sibal, communications minister, said after the meeting, adding that the cabinet would, however, take a final call on the one-time fee issue.
Refarming refers to the taking back of spectrum from telecom operators for redistribution, to ensure optimum usage of the resources. Telcos losing the spectrum will get airwaves in the 1800MHz band as replacement on payment of the market price, determined in the coming auction. The spectrum they get will be treated as liberalized spectrum, which refers to radio waves won in an auction and means the telcos can use it to offer any service. The spectrum they currently have is so-called administered spectrum, which means it can only be used for offering a certain service using a certain technology.
The spectrum will be taken back by the government at the time of the renewal of the operators’ licences, expected around November 2014.
The one-time fee refers to the fee older telcos will have to pay for having more spectrum than either their contracted or start-up spectrum (this varies depending on the technology platform used by the telco).
The spectrum taken back in the 900MHz band is to be reauctioned as spectrum that can be used by telcos for offering just about any service—including 2G (second generation) mobile telephony and data-rich 4G (fourth generation) wireless broadband services. The auction for the refarmed airwaves will take place 18 months before the renewal date, Sibal said.
The eGoM is headed by finance minister P. Chidambaram.
The refarming decision deviates from the Telecom Commission decision, taken at its 17 October meeting, which recommended that all 900MHz spectrum be refarmed and auctioned by May. The ministerial panel’s decision is based on clarifications by the Telecom Regulatory Authority of India (Trai) submitted to the department of telecommunications (DoT) on Tuesday suggesting that older telcos be allowed to retain 2.5MHz of the 900MHz spectrum to ensure continuity of services.
The operators impacted by the move have been complaining that refarming would cause huge gaps in networks across the country and heavily impact rural connectivity, and also lead to an expenditure upwards of Rs.1.5 trillion in new towers and infrastructure to minimise the impact.
Trai’s clarifications were given at the request of the ministerial panel that asked for a deeper analysis of the impact of spectrum refarming. In its meeting on the issue on Wednesday, the Telecom Commission is understood to have reiterated its earlier decision of taking back all the spectrum.
The regulator’s position is that if all telcos are moved from 900MHz to 1800MHz, there wouldn’t be enough spectrum (in the 1800MHz band) left for auctions expected to start 12 November, and that if telcos retain 5MHz in the 800MHz band, then there will be very little spectrum in that band to auction in the future.
According to earlier estimates by the Cellular Operators Association of India (COAI), the primary industry lobby group of telcos affected by the decision, the impact of refarming on these telcos would have been around Rs.1.5 trillion. A DoT official who didn’t want to be identified said the ministerial panel’s decision would halve that.
COAI was still not happy with the decision.
“We would specifically like to highlight a critical technical issue, which appears to have been ignored. Failure to consider the impact of this technical matter may give rise to a decision which may end up destroying the high scale and globally competitive network in India, causing irreparable damage to the country’s telecommunication infrastructure and pushing the country into a Dark Age and forcing consumers, society, financial institutions and investors to bear the brunt of the erroneous recommendations,” a COAI release said.
“It will be next to impossible to service 450-500 million subscribers in the existing 900MHz band with the same quality of service with limited 2.5MHz in the 900MHz band and remaining on the 1800MHz band without any disruption of wide-scale services,” the COAI statement added.
“An operator with 2.5MHz in the 900MHz band and remaining spectrum in the 1800MHz band is worse off than an operator with complete network in the 1800MHz band as this network will give a delusion of coverage. The difference in spectrum propagation/network design in the two bands will lead to coverage constraints,” the group said.
The ministerial panel also decided to approve a tweak to the mergers and acquisitions policy. In an acquisition involving a telco with administered spectrum, the acquirer would have to pay the market price for this to convert it into liberalized spectrum for the remaining period of the licence, prospectively.
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First Published: Thu, Nov 01 2012. 08 34 PM IST
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