Ringing in change

The Cabinet decision to allow spectrum trading will give a huge impetus to the ongoing efforts for making broadband available in even the remotest parts of the country under the Digital India campaign. There are many compelling reasons why the time is ripe for the introduction of spectrum trading. One of the objectives of the new National Telecom Policy is to achieve a base of 600 million broadband users, with a minimum access speed of 2Mbps by 2020. The Centre wants to create digital infrastructure to provide utility services like banking, education and healthcare to every Indian citizen. These ambitious targets can be achieved only if every operator in the country has access to adequate spectrum. The more spectrum an operator holds, the more data traffic it can carry over its network. Despite several rounds of auctions in the last two years, the quantum of airwaves with Indian telecom companies is less than that of their global counterparts. Mobile companies in the US and Japan, for instance, are able to offer high speed video services because they have 30-40 MHz of spectrum. In contrast, a 3G operator in India has only 5 MHz. Spectrum trading will allow the operators to get access to a larger pool of air waves, in turn ensuring that spectrum does not lie fallow. The option to trade spectrum also introduces an element of liquidity to its value. Interest in future auctions will increase because operators can bid with the knowledge that they can get returns by further leasing the airwaves. For smaller operators who are looking for an exit, trading gives them the opportunity to monetise their key asset without going through complex merger or acquisition deals.

However, the guidelines approved by the Cabinet have some concern areas which, if not addressed, could make it difficult for operators to trade spectrum. For example, the spectrum seller will have to pay 11 to 13 per cent of the proceeds to the government in the form of licence fee and spectrum usage charge. This could be a major deterrent if the operator is debt-laden or in an exit mode. The other big concern is the rule asking operators who bought spectrum in the 800 MHz band in the 2013 auctions, to first pay the price arrived at in the 2015 auction if they want to enter into a trading deal. Though the prices arrived at in the 2013 auctions were significantly lower than in 2015, both were market-driven processes. Thus the Centre’s view that it did not receive the full price then is misplaced.

The benefits of sharing resources can be seen in the telecom tower business where operators were able to drive down costs and improve efficiencies by sharing space on towers. Similar sharing is now happening in the optical fibre cable infrastructure. Spectrum trading will benefit consumers, since at least those operators with adequate spectrum will be able to offer better quality of service. That said, quality improvement across the board will be achieved only when more spectrum is made available.

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