Plentiful spectrum

Time to fix remaining airwave usage issues

In a commendable effort, the government has harmonised spectrum in the 1,800-MHz band. According to a report in this newspaper, this will result in additional 200 MHz of spectrum being auctioned later this year. This will come as a big relief to the telecommunications industry. It had complained bitterly that the 700-MHz spectrum was very expensive, which would make it difficult to offer data-heavy 4G-LTE services. Bharti Airtel, Vodafone and Idea Cellular have said that they will not bid for the 700 MHz at this price. It so happens that the 1,800-MHz too is 4G-friendly and is significantly cheaper; telecom companies can now buy airwaves in this band, which will be easy on their pocket. In its original auction plan, the Department of Telecommunications had identified 220 MHz in the 1,800-MHz band, of which 165 MHz was available in chunks of five MHz, the minimum size required to launch 4G services. As a result of the harmonisation, more spectrum will now be auctioned. Bids at the auction also could remain within reasonable levels. On the other hand, companies like Vodafone and Idea Cellular, which do not have 4G spectrum right now, could be expected to bid strongly.

The new spectrum released through harmonisation is expected to yield the government an extra Rs 30,000 crore in the auctions. This may look insignificant when compared to the Rs 5.44 lakh crore worth of spectrum already on the block, but this is vital: almost three-fourths of the projected auction money is linked to 700-MHz which is unlikely to get too many bidders. So, in all probability the government may end up with spectrum purchases worth Rs 1 lakh crore, which the new spectrum could augment by 30 per cent. The task of harmonisation, which involves consolidating fragmented spectrum into contiguous blocks, has been more or less completed. Though it had been talked about for a long time, the government deserves credit for doing it in three months flat and in time for the auctions.

In doing so, it is praiseworthy that the government has kept the health of the industry and the consumer in mind, not its revenue. As the government addresses the issues of spectrum shortage through harmonisation and opening up new bands, which in effect would increase overall availability of airwaves, auction prices are expected to stay within reasonable limits. The industry is sitting on a debt burden of Rs 3 lakh crore, and its ability to take more loans is limited. As the law of diminishing returns sets in, this will mean reduced revenue for the government, but this will give a boost to telecom services: their quality has suffered due to inadequate spectrum.

With this, most of the spectrum-related issues seem to have been sorted out. The government should now address the issue of spectrum user charge which is still hanging fire. At the moment, it ranges from one per cent to eight per cent of their gross adjusted revenue. The Telecom Regulatory Authority of India had recommended a revenue neutral rate of 4.5 per cent. The Union Cabinet has sent the proposal back to the regulator for a "review". The matter needs to be decided as quickly as possible.