Sibal’s new telecom policy leaves space for TRAI, operators relieved

Wednesday’s statement by the Union minister of Telecom and IT Kapil Sibal has left many decisions intentionally vague.

The biggest area where clarify has not been provided by the minister is also the most important — spectrum pricing.

Spectrum pricing itself can be divided into two areas — spectrum pricing for new entrants and that for existing operators or renewals.

While the Supreme Court has already required that spectrum be issued through an auction procedure, the government seems to see that an auction may not be possible in all cases.

For example, when an existing operator tries to renew its license and its rights to spectrum, should other operators be allowed to bid for its spectrum? If so, will this not lead to predatory behaviour, with some operators trying to ‘kill’ other operators by bidding a higher and higher price? At the end of the bidding process, what happens to the subscribers if the operator trying to renew its license feels the price is too high?

Kapil Sibal’s statement on the new telecom policy, set off by the recent Supreme Court judgement, seems to leave the conundrum to the TRAI to sort out.

For example, even as he states that all spectrum must be bought separately, Kapil Sibal has not clarified the mechanism by which the allotment will be done.

Sibal says

“On extension, the licensee will be required to pay a fee [for license without spectrum]. This fee does not cover the value of spectrum, which shall be paid for separately. While extending the licence, the licensee shall be assigned spectrum only up to the prescribed limit or the amount of spectrum assigned to it before the extension, whichever is less.

“The prescribed limit on spectrum assigned to a service provider will be 2X8MHz/ 2X5MHz for GSM/ CDMA technologies respectively for all service areas other than in Delhi and Mumbai where it will be 2X10MHz/ 2X6.25 MHz. However, the licensee can acquire additional spectrum beyond prescribed limits, in the open market, should there be an auction of spectrum subject to the limits prescribed for merger of licences.”

The existing operators are likely to be happy about the above statement because it increases their entitlement to spectrum in the ‘basic package’. From about 4.4 MHz which A. Raja wanted to implement as a limit, the ‘basic package’ of spectrum has been increased to 8 MHz — to the relief of big operators.

Most of the big operators, including Bharti Airtel, Vodafone India and Idea Cellular, hold more spectrum than 4.4 MHz in most circles. In circles like Delhi and Mumbai, operators hold as much as 12 MHz.

The 8 MHz of ‘basic’ allocation would allow most of the operators to keep their spectrum. However, it leaves the question of how this spectrum will be allocated unanswered. If there is no auction, how is the price going to be determined?

Most industry insiders believe the TRAI will call for a two-track allocation process — one for renewals and one for new entrants. The second will be purely based on auctions and the price discovered through the latter will also be made applicable to renewals.