It is wrong to sell wireless spectrum.
Introduction: Having been actively associated in the implementation of one of the early GSM systems in India in 1995, I choose to remain stead fast in my opinion I had on this subject from the inception of GSM, that in the fast changing Technology oriented systems, networks, product and services, any planning on long term basis is unworkable both on the technology front as well as in its business propositions. Therefore, the wireless spectrum needed for the operation need to be planned according to the same philosophy based on the facts mentioned below.
The Government, the Regulators and Telecom Industry need to understand and take the issues involved in close coordination between the stake holders so that right decisions are made at the right time, as otherwise it will not only hamper the growth of telecom industry as a whole but also will be harmful for the end users as it will push the country towards losing the benefits of privatization in the long run. In addition to killing the Telecom Goose that lay golden eggs it will also lead to never ending litigation. I have been writing about this to all concerned and also in various print/visual and social media websites for many years now. Unfortunately no one seems to care in spite of hundreds of debates going on day in and day out in media and in every level of political circles.
Government, the Regulatory authorities and CAG and the Judiciary dealing with Telecom issues may kindly reexamine with an open mind whether giving out Spectrum, a limited national resource to Private industrialists on long term contact basis as being done now, is the right choice for the Government and a workable business proposition for the Telecom Industrialists based on the following facts:-
1. Ownership of Spectrum shall remain with Government:
Wireless Spectrum is a non-renewable national resource and as such need to be handled scrupulously and judiciously by Government and Regulatory authorities. The ownership of the spectrum shall remain with Government, allowing only ‘right to use’ so that spectrum can be withdrawn and reallocated where it is not being put to intended use by any Agency or Operator. Therefore, re-farming and reallocation of the required amount of spectrum on short term basis from time to time as and when required without too much varying in its cost implication, is the only way out and not in selling out by auction or otherwise every time when changes in technology happen.
2. Technology is changing fast. What is best today will become obsolete tomorrow. It is an unworkable proposition to undergo cumbersome sell and buy process of fresh wireless spectrum every time there is inception of new technology, like 3G, 4G, LTE and other new generation networks yet to come.
In fact giving out a particular band width of spectrum on long term contract can never be an option any where in the world as it does not fit into any long term business plan due Telecom being a technology oriented business of fast changing nature. It is more so especially for Indian Telcos as everything needed here in telecom business except some basic infrastructure like towers are imported and hence dependent on the suppliers who continuously innovates the technology, systems and products. Different technologies would need different frequency layer and band width making it necessary for Government and Indian telecom Industrialists to closely follow the world trends.
3. Growth of Telecom is more in the interest of the nation than of the Industrialists.
Growth of Telecom is more in the interest of the nation than of the Industrialists, the policies of Govt. on Service industries like Telecom need to be people centric, not money centric. Fast growth of telecom being the prime object, it is more in the interest of the nation that required amount of spectrum is made available and given out as and when needed, on lease and /or revenue sharing basis, initially for setting up the networks and later for its expansion needs on ‘right of usage’ basis in a way to ensure its smooth operation without delays, if necessary at subsidized rates so that the service cost to end users will continue to remain low and the service is more and more available, accessible and affordable to common man.
4. Telecom growth can enhance GDP: The facts the economists need to know is that
growth of Telecom penetration across the country can contribute much more to GDP than it can do with money Government can earn through selling of Licenses, Spectrum etc.
5. M&A of business houses is a continuous process. Telecom business houses are
becoming behemoths and M&As are going to be the order of the future. Therefore, the
ownership of spectrum given out on long term contract to large number of Telecom
players, will eventually end up in the hands of few business houses. It will have many
negative impacts like blocking competition, non-availability of spectrum for new
technology roll outs by fresh entrants etc. Even the Government will find it difficult to have spectrum for its own future needs.
6. The security angle. With mergers happening, ownership of spectrum reaching the hands of companies from other countries can pose various forms of security risks to our country.
