Sunday, March 4, 2012

The 2G Supreme Court Judgment - 2

Open access is the future
Flawed technical assumptions in the Supreme Court's 2G judgment, and possible ways forward for the government
Shyam Ponappa / Mar 04, 2012

The first part of this article (‘Time for a review’, BS, March 1: dealt with erroneous assumptions, especially regarding auctions. This part covers misplaced assumptions about technology, and explores constructive alternatives going forward.

Errors in technical assumptions 
An assumption underlying the prescription of auctions is that spectrum must be assigned to operators for their exclusive use. This was how wireless evolved during the first half of the 20th century, when radio frequency interference was the predominant problem in wireless communications.

With developments in technology, some advocate open spectrum predicated on the use of “cognitive radio” or “software-defined radio”, by which user equipment avoids interference by sensing unused channels automatically. In this model, open-access spectrum is a commons.

Another approach is to use a database-driven open-access model, whereby devices register with a database, and are dynamically assigned spectrum as needed. If this were possible in 1959, when Ronald Coase first recommended auctions, it would not have been necessary to parcel out spectrum. Even in America’s developed economy, the first auction was in 1994, and it failed.1 Now, technological developments enable spectrum sharing and dynamic assignment. America’s FCC has appointed 10 database administrators for dynamic spectrum allocation, with Spectrum Bridge being the first — in operation from January 2012.
America restricts this approach to unused spectrum in the TV bands, and a portion of the 700 MHz band, called “TV white spaces” (TVWS). The UK’s Ofcom is taking similar steps, with implementation planned for 2013. While all licensed frequencies could be pooled, sharing is restricted to TVWS because of conventions and legacies, and operators’ and governments’ preference for auctions. This judgment rules out sharing, blocking other technologies if the spectrum were available.

The lure of auctions 
For markets like India, there is every reason from a technology perspective to share not only TVWS and 700 MHz, but all commercially licensed spectrum. There is a technological basis for pooled spectrum, without exclusive assignment and auctions. Yet people love auctions: liberals, because business must pay its way, and governments get revenues; conservatives, because market mechanisms substitute for government controls.2 Operators prefer exclusive assignment to the uncertainties of open access and compensation for their holdings. Governments want auction revenues. So neither governments, nor big operators, nor the uninformed public, see incentives for pursuing what is in the public interest: shared spectrum.

For Technology leaders in OECD markets, shared spectrum was not a priority, because more spectrum was available to fewer operators. For instance, in 2010, operators in many US cities had 55-90 MHz according to, and AT&T was using only about half its available spectrum, whereas in Delhi and Mumbai, operators had only 10 MHz.

Can the FCFS policy be abrogated on the basis of unconstitutionality? If so, the induced turmoil and far-reaching changes in procedures required for everything from tickets for railways or airlines, state-owned assets such as land, mining concessions, even government housing (including for judges?!), and all previous licences granted by FCFS procedures, defy imagination. This urgently needs review by the Supreme Court in the public interest.

Irregularities, outcomes, contracts and cancellation 
The same 11 companies whose licences were cancelled qualified according to the FCFS principle, except that their sequence was changed, apparently through procedural irregularities. In other words, without malfeasance, the same companies would have got the licences, except for S Tel getting Delhi and someone else not. Malfeasance deserves penalisation. However, as changes resulting from irregularities are limited in the sense that the same candidates would have won, must all licences be cancelled? Is there a judicial option of annulling the award, and placing the issue before the executive for equitable resolution in the public interest? After all, it is against the public interest to induce turmoil in markets and development capabilities, which the present ruling is likely to do not only in telecom, but in other sectors like energy, mining, manufacturing and transportation. Also, if foreign companies acquired legitimate stakes in licence holders, can these contracts be nullified without proof of their malfeasance? Or could erring parties be penalised, while legitimate parties are enabled to reconstitute their position as required by law?

The way forward 
Unfortunately, it is for our discredited and dispirited government to pick itself up and dig us out of this hole. Focused, goal-oriented action on the following lines would help.

First, review petitions: A first step is structured review petitions to the Supreme Court seeking relief, without grandstanding, bluster, or abdication of responsibility.

Second, an alternative to spectrum auctions exists in open access with payment. Both public revenues as well as public usage can be well served by treating access to spectrum as an open-access right-of-way. India’s policy makers need to consider the US and the UK’s shared spectrum approach. Spectrum can be paid for as it is used, as are oil pipelines, roads, or airports and ports.3
Open access could create tremendous opportunities in India, including for other technologies, e.g., a revival of WiMAX, if Intel grasps the nettle.

Third, on the cancelled licences. This has different problem sets. 

One set comprises parties who abused the system, punishable under due process of law. 

If there are parties in a second set that did no wrong, they should suffer no penalty.

What of a subset of the first, in which a foreign partner invested legitimately and built out, provided they were within the law? If these investors acted in good faith, perhaps a legal recourse could be to place their cases before the government for resolution and rehabilitation in the public interest conforming with the laws, if need be by a dispensation from the court, or even by fresh legislation. After all, good faith investors have contractual rights. Possible solutions might be (a) to penalise the guilty partner, while absolving the innocent, or (b) cancelling the licences of the guilty, while allowing the innocent to reconstitute as required by the law.
Above all, there is need for problem-solving that is systematic, transparent and participative, with expert inputs in domains and processes, to place the sector on a firm footing.

shyam ponappa at gmail dot com

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