Giving more spectrum to fewer players maximises net benefits
Shyam Ponappa / July 2, 2009
All nations are equally endowed with radio waves, or ‘spectrum’. But some do better than others at using this resource. Currently, by trying to optimise spectrum use measured by communications-traffic-per-unit-of-spectrum, our benefits are suboptimal. India’s misplaced emphasis on this kind of spectrum efficiency results in economic inefficiency. Some basic issues concerning spectrum allocation must be addressed before misdirected considerations of government revenues or fiscal deficits lead to self-inflicted damage from ill-advised auctions. India needs a more rational spectrum allocation policy for better communications, including broadband at reasonable prices. We can learn from the experience of other countries.
Figure 1: Spectral Efficiency
How things could be
India’s policy of a large number of operators leads to fragmented spectrum assignment, with lower traffic capacity for a given amount of spectrum (like narrow roads in land use). Limiting the number of operators was found beneficial by Vodafone for the UK as cited by the consultants, as well as by a 2008 study in India.**
|Letters: Spectral transparency|
|Business Standard / New Delhi July 08, 2009|
Former Member, TRAI / Telecom Commission
|Letters: Spectrum Allocation|
|Business Standard / New Delhi July 14, 2009|
RRN Prasad’s letter to the editor on July 8, on Spectral Transparency, makes various assertions without supporting data.
Prasad asserts: ‘The author finds fault with the globally-accepted method of measuring spectral efficiency’.
a) My objection is to the criterion of efficiency for spectrum allocation, instead of a measure of public welfare/utility/net benefits. We need reasonably-priced services, not efficient spectral use.
b) No other country uses spectral efficiency as the criterion for allocating spectrum.
Prasad asserts: ‘A high spectral efficiency does not necessarily mean that the network is congested... The TRAI monitors GoS under the Quality of Service (QoS) regulation…Therefore, the analogy of congested roads is not quite correct.’
The fact is that there is spectral congestion. The TRAI reports high levels of congestion for January-March, 2009, as in previous periods going back to 2006 at least. Details at: http://www.trai.gov.in/Reports_list_year.asp
Prasad asserts: ‘Another contention of the author, that the number of operators is ‘limited in the UK’, is not correct either… the number of operators over there is only limited by market forces.’
There are four 2G mobile operators in the UK, as stated in my article.
Prasad ends with a non sequitur: ‘…for efficient utilisation of spectrum which is a scarce national resource, there is no alternative to a transparent bidding process or auction as recommended by the Spectrum Allocation Committee…’
The question is, ‘efficient’ use for what purpose? What is the objective? If it is public welfare, technical efficiency in spectrum use is not getting us there.
The initial efforts at telecommunications privatisation began in 1994 in India with a disastrous bidding process. In 2000, the New Telecommunications Policy ’99 replaced auction fees with a revenue-sharing arrangement; only after that did the sector take off. Should our spectrum allocation build on international practice, plus:
a) Take into account our successful telecommunications development experience after NTP ’99, or
b) The disastrous experience of auctions?
Auctions abroad have been generally disastrous in Europe and in America. Besides, in comparing our situation with Europe or America, remember that these are completely different environments, at very different stages of economic development. The default situation there is that most things work; here, it is that few things work.
An Arthur D Little report for the GSM Association begins the section on India as follows:*
‘India presents an extreme example of detailed spectrum management or micro-management by a regulator.’
It goes on to say: ‘The current Indian approach to allocating and attributing spectrum is fraught with risks to the demand-driven development of mobile broadband services, which will likely be delayed and frustrated unless the underlying policies and the processes for resolving the kinds of disputes it provokes are substantially revised.’
* ‘Mobile Broadband, Competition and Spectrum Caps’, Dr Martyn F Roetter, Arthur D Little, January 2009.
Shyam Ponappa, via email