7. Access need to provide between any user to any user in Public Networks.
The name Public Network in PSTN and PLMN implicate that it is mandatory for the service providers that every user in the public network shall have means to access any and every users of other pubic networks. How to enable it is just a matter of technology, how to charge for it, is a matter of commercial policy. It cannot be that a non-Pan India service provider who do not have 3G licensed spectrum cannot facilitate its customers to access a 3G customer in a Pan India network which is against the concept of PLMN. In essence it makes it necessary for every Network operator to become Pan – India service provider if it has to enter in 3G business and same will be true for 4G and other new technology based business also. Such problems could be resolved only if spectrum is given based on the principle of ‘right of usage’ instead of selling at high cost with sole intention of making money out of it with no concern about its impact on the industry and end users.
8. The need to segregate Service provision from Network Operation.
In not far future, India will be one of the largest in volume of telecom usage in the world. At some point it will be necessary to limit the number of network operators for various reasons as mentioned my paper mentioned below. Please see my blog ‘Segregation of Service Provision from Network operation / Universal Numbering Plan.’ http://wp.me/p1ZsI2-t
8.1 With fast changing technology needing frequent inflow of fresh CAPEX, most of the small players will not be able to sustain their business. The cost of rural networks being high and revenue potential low, to enable quicker telecom penetration increases in rural areas, it will become inevitable to segregate Network operation and Telecom Service Provision so that the systems and networks set up by few operators and spectrum available with them could be efficiently shared by dozens of Service Providers as MVNOs, to keep the service cost low.
8.2 Segregation of Service Provision from Network operation will ensure better and efficient usage of spectrum. If the spectrum is sold out to large number of licensees it will defeat the concept of MVN which is going to be the path of telecom growth in the future.
9. New Generation Technologies will make umbrella spectrum usage redundant. The mobility scenario in the higher data range will demand smaller and smaller cell areas and hence closer handovers. As data rates going higher and higher, network topology will become complex difficult and cannot be managed by the conventional Microwave linked cell sites of 2G/3G/4G etc., with the method of spectrum utilization as being done now. The wired portion will become more and wireless potion will become less and less. The new generation mobile networks will comprise Optical Fiber cable connectivity in most part of its network topology and WiFI and other developing wireless technologies as the last mile and end links limiting the spectrum needs as such. Please see my blog: Who need spectrum? http://wp.me/p1ZsI2-82
10. Convergence will be order of the future. With the advent of LTE and other new generation technologies making the wireless portion of the network less and less, it will lead to convergence of Systems, Network and user devices. The net effect is going to be a reduced need for umbrella coverage of Wireless spectrum for various technology based solutions in the future. As the scenario changes, the spectrum bought by many Telecom providers at high cost now will be of less use later. Please see my blog ‘Convergence of Wired and Wireless networks’. http://wp.me/p1ZsI2-26
11. Too many Network Operators will crowd the Industry. Allowing large number of Network Operators is not desirable for various reasons. Segregation of Service Provision from Network operation with more Mobile Virtual Networks (MVN) for keeping the investment costs low and better utilization of Spectrum is going to be the path of telecom growth in the future. Please see my blog: http://wp.me/p1ZsI2-t
12. De-linking Spectrum from license is impractical: The proposal of de-linking
spectrum from license will only add to the confusion about telecom license and Spectrum
allocation issues. Please see my blog. http://wp.me/p1ZsI2-3
The complexity in de-linking Spectrum from License. In a situation where Spectrum is de-linked from License or Network Operation /Service provision as being proposed now, a situation will arise that will make it very complex to follow the concept of various forms inter-working between different Pan India licensed networks, and those Network operators who do not have Pan India License.
