Last week, India’s telecom regulator proposed cutting the charges operators pay to use a set of airwaves known as microwave spectrum. These airwaves are not used by consumers directly. Instead, they serve as backhaul—connecting mobile towers to the core network so calls, data, video streaming and messaging work seamlessly.
The proposal by the Telecom Regulatory Authority of India (Trai) seeks to rationalise how this backhaul spectrum is priced and assigned, arguing that operators have long been paying disproportionately high charges for what is essentially enabling infrastructure. If accepted by the department of telecommunications (DoT), the changes would lower network rollout costs and offer limited but meaningful financial relief to telecom companies.
Mint breaks down the development.
Why microwave backhaul matters
Every video call or movie stream depends on an invisible network backbone. Microwave backhaul spectrum forms a critical part of that backbone, particularly in India, where fibre connectivity remains uneven. In areas with patchy or unviable optical fibre coverage, microwave backhaul allows operators to rollout out 4G and 5G, expand rural broadband, and support public Wi-Fi networks.
The scale of the problem is evident in government data. As of March, only 46.09% of India’s mobile towers were connected to the core network through optical fibre, a process known as tower fibreisation. As data traffic rises sharply, this gap has made backhaul spectrum indispensable for handling higher network loads.
Despite its importance, policy around backhaul spectrum has remained unclear. There was no settled framework on whether it should be auctioned, administratively assigned or delicensed. In practice, spectrum was allotted provisionally, but at charges operators say were too high to justify widespread use.
What Trai has recommended
On 10 December, Trai submitted recommendations to the DoT on how microwave backhaul spectrum should be assigned and priced. These cover traditional backhaul bands—6 GHz (lower), 7 GHz, 13 GHz, 15 GHz, 18 GHz and 21 GHz—as well as higher-frequency E-band and V-band spectrum.
The regulator’s aim is to create a simplified, affordable and flexible framework to support rapid mobile network expansion, particularly after the launch of 5G in October 2022. Since then, mobile data traffic has grown by 75%, sharply increasing demand for backhaul capacity.
In many cases, microwave backhaul has become the preferred option for connecting new base stations where laying fibre is difficult or uneconomical.
Taking reference from the Telecommunications Act, 2023, Trai has recommended that backhaul spectrum be assigned without auction. The most significant change is a reduction in spectrum usage charges (SUC) by up to 55% in certain microwave bands. Trai has proposed a uniform SUC of 0.1% per carrier, replacing what it described as a non-linear pricing structure that was “simply not justified”.
The regulator’s reasoning is straightforward: backhaul spectrum does not generate revenue on its own. It is an enabling input, not a consumer-facing asset. Pricing it like access spectrum, Trai argued, distorts network economics and inflates rollout costs.
Trai has also recommended that there be no rollout obligations attached to backhaul spectrum assignments across traditional bands, E-band or V-band. The spectrum would be assigned for five years, with a possible extension of up to two years. To improve transparency, Trai has proposed an online portal for assignment and renewal, with a comprehensive database of all block-based and link-based spectrum allocations.
How much telecom operators could gain
If the DoT accepts Trai’s recommendations, telecom operators are expected to see modest financial benefits. Analysts at IIFL Capital estimate that the potential Ebitda uplift would be less than 1% for Reliance Jio and Bharti Airtel, while Vodafone Idea could see an upgrade of around 1.5%. The improvement would come from annual savings on spectrum usage charges.
The numbers underscore the limited but tangible nature of the relief. In FY25, Bharti Airtel, Vodafone Idea, and Reliance Jio together paid ₹4,068 crore in SUC to the government. Of this, ₹3,051 crore was for backhaul spectrum alone. Had Trai’s proposal been in place, operators would have saved about ₹1,545 crore, according to IIFL Capital estimates.
Bharti Airtel would be the biggest gainer in absolute terms, given its higher SUC payouts, although its diversified earnings mix would limit the impact at a consolidated level, IIFL noted.
Lower SUC could also lift valuations. Analysts estimate an increase in enterprise value of about $1.1 billion for Jio, $1.5 billion for Bharti Airtel and $0.4 billion for Vodafone Idea. This translates into a 1.2% fair value per share upside for Bharti Airtel and around 3% for Vodafone Idea.
Why spectrum isn’t being auctioned
The Telecom Act explicitly allows non-auction assignment of backhaul spectrum, and Trai has leaned heavily on this provision. Auctioning such spectrum, stakeholders have argued, would push prices up sharply, creating barriers to network expansion, discouraging the adoption of spectrum-efficient technologies and slowing improvements in coverage.
Since backhaul spectrum does not directly generate revenue, using auction benchmarks derived from access spectrum would be flawed. It would inflate costs without improving consumer outcomes, leading to distorted cost structures across the industry.
That said, the approach is not without dissent. Reliance Jio has opposed non-auction allocation of backhaul spectrum, citing national security concerns, particularly if non-telecom entities are allowed access.
For now, Trai’s proposal represents a clear attempt to align pricing with economic reality: treating backhaul spectrum not as a cash-generating asset, but as essential infrastructure that underpins India’s fast-growing mobile networks. Whether the DoT accepts this logic will determine how quickly, and cheaply, India’s next phase of digital connectivity is built.