Take a holistic view

Spectrum cap decision can't be taken in isolation

The Telecom Regulatory Authority of India (Trai) is currently reviewing whether the in-band spectrum cap of 50 per cent should be relaxed for service providers, and if the overall spectrum holding by an operator should be raised from the current 25 per cent. At present, government rules debar any company from holding more than 25 per cent spectrum allocated in a service area or circle, and above 50 per cent in any specific band. Telecom operators in India use air waves across bands. A closed consultation process between the regulator and the companies has already been completed, following which the sharp division in the industry is out in the open. It is up to the regulator now to take a call.

The regulator went through a similar exercise more than two years ago without recommending any change. In 2015, the department of telecommunications (DoT) sought a response from Trai on whether the overall spectrum limit should be relaxed and if there was any need to revise the technology-linked or in-band cap. After consulting operators, Trai had found that the majority of telecom companies had wanted the caps to continue, except for one operator, which was seeking a higher overall cap of 40 per cent from the existing 25 per cent and in-band cap relaxation to 60 per cent from the current 50 per cent. Yet another telecom company pressed for removing the in-band cap because it believed that holding spectrum in any particular band did not confer an operator significant power as long as such spectrum holding was within the overall cap. In other words, its demand was for doing away with the in-band cap while retaining the overall limit.

Trai’s verdict two years ago was that the provision of a cap should continue on spectrum holding a service provider might acquire through auction or otherwise and there was no need to modify either the overall cap or the in-band holding by a telecom company. The regulator reasoned that the objective of continuing with the cap was meant to prevent any operator from acquiring large holdings of spectrum as it could lead to an uneven playing field, disturbing competition in the market.

The regulator’s observation of 2015 may provide some answers to the questions being thrown up now. It is true that the dynamics of the Indian telecom sector have changed since then. India is heading to a technology-neutral era and any policy guidelines linked to band-specific spectrum holding may be limiting for the industry as well as for the consumer. However, Trai should not ignore the disruption in the telecom sector as well as the consolidation that is happening. Trai is reviewing the spectrum cap issue at the behest of an inter-ministerial committee looking at addressing the financial stress in the telecom sector. So, spectrum caps should not be seen in isolation, but along with the ongoing challenges, including the declining profitability of companies. Although many companies have altered their views on spectrum caps in two years, the regulator’s recommendation on whether to go in for modification and how must not end up disrupting the sector further, especially as most telecom companies are not in a hurry to top up their spectrum holding at this point.