India may offer spectrum discount to satellite internet providers

The plan to give a discount will be on the 5% annual spectrum charge, which the department of telecommunications (DoT) is looking at imposing on companies that will provide satellite internet services in the country. The companies will have to pay this charge from their adjusted gross revenue (AGR) to the government.

“What DoT has asked Trai (the Telecom Regulatory Authority of India) to examine is an annual spectrum charge of 5%, instead of 4%. This can be implemented with a discount of 1% if a certain percentage, say 5% of the overall customers, enrolled in the year are from the hard-to-connect areas such as border, hill, islands, etc," said the first person, adding that the government could also notify such areas where connectivity through satellite internet technology offers an advantage compared to traditional mobile network method.

Last week, the DoT sent a back reference to the regulator on its recommendations on assignment of spectrum for satellite internet services. The department suggested Trai should re-examine its recommendations on the charges, said the second person cited above.

DoT and Trai: Diverging views

The approach of the DoT's plan to give discounts for connecting far-flung areas is different from the one recommended by Trai. In its recommendations dated 9 May, the regulator had suggested that the telecom department either charge 4% of their AGR or ₹3,500 per MHz, whichever is higher, from the satellite internet companies. In addition to the 4% charge and taking care of the concern that the satellite operators may primarily target the urban users, Trai had recommended an annual ₹500 per user charge on the companies for serving urban areas.

If the DoT's new suggestion is implemented, the change in approach for a discount-led model for serving hard-to-connect areas would replace the ₹500 ‘disincentive’ in urban areas, as was recommended by Trai.

The view within the Dot is that Trai’s disincentive-led model could lead to implementation challenges as it would have been difficult to differentiate rural vs urban areas.

“The idea is that the incentives should be based on areas where LEO/MEO (low-earth orbit/medium-earth orbit) satellites work better than regular technologies—like border regions, hilly areas, and islands," a third person said.

Queries emailed to Trai as well as the DoT on Saturday did not elicit any response till the press time.

Pricing concerns

The price and charges of satellite spectrum has been an issue of contention between telecom operators and industry associations representing satellite internet companies. Telecom operators had called the pricing, recommended by the telecom regulator, for satellite spectrum as unjustifiably low, non-transparent, and leading to a non-level-playing field. They also expressed concern before the government that satellite internet services will compete with them and eat into their market share by tapping the elite users in urban areas.

Countering this view, the Broadband India Forum, which represents satellite communication service providers, wants the telecom department and the regulator to lower the charges.

“The markets that satellite service providers basically serve, generate much lower revenues as compared to terrestrial service providers. This is proven by the market revenue figures of ₹540-600 crore in case of satcom vis-a-vis ₹336,000 crore in case of Terrestrial," said T.V. Ramachandran, president of Broadband India Forum, in a letter to telecom secretary Neeraj Mittal last month.

Last month, Elon Musk-owned Starlink had said a large part of its capacity will remain underutilized in India if the country's rural users are not brought onto its soon-to-be launched satellite internet services. Rural users are fundamental to how its network operates, it had said.

Regulatory obligations, subsidies

To be sure, satellite communication (satcom) operators will also have to pay an annual licence fee of 8% of AGR to the government, as per current authorization terms of the DoT.

As part of back reference to Trai on satellite spectrum assignment, the DoT has rejected Trai’s recommendations on the provision of a subsidy for each fixed satellite user terminal in the rural areas at an appropriate amount through a direct benefit transfer or Digital Bharat Nidhi (DBN) fund, which is there to bridge urban and rural digital divide.

Among other suggestions, the DoT sought easing of rollout obligations for these companies. In addition to Trai’s recommendation of 12 months to the companies for rolling out satellite internet services, the department mooted another 30-day period to the companies after the expiry of the due date, the third person said.

Spectrum rules

Besides, in the case of surrender of spectrum by a licensee/authorized entity that may lead to discontinuation of services, the company will have to inform at least 60 days prior to the intended date of discontinuation of service, together with reasons for such intended discontinuation. This is also a modification from the Trai’s recommendations of 30 days.

“Any request for discontinuation of service will be at the discretion of the telecom department," the third person said. Further, since satellite spectrum is a shared spectrum among different providers, the government wants the companies to enter into frequency coordination agreements or coexistence arrangements to ensure seamless operations without harmful interference.

Satellite internet service providers such as Starlink, Eutelsat OneWeb, Jio Satellite and Amazon's Kuiper, among others, are preparing to launch services in India. The only hurdle now is the allocation of spectrum to these companies, on which the telecom department and the regulator are working.