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Spectrum Sharing: TRAI issues recommendations to optimise resource use

September 02, 2014
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To ensure efficient use of scarce resources and pave the way for better voice and data services, the Telecom Regulatory Authority of India (TRAI) released its recommendations on the guidelines on spectrum sharing on July 21, 2014.

The recommendations broadly state that spectrum sharing will be limited to only two licensees within the same circle. No permission will be required from the government for effecting the sharing arrangement. Also, the two telecom operators can share spectrum in all frequency bands (800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz), provided they have spectrum in the same frequency band.

While licensees sharing spectrum assigned through auctions or payment of the prescribed market price can offer telecom services using all wireless technologies, operators sharing spectrum allocated through the administrative process can offer services using only select technologies. Leasing of spectrum has not been permitted. Further, TRAI has suggested that 50 per cent of the shared spectrum should be added to the service provider’s total spectrum holdings. This will be used for applying the existing prescribed limits of 25 per cent of the total spectrum held in a circle and 50 per cent of the total airwaves allotted in a specific band.

TRAI also notes that since spectrum sharing will result in higher revenues for both the telecom licensees, they will have to pay 0.5 per cent higher spectrum usage charges to the government.

Impact on operators

At present, telecom operators are allowed to share passive infrastructure like mobile towers but not active infrastructure like spectrum. To this end, TRAI’s recommendations are a positive step.

“Overall, the recommendations provide options to operators for bridging their spectrum deficit,” says Jaideep Ghosh, partner, KPMG.

Uninor CEO Morten Karlsen Sorby says, “This allows operators with a growing subscriber base and a long-term view of the Indian market to meet their spectrum needs with enhanced efficiency, brought in through resource sharing.”

For large operators like Bharti Airtel, Vodafone India and Idea Cellular, which together offer services to 56.4 per cent of the total 910 million mobile users in India, spectrum sharing is an opportunity to increase their capacity in dense subscriber locations that require more bandwidth. And for operators like Tata Teleservices Limited and Aircel, which have 50-60 per cent active users on their networks, it is a chance to monetise their unused spectrum by sharing it.

Telecom operators have for long been asking for more spectrum to resolve congestion issues in high-density areas. This move will therefore help them. However, analysts believe that since TRAI’s recommendations come with many riders, sharing agreements among operators will be limited. “The various restrictions under the new rules could lead to spectrum sharing being used as only a temporary arrangement for capacity expansion by these operators, before launching their 3G/long term evolution (LTE) networks on newly acquired spectrum,” says a senior analyst from Anand Rathi, an equity research firm.

For instance, service providers can share spectrum in a circle only if both have spectrum in the same band (800 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz).  Analysts say that this could impact Mukesh Ambani-led Reliance Jio, which wanted to use Reliance Communications’ (RCOM) infrastructure to get started. Now, RCOM cannot share its 800 MHz spectrum with Reliance Jio unless the latter participates in future auctions and wins 800 MHz spectrum. Similarly, Bharti Airtel, Vodafone and Idea Cellular will not be able to share their 3G spectrum in all circles as Bharti Airtel has 3G spectrum in 13 circles, Vodafone in nine circles and Idea Cellular in 11 circles. There are only a handful of circles where all three own spectrum and hence, can share spectrum. This will once again draw attention to the need to address the issue of 3G roaming pacts between operators. Analysts say that it is possible that the top three players continue with 3G intra-circle roaming (ICR) arrangements rather than getting into spectrum sharing. Also, restricting spectrum sharing to two operators reduces the opportunity for telecom companies to monetise their unused spectrum.

“In all, the regulator could have made spectrum sharing much simpler. Keeping it band-specific limits growth. Also, it could have looked into permitting sharing among more than two operators,” says Rajan Mathews, director-general, Cellular Operators Association of India.

Since these are not the final guidelines, there is still scope to incorporate changes. It is expected that once the spectrum trading policy is announced and the government releases additional spectrum blocks in the 2100 MHz band, sharing will become important for the remaining quantum of spectrum to keep up with capacity demand.

While experts debate the benefits of spectrum sharing, users are likely to be the biggest beneficiaries of the move. With spectrum sharing, subscribers are likely to witness fewer call drops and better speeds for data services. It would also give telecom companies the opportunity to fill gaps in clusters and circles where the number of active subscribers is very high. By way of sharing, operators can get the required spectrum in these areas to ensure better quality of service to consumers.

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