Improving The Odds For 5G

Fixing the approach for networks and services is necessary for getting to 5G.

Shyam Ponappa   |  July 7, 2022 

Towards the end of 2021, the government acted admirably in the public interest, making difficult and courageous decisions to partially resolve legacy problems in telecom, such as redefining adjusted gross revenues and withdrawing retrospective tax demands. This gave rise to expectations that reforms would be less constraining, and more beneficial for the public interest. The announcement in June of 5G spectrum auctions and limited E-Band backhaul allocation, alas, falls far short. Why the disappointment, and how might the situation be improved?

Two areas need changes: Backhaul, and access spectrum. One aim is to remove self-imposed constraints. Another is to replicate the successful pattern of other sectors, where enterprises build their business, earn revenues, and then pay taxes. For some reason, this does not apply to communications despite it being a critical essential service.

Backhaul – E-Band

A fundamental problem is the limited backhaul spectrum. Two bands of 250 MHz of E-band spectrum (70-80 GHz) are to be assigned to each telco that wins 5G spectrum. This is puzzling, as there are 10 GHz available (20 times 500 MHz). If press reports that this is temporary are correct because these frequencies are to be auctioned— and telcos must agree to pay the auction price at that time — the situation is disastrous, because 5G needs large backhaul capacity.

In other countries such as the US or the EU, policies are framed so as to enable usage of the full 10 GHz at minimal cost. This provides flexible capacity for much higher throughput, whereas we are creating a self-imposed constraint by restricting capacity. This means that the Organisation for Economic Co-operation and Development countries gain more from increased productivity than a developing country with the same resource. This can be remedied by adopting their regulations as appropriate.

The public interest is well served when policies enable telcos to use available resources to increase productivity and efficiency, instead of being obstructed in delivering services, or having to spend more to achieve comparable service levels. The same goes for the discriminatory allocation of spectrum to non-telcos (private companies), who will apparently be allotted spectrum on preferential terms compared with telcos. India’s networks cannot compare with those of the OECD countries that have such policies, which is why such allocations would be too disruptive here.

Just as we are deprived of network capacity because spectrum is either not permitted for use, or is extortionately priced (both self-imposed conditions), limiting wireless backhaul or pricing it high will hamstring 5G and even 4G, because wireless backhaul will not be deployed extensively if the cost is prohibitive. These circumstances are aggravated by the threat of auctions for backhaul spectrum.

Without extensive wireless backhaul, access spectrum from auctions cannot be fully utilised because of limited direct fibre connectivity. Unlike countries that have good wireless backhaul— business hubs such as Mumbai’s Bandra Kurla Complex or Nariman Point, Gurugram’s DLF Cyber Hub, Connaught Place or the Dhaula Kuan, — the Airport stretch in Delhi, hospital and medical research complexes, engineering and manufacturing clusters, and so on, are denied vastly improved communications and access to data using gigabit wireless mesh networks. Even the spread of 4G small cells is constrained, reducing efficiency and productivity.

It would be useful to base India’s regulations on what others such as the US, the EU, and the UK are doing with E-band. They require non-exclusive nationwide licences, with mandatory coordination and link registration (usually through a geolocation database). Our comparatively less developed networks make it inadvisable to adopt their policies wholesale, because it would disrupt equitable network development in India, accentuating the divide by skewing investment to the most profitable areas.

Our authorities need to focus on setting up and institutionalising processes such as non-exclusive licensing to telcos, and the mechanism of geolocation databases for backhaul spectrum for mandatory coordination and registration. Policies need to be framed so as to help builand grow gigabit wireless links to reinvigorate the sector, to recoup its stellar trajectory and contribution as in the past.

An instructive example is the approach taken by the City of London, or the “Square Mile”, in addressing communications for its 400,000 workers every day, 10 million visitors annually, and 9,000 residents. The mix of historical buildings and modern architecture poses a challenge for mobile network services. In 2017, the City initiated a project for providing free public gigabit Wi-Fi throughout the Square Mile.¹ The design incorporated 4G small cells for better connectivity, and the City offered 3,000 street assets (such as lampposts), stipulating that the system must be a neutral host open to all service providers.

