Spectrum management: the telecom lifeline

Spectrum is the fundamental resource in wireless communication. It is scarce and is allotted by the government to various users. The increase in number and the popularity of wireless communications have led to a situation of demand pressure on the limited spectrum supply. In the telecom sector particularly, the demand has shot up since the introduction of cellular mobile and wireless in local loop ? WLL(M) ? services. The cellular subscriber base has been growing at 80-90 per cent the last few years. In addition to the voice, data services such as short messaging are also becoming popular, fuelling spectrum requirement. Besides market dynamics, the government policy of unlimited number of WLL (M) operators and its contemplation of the same in cellular service has further raised the issue of spectrum availability, an adequate quantum of which is essential to maintain reliable quality of service and efficient planning of networks. Against this, the current inadequate availability combined with rising telecom traffic volumes has led to increasing incidence of dropped calls and busy networks, particularly in the metros and large cities. The Telecom Regulatory Authority of India has also called for additional spectrum to be made available to the existing operators for providing service in a more cost-effective manner. Currently, the average GSM spectrum per operator across Europe and Asia Pacific is pegged at 17.1 MHz. In China, it is 22.1 MHz. In India, the maximum spectrum allowed for a metro operator is 10 MHz while the real allotment is less than 8 MHz. In view of this, it is important to review the scope for and institutional arrangements relating to allocation of additional spectrum for the telecom sector. By its very nature, radio spectrum requires transnational co-ordination to avoid interference of radio signals. Besides, the strategic decision-making such as which future services should be allowed in which frequency bands also requires co-ordination among countries for harmonisation of allocations. This is done under the auspices of International Telecommunication Union (ITU), which is an inter-governmental agency. The ITU has an important role as the countries that ratify its regulations have to do their respective spectrum planning in accordance with these regulations. However, interference issues that arise solely within national boundaries and the frequency distribution mechanism adopted are matters for individual administrations and respective regulators. ITU agreements on spectrum allocation are set out in the ITU Radio Regulations, which include the rules and procedures for use of the frequencies. These regulations are updated every two-three years at the World Radio Conference (WRC). There are dedicated technical agencies of the ITU that carry out the research and background data work for these conferences. The delegations of all ITU member-countries are entitled to participate in its conferences and related activities. Of late, private sector entities have also been allowed to participate in these conferences, and since most such entities are from the developed world, it has contributed to a developed country bias in the ITU deliberations. There are issues on the allocation approach followed by the ITU and the institutional set up that has emerged under its framework. The a-priori method of allocation reserves frequency bands and associated services for different countries well in advance of their real use. This is done on the basis of the expected or declared needs of the countries interested. This leads to `warehousing' of frequencies by some countries. Though the developing countries command numerical majority in the ITU, the level and quality of participation have been skewed towards the stakeholders from developed countries. The recommendations and reports generated, therefore, generally reflect a bias in favour of the more powerful group of nations. With the rising scarcity of commercially available spectrum within the country, it is important to understand the common mechanisms adopted to distribute spectrum among different users. Historically, most countries have mainly followed administrative approaches without due regard to the scarcity value of spectrum as a resource. More recently, a few countries, especially in the developed world, have tried new mechanisms, which broadly fall under two categories ? auctions and comparative hearings. Auctions are a way of assigning spectrum among competitive buyers at the best price, which the market can offer. On the one hand, it allots spectrum to those who will put it to the best use to get the maximum returns on investments, on the other, it generates revenue for the exchequer. The success of this mechanism is, however, circumscribed by many external factors such as the political regime, legal administrative framework, number of competitors etc. In comparative hearings, also known as `beauty contests', the price that the operator is prepared to pay for spectrum is only one of the several criteria that is taken into account. However, compared to auctions, hearings are less transparent. They require assessment of competing firms on criteria other than willingness to pay, which can make the selection process subjective. Both these methods have been tried in different countries. For instance, auctions have been used in Australia, the UK, and the US, and `beauty contests' in France, Spain and Sweden. With regards to auctions, the most controversial case has been that of third generation (3G) licenses in the UK. Whereas it raked in ?22.5 million for the government, the industry is saddled with huge debts. These huge bids have hampered the ability of the licensees to make required investments in infrastructure. There is a big question mark over their ability to recover in the foreseeable future the costs they had sunk in the license purchase. Yet, there have been successful auctions, particularly in the US where innovative approaches to design of auctions based on game theory and information economics were pioneered. In India, auctions have been used for allocation of basic and cellular licenses. It is the service provision and not the spectrum that has been auctioned. This way the market value of spectrum has been determined indirectly through the services that can be provided over it. However, a spectrum charge is levied essentially to recover the costs incurred in managing the spectrum. As this charge is not directly linked with the market value, it results in inefficient use of spectrum. For instance, fixed-line basic service can be provided by either wired or wireless means. Mobile telephony, on the other hand, can be provided only via the spectrum. A below-market value price would make fixed-line service providers prefer spectrum over its available alternatives. Compared to this if all the resources (spectrum, fibre optic cable, copper wire) are priced at the market rate, then the cost incurred in spectrum are likely to be compared with that of its alternatives, and accordingly the selection is made. Therefore, there is a strong argument to auction spectrum licenses rather than service licenses bundled with spectrum. However, various committees formed to look into the spectrum management issues have recommended a cautious approach to auctioning spectrum. There are issues such as design of auction, post-auction process, flexibility of use, spectrum trading, increment to the existing quantum for commercial use and so on. Besides, there are various transitional issues that require study and workable solutions before switching over to auctions. The Wireless Planning and Coordination (WPC) Wing is the regulatory authority responsible for spectrum management in India. A committee comprising all major wireless user ministries and administrative departments of the government, it provides a forum for co-ordinating their wireless activities. There is, however, no private sector representation in this committee. With the emergence of a large number of private sector spectrum users, it is desirable that the decision-making process is made more broad based. The WPC is not a statutory independent institution and its decision-making process is subject to government procedures and hence not fully transparent. An independent authority on spectrum management could be mandated to be transparent in its consideration of competing demands for spectrum assignment. The Convergence Bill envisages the setting up of a Communications Commission, which would be responsible for assignment of the non-strategic and commercial spectrum. The Commission would work in co-ordination with the spectrum manager which would be responsible for allocation of all the frequencies including those assigned by the Commission. Besides rational pricing of the spectrum available for commercial purposes, which should lead to greater efficiency of use, the availability of spectrum for commercial purposes in India can be increased through relocation of defence forces from the non-NATO band to the NATO band. All NATO countries have adopted the NATO band for their defence requirements. In these mostly developed countries, the non-NATO band, therefore, accommodates most of the civilian requirements. Due to the global inter-connectivity considerations and the fact that most of the telecom equipment are designed and produced by and for NATO country markets, the civilian demand for spectrum in India is within the non-NATO band. As a result, both defence and private users compete for the same spectrum bands. Therefore, relocation of defence spectrum requirements to the NATO band would contribute substantially to the additional availability of spectrum. However, such a migration involving large amount of existing equipment would be costly and time consuming. At the same time, the cost of switch at a later date would only be higher. Therefore, this issue needs to be tackled on priority. In sum, spectrum is a scarce and valuable resource and its scarcity is beginning to show in the quality of service of mobile telecom services. The management of this resource should be done in the best interests of all stakeholders through a transparent process, which an independent regulatory body could adopt. This is the scheme envisaged for the management of the commercially available spectrum under the proposed Communications Convergence Bill. In the meantime, a move should be made towards more realistic spectrum charges across all users engaged in commercial activities including the government departments.