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Friday, July 20, 2018

Trai favours removing cap on spectrum holding by telcos

Regulator for allowing telecom operators to hold 35% of spectrum in a circle.

By: ENS Economic Bureau | New Delhi | Published: November 22, 2017 1:48:57 am
Telecom Regulatory Authority of India, Trai, Trai spectrum cap, spectrum intra-band cap, spectrum auction, telecom sector, Trai has said that the govt should now ensure that an operator does not have more than 50 per cent of all the sub-1 GHz band like 700, 800, and 900 MHz bands put together.

The Telecom Regulatory Authority of India (Trai) on Tuesday recommended the removal of the intra-band cap of 50 per cent spectrum holding by operators in a circle. It also said that operators should now be allowed to hold 35 per cent of the total spectrum assigned in a circle against the current cap of 25 per cent.

In the intra-band cap where current regulations prohibit any operator to have more than 50 per cent in a given band, Trai has said that instead the government should now ensure that an operator does not have more than 50 per cent of all the sub-1 GHz band like 700, 800, and 900 MHz bands put together.

Both the measures, once accepted by the Department of Telecommunications (DoT), will enable operators to create better LTE-capable 4G networks as they can optimise their spectrum holdings in a much more efficient manner.

In the immediate term the move is likely to benefit Vodafone India and Idea Cellular, which are merging their operations and were breaching the intra-band cap of 50 per cent in five circles. It will also enable Reliance Jio to acquire more spectrum through trading deals in the 800 MHz band from Reliance Communications.

The Trai suggestions has come after a consultation process with the operators, which in turn came after the DoT asked it to examine the current caps following a suggestion from the government-appointed inter-ministerial group that the caps should be relaxed.

Most operators had favoured a relaxation. While Bharti Airtel was not in favour on the ground that it would lead to one operator monopolising spectrum in a given band, it had batted for relaxation in the overall limit.

Explaining the rationale, Trai said this option would prevent concentration of sub-1 GHz spectrum in the hand of one operator.

Trai added that this will at the same time provide flexibility to the operators to acquire the large contiguous blocks of spectrum which will allow for more efficient use of spectrum. “This would also be in line with international practices adopted in a number of countries,” it said.

Since operators are adopting LTE in various spectrum bands such as 800, 1800 and 2300 MHz bands and in near future, it is likely to be deployed in other bands also, Trai felt that there is no real need to put spectrum cap in each spectrum band. It said that asking an operator to acquire spectrum in different band to deploy the same technology increases the cost of network with no real gains. For instance, if an operator has acquired spectrum in the 2300 MHz band, it may like to acquire additional amount of unpaired spectrum in the 2300 MHz band only; and it serves no purpose to restrict it from acquiring additional spectrum in this band but offer it spectrum in the unpaired spectrum in the 2500 MHz band. Rather, it fragments the spectrum and denies the opportunity to take advantage of large contiguous blocks of spectrum which may offer greater spectral efficiency.

Since spectrum in sub-1 GHz have better propagation characteristic, Trai felt that they should be dealt with separately and special provisions be made to safeguard against the creation of a monopoly. It said that operators with exclusive rights over sub-1 GHz spectrum would have a competitive advantage over others and thus may create non-level playing field. Therefore, it is essential to have a cap on the spectrum holding in the sub-1 GHz bands.

On the overall spectrum cap of 25 per cent, Trai said it was imposed at a time when there were 6-10 operators in a circle. After the ongoing consolidation in the sector, the number of operators in a circle has come down. Some merger proposals have already been filed while some are still in process. M&A guidelines allow holding 50 per cent of market share in terms of subscriber base as well as revenue. Therefore, a 25 per cent cap on overall spectrum holding may put a constraint on the ongoing consolidation phase. It may also restrict the capability to purchase additional spectrum in the future auctions.

“If the overall spectrum cap is revised to 35 per cent from the present level of 25 per cent, theoretically, there may be minimum three operators in each circle. However, each operator is unlikely to have equal spectrum; therefore, in the more likely scenario, there will be minimum four operators in each circle. It would balance the need to promote consolidation in the telecom industry and to ensure enough competition in the market at the same time,” Trai said. FE

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