The project was awarded to a joint venture of which one company is active in India. The backhaul uses a self-organising millimetre wave (mmWave) mesh as a “neutral host” that enables use by multiple operators. The mesh gives all service providers gigabit backhaul and access applications at 12Gbps with its 60GHz mmWave access and backhaul.

5G Access Spectrum

Assuming the objective is ubiquitous 5G and other services, India needs a different approach. Spectrum auctions will not get us there. We achieved a level in mobile telephony by adopting a reasonable revenue share on licensing around 2003 after NTP-99. The same needs to be done for spectrum.

One proposed approach² suggests that as there are only three serious telecom operators, spectrum can be allocated equitably to all three without auctions. This seems reasonable, as the funds diverted to auctions could then be invested in networks, and collections from revenue sharing are likely to far exceed collections from auctions, as they did after NTP-99.³ The downside is that it would require the development of three networks, unless the operators share infrastructure. An alternative approach would be mandatory infrastructure sharing with one neutral host network, or two competing networks owned by different consortiums.

If the authorities could take these points into consideration in improving the regulations, we are likely to have better outcomes in terms of networks, services, and the state of the sector.

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Shyam (no space) Ponappa at gmail dot com

1) The City of London Case Study: https://www.gsma.com/futurenetworks; 

2) Rajat Kathuria and Mansi Kedia: https://indianexpress.com/article/opinion/columns; 

(3) See Chart 2: Telecom Auction Fees Foregone vs Licence Fees + Spectrum Charges at: https://organizing-india.blogspot.com/2020/08/configuring-indias-digital-ecosystem.html

A Market Structure for Digital India

If delivery is priced below cost, communications services will be unsustainable and ineffective.

Shyam Ponappa   |   October 6, 2016

The stress in the telecom sector is evident from the data. The market capitalisation of listed telecom operators has been stagnant since the 3G auction in 2010, while the government collected Rs 2.83 lakh crore of non-tax charges from them.1 In March 2010 before the auction, the capitalisation was Rs 1.84 lakh crore; in March 2016, it was Rs 1.71 lakh crore, with the BSE Sensex up nearly 60 per cent. A larger share of earnings has gone to government rather than shareholders, and also to banks as interest (Rs 2.08 lakh crore). The irony is that no operator has bid so far for the most useful spectrum bands on auction, 700 and 900 MHz. Uncertainties abound, and there are several questions.

Reliance Jio's entry, although expected, is a jolt. Will voice calls priced below mandatory interconnect charges be treated as being predatory or anticompetitive? The technicality is that Jio doesn't have high market share, apparently a criterion under competition law. Will this hold, given that Jio's entry has reduced total market capitalisation? Will delivery capability in terms of network size and/or market power from associated businesses be relevant criteria for dominance? What happens when Jio does have sizeable market share?

• On the face of it, lower prices seem better for users. Look more closely and it's not so simple, especially when you consider other services in India offered for free or at highly subsidised rates. One issue is the structure of a market that supports delivery below cost, and its quality of services/products. Another is the criterion that maximises social welfare that should drive government's policies. Is consumer surplus in the short term a reasonable criterion? As it happens, we have experienced markets with constrained consumer surplus for years. For example, in the category of infrastructure and essential inputs/utilities, we've had this approach towards fertilisers, electricity, petroleum products like kerosene, cooking gas and diesel until recently, water, and sewerage. We've also experienced this in our entire range of manufactured products earlier, when we had exorbitant import barriers. These experiences have been less than sanguine. The misuse of kerosene and gas, and the effects of diesel subsidies are prominent examples. The distortions that have set in, such as overuse of ground water and fertilisers, and the vicious circle with electricity and diesel generators, will be difficult to correct.
   
