Spectrum allocation policy: a critique on 2G policy (India)

Abstract

Delhi which is touching 700,000 customers was struggling on the frequency. We were promised that we will be given more spectrum which significantly improves our capability to handle the tremendously ever increasing traffic that is happening in Delhi. .we have reached 8 MHz, but we have a provision which will allow us to go to 10MHz once we reach our next threshold . For this purpose, 1% extra revenue share based on adjusted gross revenue has to be paid to the government, but we believe this is a low price to be paid for such an expensive spectrum that we desperately need Sunil Mittal, Bharti Cellular, Webcast July 31,2002 Q1 Earnings Call This statement really captures that issue that we face today and strongly signals that there is lack of incentive in allocation policy for an operator to utilize spectrum efficiently before he goes for additional spectrum. Spectrum allocation policy is an issue where the proverbial last word is yet to be said . Historically the first application of the wireless communications industry (in the US) was for the telegraph and the World Wars. Spectrum was thought of in the same way as public roads wherein both the government and the public thought of spectrum as a public resource that should be controlled by federal laws. One commonly held opinion is that policy has not kept pace with technological changes. Transmission costs have reduced, Carrying capacity has increased and so has the range of usable spectrum that has been extended to broadcasting, terrestrial communications, defence purposes and ultimately personal mobile telecom devices. At the same time, innovations in computing, technology manufacturing and consumer demand preferences for lower prices and higher quality has led to an increase in the quantity of bandwidth demanded. More importantly, the telecom space is no longer the private realm of the government and private anticipation has been the biggest contributor in making connectivity ubiquitous and affordable. The government of India through the auspices of the department of telecommunications has identified this Industry as a strategic one that will also aid in bootstrapping growth of other sectors of the Indian economy. Today regulators are faced with a host of issues relating to spectral efficiency, scarcity, path dependence, interference, user serviceability, anti-trust, QoS etc. But if we were single out one factor that looms large and is going to decide which way the industry moves it has to be Spectral Efficiency. The advent of 3G services has further aggravated the problem of spectrum scarcity. In this report we have tried to study the method adopted for spectrum allocation in 2G in India based on publish literature on this topic. We then identify existing issues that plague the sector based on arrived framework, which captures perspectives regulator needs to take in formulating policy. Our final aim is to identify, at a policy level, the shortcomings in the approach for 2G and how they can be avoided when considering spectrum allocation for both 2G and 3G services. Key suggestions that emerge from our analysis are_ Overcome Structural economic factors - To take a relook at the current arrangement of telecom circles and see if the circles can be merged. This will give firms the chance to improve economies of scope_ Encourage secondary market activity to improve spectral efficiency by M and A activity and buying/selling of spectrum._ Devising an economic model that charges firms when acquiring additional spectrum, so as to promote spectral efficiency._ Creation of a body to evaluate spectral efficiency of firms across India and in any sector.