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Spectrum Sharing: TRAI recommendations fall short of industry expectations

September 17, 2014
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The Telecom Regulatory Authority of India (TRAI) has given its recommendations on spectrum sharing guidelines. While industry stakeholders have welcomed the guidelines, they are of the view that several limitations with regard to spectrum sharing need to be removed in order to achieve the objective of efficient utilisation of frequency airwaves. Industry experts share their views on TRAI’s recommendations…

Pankaj_AggarwalBharat_Bhargava_EYHemant_M._Joshi_DeloitteRajan_Matthews

What is your view on TRAI’s recommendations on the spectrum sharing guidelines? To what extent do you agree with the recommendations?

Pankaj Agrawal

TRAI has allowed telecom operators to share spectrum only in the same frequency band, which restricts potential collaborations. Moreover, spectrum sharing will not address the issue of network coverage. Operators are not able to offer adequate coverage in the 2100 MHz band and the issue will not be resolved even with the sharing of spectrum. The major problem is the non-availability of good frequency spectrum to provide coverage. As a result, operators have cautiously underinvested in setting up networks in the higher frequency bands.

Spectrum sharing only helps in areas where there is a capacity constraint. Operators can pool their spectrum resources to get higher spectrum efficiency, but this restricts spectrum sharing to dense urban areas where capacity is an issue. In terms of capacity too, the gains would be limited. For instance, incumbent operators hold spectrum in both the 900 MHz and 2100 MHz bands. So they will deploy 3G networks in the 900 MHz band and use the 2100 MHz spectrum to provide additional capacity. Consequently, they would not need to share spectrum with other operators for access to additional capacity. Moreover, some of the capacity issues will be addressed through the deployment of LTE networks in the 1800 MHz band. In sum, spectrum sharing is not likely to have a major impact.

Bharat Bhargava

TRAI’s recommendations on spectrum sharing are a positive for the industry. Spectrum sharing provides an opportunity to two access licensees in a service area where both licensees have spectrum to pool their spectrum in the same band. Spectrum sharing, that is, pooling of spectrum by operators, results in the efficient use of a scarce natural resource and provides the much-needed network capacity to alleviate congestion and carry more voice and data traffic, using the existing resources.

Hemant Joshi

TRAI’s recommendations on spectrum sharing, though in the right direction, will not address all the concerns of telecom players. With some changes, the guidelines could be a positive for the industry.

Rajan S. Mathews

We welcome TRAI’s recommendations on spectrum sharing as they will help improve service quality for customers. Spectrum sharing will facilitate faster network roll-outs, resulting in improved service quality and enhanced revenues for the industry and the government. The industry has been requesting for this move for some time as it believes that increased network efficiency will boost investor confidence in the industry, thereby leading to higher foreign direct investment in the sector.

 

Which set of telecom companies (incumbent, new entrants or dual licence holders) is likely to benefit the most from spectrum sharing as per the guidelines, and why?

Pankaj Agrawal

In my view, no service provider is expected to benefit from spectrum sharing at present. Some entrants do not have spectrum in the 2100 MHz band, and the incumbents have sufficient spectrum in multiple bands and have acquired spectrum in the 900 MHz band, which will address both capacity and coverage issues. However, operators may share spectrum to get access to additional capacities in some areas within a circle. Consequently, only the incumbent operators may benefit from spectrum sharing and, that too, only in select locations.

Bharat Bhargava

Spectrum sharing will help operators bring down their costs. The increase in capacity resulting from sharing is likely to reduce the capex and opex related to capacity expansion (in the short term), either through the acquisition of additional spectrum or the roll-out of additional sites. Spectrum sharing, as envisaged under the current recommendations, will benefit operators that are facing or are likely to face capacity constraints. It is a strategic decision and requires operators to work closely on their growth plans and technology road maps.

Given the limited amount of 3G spectrum available with operators, they can consider spectrum sharing/shared radio access network (RAN) for additional capacity and cost savings. Operators currently using intra-circle roaming can also consider similar solutions to address their capacity requirements as traffic on the shared network increases. Tower companies are likely to get impacted by spectrum/RAN sharing by operators.

Hemant Joshi

All telecom companies will benefit from the spectrum sharing guidelines. The incumbents will get the opportunity to procure additional spectrum to decongest their networks without having to wait for the next auction. On the other hand, the new entrants, which have not rolled out services or are partially using spectrum, can monetise the unused spectrum.

Rajan S. Mathews

It will positively affect the revenues of both private players and public sector units like Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited, as the latter also hold a large quantum of spectrum.