• Aren't there similar deleterious effects in communications from spectrum auctions and government charges that inflate input costs, and price wars that degrade investment capacity for network extension and delivery? As it is, the quality of services for voice and data is very poor. An essential resource for better connectivity is spectrum, yet government's approach to its management has been and remains inimical to its stated objective of achieving ubiquitous access of good quality. Governments make it difficult for operators to extend networks simply by not setting the right administrative policies. To quote Google Vice-President Caesar Sengupta: India is "a very large country with very little spectrum". It does not seem clear to our governments that broadband access through fixed lines for everyone is infeasible in the foreseeable future. Also, that unless radical changes are made, it is inconceivable that broadband services can be made available at prices and quality comparable to TV.

The Triad of Interests

Even if the criterion for public welfare is user benefits/consumer surplus, judging by price alone is simplistic, because it misses other aspects of service delivery that contribute to the cost-benefit package. One essential aspect is ubiquitous access. Another is effective, consistent service delivery, which requires quality, and stability. A third is the period or life cycle. It doesn't help if you have an inexpensive product or service today, and nothing tomorrow. The definition of long term also varies, depending on one's perception of the life-cycle cost of the product/service. For a user, it may be several years, or his/her life cycle. For a society, it may mean generations.

In addition to consumer benefits, other factors need to be considered from the perspectives of pragmatism and realpolitik. Realistically, a triad of stakeholder interests has to be balanced for a sustainable beneficial outcome. These are: consumer and producer surplus, and what might be termed "government interests" in the broadest sense defined below. The latter has been manifest in many global spectrum auctions, and although detrimental to the sector, is an aspect of reality that cannot be wished away. For example, our governments preferred rationing and auctions to more constructive approaches such as sharing infrastructure, and when the Supreme Court ruled that resources need not be auctioned, spectrum was excluded, which seems logically indefensible. For sustainable, consistent services, champions of all three criteria must partner to adopt mutually acceptable solutions.


Assumptions About Enabling Policies

Certain basic amenities comprise the essential infrastructure that everyone needs to be productive and have reasonable well-being. To some extent, this is linked to reasonably high per capita income. Without it, broad access to good infrastructure is infeasible. It takes that level of organisation, institutions and investment, including its implications for developing and organising human capital, to build such capabilities, as in Organisation for Economic Cooperation and Development (OECD) countries. Emerging economies have to manage with lower order platforms, or a subset of higher order services combined with others of lower order. Prioritisation then becomes the key, and areas of emphasis have to be chosen. This is where the priority accorded to Digital India comes in. If digital systems are crucial facilitators for development and productivity, they need to be accorded that level of importance and effort, with substantive changes to policies.

The government sets the policies and incentives. Government here means not just the central government and the states' executives, but the gamut of regulatory and government agencies: the legislature, the regulators, and the judiciary. These agencies must converge and persuade public opinion to support action in the public interest. Ultimately, society has to pay. If delivery is priced below cost in communications, the services will be as unsustainable and ineffective as in other distorted sectors with freebies.

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Shyam [no-space] Ponappa at gmail dot com

1: Krishna Kant: http://www.business-standard.com/article/economy-policy/spectrum-fees-leave-no-money-in-shareholders-pockets-116092701398_1.html, Business Standard, September 28, 2016

Connectivity: Let's Apply What We Know

Those who cannot remember the past are condemned to repeat it - George Santayana.

Reprise good decisions, and avoid the missteps.

Shyam Ponappa    |   March 3, 2016

Past decisions deserve scrutiny when we can learn from them. The Budget expects about Rs 75,000 crore from spectrum auctions. What will be gained and lost? A study by the Telecom Regulatory Authority of India (TRAI) in 2005 has some pointers for policies going forward. These relate to decisions that enabled the proliferation of mobile telephony between 2003 and 2011. Other decisions had less salutary outcomes, which we would do well to recognise and avoid. Reviewing some of these could influence supportive policies, resulting in industry growth with enhanced user benefits and government revenues.