This is because for those who have Pan India service, the entire country becomes one service area where it can have regional roaming with no extra roaming cost. Whereas a customer of non-Pan India license holder roams into a Pan India network, it becomes national roaming with implication of roaming charges. It also brings out technology related issues of inter-operation of different networks using different frequency layers and different technology devices. Please see my blog “A new outlook to usher in Pan India Telecom and Unified Licensing’. http://wp.me/p1ZsI2-8W
While there is still no clarity on the issues related to technology based spectrum needs, the proposal of de-linking spectrum from license also raise many more questions:-
a. Will both License and Spectrum be given with auction process? Which will be auctioned first, License or Spectrum? For new entrant Telcos, what need to be obtained first, License or Spectrum? What will happen if some one get License first and do not qualify in spectrum auction or the other way around? Will an operator getting spectrum first by auction automatically given license? If so what is this big idea of de-linking?
b. What happens to the incumbent Telecom operators? Building up of Telecom business is a continuous process, of expansions, upgrades and migration to new technology. Telecom being a service industry providing service to huge base of customers and therefore, license of operation cannot be cancelled on a cut off date for whatever reason. Being it so, how can Govt. ask an incumbent operator to get fresh license through auction on expiry of existing tenure? How an incumbent operator can make sure that they can get license through auction? What happens otherwise? Even if the License is being obtained by auction, what about spectrum? What happens if they are not successful in getting spectrum at affordable cost through auction process?
Since the Spectrum is also proposed to be given on a long term contract, what will the operator do if it had to change over to other technology that work on entirely different layer of spectrum which the operator need to buy by auction making the earlier investment redundant? How can an operator plan for change over to new technology system for which he will have to obtain License again through auction process and then again for obtaining spectrum required for it? It becomes a situation that operators can do planning of new systems only after getting License and spectrum before hand which is impractical.
c. Re-farming is expected to make available enough spectrum causing a situation where supply far exceed demand. In such a situation how can auction be an option? In that situation, first of all the basic bid price need to be low as there is no justification to keep the cost high when enough spectrum is available to be given out for all, just for Government to make money.
Secondly, in a situation where everyone is sure to get spectrum at the minimum bid prize, why should any bidder quote higher price? Then it goes back to the mode of first-come- first- served.
If none of the incumbent operators participate in auction process, can Govt. impose penalty or ask them to shut down operation? Ultimately Govt. will have to give required spectrum as government cannot allow growth to stagnate for want of policies in place because growth of Telecom and maintaining the Service at affordable cost is more in the interest of people, that is the Government, than that of the Industrialists.
13. With advancement in technology, spectrum used in legacy systems will become become redundant. It is only natural that with the advent of modern technology systems that work in much higher frequency layers, the earlier technology systems will inevitably become obsolete and the spectrum used for it also become redundant drastically impacting its pricing. This fact being known, the industrialist cannot afford to do heavy long term investment in spectrum that is going to be redundant. Therefore, the argument that 2G spectrum could have been procured more income for government had it been auctioned is illogical as the fact is other way around.
True that the spectrum vacated will become useful later for other areas in due course. And that is why it is imperative that the ownership of the spectrum remain with Government.
Please see my blog: The never ending Telecom muddle in India. http://wp.me/p1ZsI2-gG
14. Auction of spectrum can never be an option.
With proposed re-farming there will be enough spectrum for all. In such a scenario of ‘Supply exceeds Demand’ auction can never be an option. Ultimately Govt. will have to give required spectrum as government cannot allow growth to stagnate for want of policies in place. Then it goes back to the mode of first-come- first- served.
In addition to the above fact, with the inevitable segregation of Service provision from Network operation, there need be only lesser number of Network operators and that will bring down demand for spectrum drastically and that by itself eliminates the workability of auction route.
If analyzed in detail, Government’s idea to counter this situation by creating more players in telecom industry and artificially hype up demand for License and Spectrum with sole object of milking the telecom industry, perhaps is the root cause of most of the problems we saw in the past few years.
