DoT questions Trai's spectrum trading views

Trai had proposed spectrum trading should be permitted, and initially only outright transfer of spectrum should be allowed

A Department of Telecommunications (DoT) committee has asked the Telecom Regulatory Authority of India (Trai) to reconsider the latter’s recommendation on allowing the trading of spectrum.

In a report to the Telecom Commission, the DoT committee admits spectrum trading finds place in the National Telecom Policy (2012) but doubts if this is the time to effect this. It fears some unintended consequences and suggests a more holistic view. The committee has suggested that prior to an in-principle approval, Trai be requested for a detailed recommendation on the issue. To date, the government auctions only right-to-usage of spectrum and the legal framework under which it can be treated as transferable and tradable in whole or part needs to be prepared. According to the report, conformity of such a framework with the Supreme Court order in the 2G spectrum allocation case and the Presidential Reference on the issue is also required.

And, it says, there is a need for assessment of market sale of spectrum. This exercise would assume more importance in merger  and acquisition (M&A) cases, for assessment of the fair value of spectrum, where the entire business might be taken over as a going concern along with the spectrum, without separate determination of the price. It should also have provisions to curb fly-by-night operators entering for only trading benefits. There should be corrective  provisions for situations where the auction price varies substantially from the traded values, the report says. Besides, there is a need to link the trading policy with the exit policy or surrender of licence, it added.

Last month, DoT had sought Trai’s views on the conditions and timing for allowing trading of what was got through auction, the quantity for trading by an operator, revenue payable and the legal, regulatory and technical framework.

The GSM telecom lobby, the Cellular Operators Association of India, had also requested DoT to allow spectrum trading as part of the coming M&A policy for the industry. It had asked that trading transactions be subject to the spectrum cap of 25 per cent of the total commercial spectrum assigned. Besides, the association has said, sharing should also be allowed as spectrum is technology-neutral.

DoT sought Trai’s views after Montek Singh Ahluwalia, deputy chairman of the Planning Commission, made a strong recommendation in a letter to communications and information technology minister Kapil Sibal to allow trading of spectrum. He’d said the matter could be discussed by the Empowered Group of Ministers (EGoM) on telecom, headed by Finance Minister P Chidambaram. The matter was then discussed at the EGoM meeting on June 26.

Ahluwalia’s note says spectrum was earlier being auctioned on the basis of an administered price. If it is now done on a clearly stated basis, then  it is tradable and any potential for gain through subsequent trading will be reflected in the auction price.

At present, spectrum trading is allowed in Australia, Canada, New Zealand and some European countries. On sharing of spectrum, the DoT committee has said Trai should reconsider this recommendation, too. Guidelines are to be finalised for the sharing of spectrum in accordance with the Trai suggestion on a spectrum management and licencing framework. However, the present recommendation for a flat spectrum usage charge would impact the previous recommendation, it felt.