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Why spectrum needs a change in approach

Rajat Kathuria and Isha Suri write: It must be recognised that spectrum needs to be combined with other infrastructure to enable service delivery. One must bear in mind that the cost of deploying other infrastructure in remote areas is nearly twice as much, while revenue opportunities are far lower, damaging if not destroying the rural business case. The stark digital divide needs a fresh approach to crack it

It is widely acknowledged that spectrum policy in India has had ups and downs, regretfully more downs than ups. (File Photo)

On September 22, the government released the draft Indian Telecommunication Bill, 2022, seeking to replace the colonial era Indian Telegraph Act, 1885. The draft bill compares spectrum to aatma: “In a way, spectrum is similar to aatma, which is ajar, amar as described in Shrimad Bhagwad Gita. Like aatma, spectrum too does not have any physical form, yet it is omnipresent.” And yet there is one immutable difference in this material world. While the value of aatma is inestimable, spectrum has always had a banal price tag associated with it.

It is widely acknowledged that spectrum policy in India has had ups and downs, regretfully more downs than ups. It has for the most part failed to capitalise on the ubiquity of the electromagnetic spectrum to provide meaningful connectivity to all citizens. Despite the recognised failure, we boast of a billion plus mobile subscribers, 800 million internet users and host the second-largest telecommunications network in the world. We wonder what might have been achieved with a more reasonable and transparent spectrum policy.

How we got here is a depressing mix of operator and political greed that is best consigned to history. The intent of the draft bill is to correct past sins so that the benefits of spectrum and technology are better shared, and the quality of access improved for everybody. In other words, since effective access to spectrum has remained a significant barrier to facilitating meaningful connectivity for Indians, we critically examine the role envisaged for spectrum policy in the draft bill, especially with regard to bridging digital divides.

The draft bill rightly refers to the spectrum as having the characteristics of a public good. It is also an inexhaustible resource. But while spectrum per se is not depletable, there are technical limitations to its optimum utilisation at a given point in time. Consequently, it is viewed as a scarce natural resource and what’s more, expensive auctions have made the spectrum dear and arguably exclusionary.

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Since 2010, the government has consistently used auctions for spectrum allocation and in only one of the seven auctions held since then, the government was successful in selling 100 per cent of the available spectrum. One reason for this lukewarm response, barring the 2010 auction, is the high cost of spectrum acquisition. According to one estimate, at 7.6 per cent of their aggregate revenue, spectrum cost in India is amongst the most expensive in the world. Since network operators incur a significantly higher cost for spectrum compared to other emerging markets, the ability to invest in network upgradation and infrastructure is severely impacted, resulting in uneven distribution of service and poor quality to boot.

Due to the high reserve price, the most recent auction witnessed spectrum being sold at the “reserve price”, effectively rendering the basis of an auction moot. If almost all spectrum was sold at its reserve price, and a significant amount goes unsold, it implies that the price was too high, to begin with. It also implies a loss of revenue for the government for spectrum unsold is spectrum squandered. And finally, it results in areas being underserved or unserved affecting quality and quantity.

It must be recognised that the spectrum needs to be combined with other infrastructure to enable service delivery. And one must bear in mind that the cost of deploying other infrastructure in remote areas is nearly twice as much, while revenue opportunities are far lower, damaging if not destroying the prospects of rural businesses. Plugging the digital divide, therefore, needs a fresh approach.

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Since licences and spectrum are typically assigned for service areas that are, for the most part, identified by state boundaries, the cost of spectrum in Lucknow is the same as for Dadri, for Bengaluru the same as for Ramanagara and so on. Since operators predominantly cater to urban markets, the spectrum in remote areas remains under- or in places un-utilised due to a lack of investment in allied infrastructure. The draft bill incorporates practical provisions on the spectrum such as use it, share it, or lose it – an awaited policy that, however, needs innovative support to be successful. The idea of “niche operators” providing services including to telecom operators and manufacturers, introduced in 2005, needs revival in this regard. If licensed operators are unable to utilise the assigned spectrum, the same could be given to local entrepreneurs who understand the needs of rural customers and are better placed to develop a more effective business case more quickly than the larger telcos. Active promotion of the idea of niche operators might just jolt operators out of their lethargy towards rural services. Alternatively, the government may want to explore innovative methods of spectrum access such as a non-competitive licensing framework for certain specific use cases. Canada, for instance, has initiated consultations on a non-competitive local licensing framework in the 3900-3980 MHz Band and portions of the 26, 28 and 38 GHz bands to inter alia facilitate broadband connectivity in rural areas.

The reset of the dated Indian Telegraph Act is opportune and the good news is that the draft bill recognises the dangers of addiction to an auction regime. The cost of “transparency” induced by auctions since 2010 has been unsold spectrum, lost revenue, and deferring of the rural digital ecosystem. It is perhaps better to supplement auctions by “administrative allocation, and any other manner as may be prescribed” as stated in the bill in the short-term and eventually do away with auctions altogether. During the transition, the government should build an ecosystem that inspires trust so that transparency in assignment can be secured at a reasonable price for operators with strict service obligations without the phantasm of auctions.

At the same time, there should be no unsold spectrum. Niche operators should be invoked to engender competition, and government could yet collect revenue for itself. The basis for these proposals is that telecom is no longer an end in itself. It exists for user industries much more than ever before. The spillover benefits are far greater than what the sector commands within. Thus, to state the obvious, the vision that is “Digital India” can never be realised if affordable broadband connectivity remains only within the reach of a few. Just like it is crass to try and price aatma, it is unwise for the government to use auctions for direct revenue generation.

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Kathuria is Dean, School of Humanities and Social Sciences at Shiv Nadar Institution of Eminence, and Suri is Senior Researcher at The Centre for Internet & Society. Views are personal

First published on: 29-10-2022 at 04:08:07 am
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