If the spectrum given on long term contract at considerable high cost need to be surrendered for change over to new technology system and network before the expiry of its contract period, it is only fair that proportionate amount for the remaining contract period is reduced from new found spectrum cost. The mess all these can create in Telecom Industry in India is anybody’s guess. It is astonishing why no one from the Industry bothered to explain these facts to the Government and the Government in turn to the Judiciary that is now made itself grossly involved in the decision making process.
15. Government needs Income.
No doubt, Government needs to generate income from all possible sources. What I would suggest from the vast experience I have in Telecom space, is as follows.
Government may consider a long term policy say covering a period of 25 years as Pan-India Telecom License tenure, and its cost as a combination of basic charge for the License and for ‘right of usage’ of whatever Spectrum as required from time to time, with no additional cost.
For example; the combined cost could be say, Rs.75,000 Crores payable in 25 yearly installments of Rs.3000 Crores. In addition to this an additional charge in the form ‘revenue share’ based on the active subscriber base also could be levied to cater for additional quantum of spectrum needed with expansion of networks.
(P.S. The amount and tenure of license period I have mentioned above is just indicative
and hypothetical and these could be decided based on various other factors related to the
business growth and also related to economy situation in India and the world.)
The distinguishing factor in what I have suggested above is very simple. In this case, Network Operators can implement or migrate to any technology during the License period and it will be the responsibility of the Government to make available the type of spectrum according to international standards as and when the licensee is in need of it without any additional cost.
Considering above facts, the right decision shall be to continue allocation of required bandwidth of spectrum to each Network Operator along with license for its ‘right to usage’ and additional license on a time to time basis on a fixed basic cost and/or revenue sharing basis. To enable continuity, spectrum need to be given along with license for the same duration. It shall be on condition that the Network Operators who are given spectrum as per such a license conditions to operate their network cannot sell it or lease it directly to
others and shall vacate the spectrum and surrender it back to Govt. when not used and not
required by them. Network operators can use any technology within the license period and ask government to provide the type of spectrum needed for it, in replacement of spectrum given earlier.
It is only prudent for the Government and TRAI, CAG etc., to take help of right Telecom technocrats with futuristic vision and knowledge, to come to proper Governmental and regulatory decisions. Otherwise it will end up in opening a Pandora’s box landing the Industry into endless litigation and hampering growth of Telecom penetration in the country as well end up in killing the industry as a whole.
Conclusion: It is easy to understand now from what we have learned from the muddle created in selling out 3G spectrum through process of auction for Government to supplement its exchequer. Governments’ monetary gain due to auction of 3G spectrum has become totally overshadowed with the resultant acrimonious and unending debates and turmoil in governance and political arena with regards to some speculative loss due to 2G spectrum allocation according to then standing principles and the Industry world over losing faith in the ability of government to fulfill its commitments.
If someone cares to analyze closely, it can be seen that all these current fuss about spectrum is meaningless and will become a non issue later. I am sure, it will finally come to pass that what Government did on 2G spectrum allocation was right and what it did on 3G spectrum sale is wrong and all these commotion is “Much a do about nothing”.
I hope CAG will surely introspect about the propriety of selling out of wireless spectrum to know whether his contention of loss in not selling 2G spectrum is right or not and will chose to reconsider issue based on the above facts. In fact what CAG should have done was to point out impropriety if any in the process of 2G spectrum allocation according to standig policy of the government and object to selling out spectrum, a limited national resource by auction indiscreetly to private industries on long term basis until government came out with a clear policy decision on that.
What went improper is Government trying to create to push in more stakeholders in the telecom industry, perhaps to create artificial demand for spectrum for government to make some quick money, or to counter the inertia of incumbent private operators in taking expansion of telecom into rural areas. Of course, if any politicians or bureaucrats did not care to follow the rules and procedures with obnoxious intentions to make personal gains out of spectrum allocation, law should take its own course to punish them, but definitely not by changing the right philosophy and methods that help people centric policies of government.
Author: Abraham Paul. P. e-mail: firstname.lastname@example.org Tweet @PA_Paul