No space for new telcos, says Trai

New Delhi: A delay in 3G spectrum auction, scheduled for December, appears imminent as the Telecom Regulatory Authority of India (Trai) is reviewing the spectrum policy for the sector.

In its consultation paper on issues related to spectrum management, licensing and mergers and acquisitions (M&As), the regulator has said that it is not possible to entertain any new applicant for 2G (second generation) telecom licence under the current policy.

The regulator has projected India's wireless subscriber base at 1 billion and the spectrum requirement at 582 MHz in various bands for wireless mobile and broadband services in the next 5 years.

Out of 1,161 MHz of identified spectrum, a minimum of 287 MHz and a maximum of 454 MHz is currently available for commercial usage, according to Trai estimates.

The mobile subscriber base stands at 456 million today.

Spectrum in the 800 MHz, 900 MHz and 1800 MHz bands is not sufficient to cater to even the present licensees, even if the entire 100 MHz of spectrum in the 900/1800 MHz band and 20 MHz in the 800 MHz band are earmarked for assignment, the telecom regulator has argued.

Therefore, under the present licensing regime, where 2G spectrum is bundled with the unified access service licence (UASL), it may not be possible to entertain any new applicant for the licence.

A total of about 582 MHz of spectrum in various bands will be required to be made available for mobile and broadband wireless services in the next 5 years.

Trai has also noted that government agencies are using spectrum in various bands and have expressed difficulty in vacating the unused spectrum from time to time.

The regulator has sought industry views by November 12 on the consultation paper, after which the regulator would issue recommendations on 2G and 3G spectrum management including uniform use of advanced spectrum-efficient technology, review of entry fee for telcos, feasibility of district-wise allocation of spectrum rather than circle-wise, imposing cap on number of operators, desirability of uniform licence fee, new M&A rules, and spectrum-sharing/trading, among others.

Market developments necessitate a review of spectrum management policy, Trai has said, adding, like any natural resource, spectrum is now a highly sought and valuable input for a variety of economic activities.

The regulator, which had earlier suggested limiting the number of access providers, has now reasoned that "in case the 2G spectrum is delinked from the licence, then perhaps the issue of having a cap on the number of access provider may not be relevant."

Trai has noted that its recommendations on delinking of spectrum from the licensing regime, issued in August 2007, were not accepted by the government.

At present, a pan-India UAS licence has an entry fee of Rs 1,651 crore. "In case, this spectrum is delinked from the licence, then probably the amount of entry fee will also need to be reassessed," Trai has said.

Similarly, even if the grant of spectrum is linked with the licence, the quantum of the entry fee needs to be deliberated upon," the regulator said.

Efficient technologies have also found prominent mention in the paper. According to Trai, all service providers should employ the latest and advanced spectrum-efficient technologies in their networks so as to serve more subscribers and provide better quality of service. "However presently there is no institutionalised mechanism to ensure the same.

One alternative could be that a periodic technical audit of the networks is carried out on a sample basis, especially in dense urban and urban areas."

Since service providers need to recover their investment, feasibility and desirability of asymmetric pricing of services has also been discussed in the paper. "It needs to be explored whether it would be appropriate for the consumers in the metropolitan areas or even the large cities to pay higher rates for telecom services than those paid by those in the villages."

Trai is also exploring the possibility of assigning spectrum district-wise, rather than by service areas or circles as is being done now. "Since most service areas have urban areas and rural areas, and since a service provider may require more spectrum in the urban areas, the feasibility of assigning spectrum district-wise could be explored."

The consultation paper raises several questions --- whether spectrum should be delinked from the UAS licence; whether there should be a limit on the minimum and maximum number of access service providers in a service area; what should be the criteria for determining the maximum spectrum per entity; how an existing licensee with more spectrum than the specified limit should be treated --- should such spectrum be taken back or should it be subjected to a higher charge, etc.

The regulator also wants to know from the stakeholders whether spectrum can be delinked from the licence and what should be the entry fee in such a scenario.

On M&As, the regulator has asked whether the existing licence conditions and guidelines restrict consolidation in the telecom sector. "If yes, what should be the alternative framework for M&A in the telecom sector?" It has also sought industry views on whether the lock-in clause in the UASL agreement is a barrier to consolidation in the telecom sector, and whether market share in terms of subscriber base/ AGR should continue to regulate M&A activity in addition to the restriction on spectrum holding.