 

What will be the cost economics of sharing spectrum for the incumbent players?

Pankaj Agrawal

If operators start sharing spectrum in dense urban areas, given that they are already co-locating their existing 2G BTs, the payouts to tower companies will be minimal. Further, sharing spectrum would be more favourable for operators, rather than purchasing additional spectrum in the auction.

Bharat Bhargava

Operators will need to evaluate the benefits resulting from savings in network capex and opex and any increase in revenue resulting from the additional capacity. They need to compare the benefits with the costs associated with the additional spectrum usage charge and any costs linked to re-engineering the existing networks.

Hemant Joshi

The incumbents will have to pay an additional 0.5 per cent spectrum charge on sharing, which would result in increased spectrum costs. Therefore, it makes commercial sense for them to opt for spectrum sharing only if the actual revenue earned from the shared spectrum is at least five times the additional spectrum cost.

Rajan S. Mathews

The 0.5 per cent increase in spectrum usage charges (SUC) for sharing, as suggested by TRAI, is not likely to be a major deterrent for the industry. The key issue is the SUC on spectrum as a whole. The Cellular Operators Association of India (COAI) has consistently opposed the discriminatory SUC regime and endorses a uniform SUC for all operators offering voice and data services.

 

What will be the effect of spectrum sharing on market consolidation in the Indian telecom industry?

Pankaj Agrawal

Given that operators can get access to additional spectrum through sharing, they will not opt for mergers or acquisitions, since this will entail taking over the target company’s liabilities as well. Consequently, spectrum sharing may have a negative impact on consolidation in the telecom industry.

Bharat Bhargava

As envisaged, spectrum sharing is unlikely to have a significant impact on consolidation in the telecom industry. Spectrum sharing will require both the operators to utilise the spectrum, as a result shared RAN will be connected to the core networks of each of the licensees. Currently, spectrum leasing is not permitted.

Hemant Joshi

The current recommendations may not have any major impact on industry consolidation due to some clauses pertaining to sharing in a common circle, ownership of spectrum in the same band, allocation of spectrum through the administrative process or auctions, etc.

Rajan S. Mathews

TRAI has emphasised that the slab rate structure acts as a disincentive for any mergers/acquisitions as well as for spectrum sharing and trading. It also creates opportunities for arbitrage between bands and technologies that are likely to operate under a common unified licence.

 

What will be the technological challenges with regard to spectrum sharing? To what extent do TRAI’s recommendations address these challenges?

Bharat Bhargava

Spectrum sharing is a strategic decision taken by operators. While technology solutions for spectrum sharing/shared RAN exist, there will be commercial and operational challenges in implementing the solutions.

Hemant Joshi

As spectrum sharing would be in the same band, the company may not be required to deploy new equipment. Some of the challenges are the development of interfaces, security touchpoints, interference guards, standards for interoperable systems and technologies allowing spectrum sharing. Mobility management while moving from one circle to another might be another key concern.

 

In your opinion, what changes should TRAI incorporate in the final guidelines to facilitate spectrum sharing?

Pankaj Agrawal

TRAI should reconsider the spectrum usage charges to improve the cost economics of spectrum sharing, which may interest more operators. TRAI has also stated that it may consider allowing spectrum leasing in the future, which are likely to be more beneficial for operators than spectrum sharing.

Bharat Bhargava

Going forward, TRAI can consider inter-band spectrum sharing and spectrum leasing. This will encourage more efficient use of spectrum assets.

Hemant Joshi

The government’s objective of optimally utilising scarce spectrum through sharing can be achieved if:

  • The imposition of the additional 0.5 per cent charges is avoided (as the government would in any case receive additional revenue share from the revenue earned by the operators through spectrum sharing);
  • Spectrum sharing is allowed across bands and circles (operators would want to share/get airwaves in the band in which they do not hold spectrum at present);
  • There is no distinction between administratively acquired spectrum and spectrum acquired through an auction.

Rajan S. Mathews

The COAI maintains that the application of a flat rate as a percentage of adjusted gross revenue for SUC would simplify and rationalise the levy structure, which will make it beneficial for the government as well. For an industry in need of consolidation as well as for an economy in need of meeting its fiscal deficit target, the SUC regime needs to be changed.

We also suggest that there should be no cap on spectrum sharing as this will act as a hindrance for some operators. The policy should aim at giving equal opportunity to all operators, irrespective of the amount of spectrum they hold.

Also, spectrum sharing arrangements should not be limited between licensees holding spectrum in the same band. The true benefit of sharing airwaves can only be obtained if sharing is allowed in all frequency bands.

 

 
 
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