1. Reasonable fees increase govt revenues

The TRAI report cited below states that as a consequence of the New Telecom Policy 1999's (NTP-99's) shift to revenue sharing for licence fees and spectrum usage charges, government revenues soared. Collections through March 2007 greatly exceeded the auction payment commitments of Rs 19,314 that were given up.

The NTP-99 stirred controversy because of this opportunity loss, as a suspected sellout to the private sector. However, government collections actually turned out to be much higher through revenue sharing. Operators did indeed benefit, but for a good reason: explosive growth in mobile services. Users also benefited immensely through the rapid spread of widely accessible services at relatively low cost, as did government revenues.

In the chart below, the second column shows the auction fees foregone through March 2007 after adopting the NTP-99, amounting to Rs 19,314 crore. The third column shows annual government revenues collected, while the fourth column shows cumulative government collections. Compared to the opportunity cost of auction revenues foregone of Rs 19,314 crore, government collections by March 2007 amounted to over Rs 40,000 crore, more than double the "loss". With revenue sharing, collections did not stop in March 2007, and by March 2010 were nearly Rs 80,000 crore, or four times the "loss". By March 2015, the "loss" had been made up by more than eight times, by collecting over Rs 1.6 lakh crore.



Sources

Column 1 - 1999-00 to 2006-07:

Indicators for Telecom Growth, Study Paper No. 2/2005,TRAI:

https://main.trai.gov.in/sites/default/files/ir30june.pdf - CHANGED

https://www.trai.gov.in/sites/default/files/2024-10/ir30june.pdf

Columns 2 & 3 – 2002-03 to 2009-10:

Performance Audit Report on the Issue of Licences and Allocation of 

2G Spectrum by the Department of Telecommunications, CAG:

https://cag.gov.in/sites/default/files/audit_report_files/Union_Performance_Civil_Allocation_2G_Spectrum_19_2010.pdf - CHANGED

https://cag.gov.in/uploads/download_audit_report/2010/Union_Performance_Civil_Allocation_2G_Spectrum_19_2010.pdf

Columns 2 & 3 – 2010-11 to 2014-15 are from the TRAI web site:

http://www.trai.gov.in/Content/PerformanceIndicatorsReports/1_1_PerformanceIndicatorsReports.aspx

In hindsight, a combination of policies, market structure/competition, and technology resulted in enormous growth, much higher government collections, and tremendous user benefits. A key impetus was the adoption of the high-volume-low-margin approach of Henry Ford's "Model-T" strategy. This principle is an essential ingredient for achieving Digital India.

2. Unenforced regulations lead to chaos

In our conditions of deficit infrastructure with constrained capital, the need for collaborative access to capital-intensive resources cannot be sufficiently emphasised. It's either that or do without the connectivity, as we've had to so far.

Until around 1999-2000, only GSM technology was permitted in India for mobile telephony (Global System for Mobile Communications, originally Groupe Special Mobile). Thereafter, CDMA (Code Division Multiple Access) technology was introduced for wireless last-mile connections. While CDMA was supposedly restricted to the so-called Wireless-Local-Loop or WLL in place of fixed-lines for basic telephony, ambivalence/laxity in the enforcement of stated policies and the extension of this technology to mobile services led to unending contention and protracted legal battles between GSM and CDMA operators. While users benefited from price wars resulting from overly intense competition, both industry and users suffered considerable opportunity losses, as broadband development was constrained by a hypercompetitive environment roiled by unrelenting conflict. The marketplace was simply not conducive to the extension and evolution of broadband networks, particularly for less dense rural markets, so connectivity and services suffered.

Although several operators negotiated a degree of resource-sharing among themselves that was permitted, the industry couldn't converge on collaborative approaches to highly capital-intensive network building and service delivery, nor did the government devise supportive policies. Those in favour of unbridled market forces may approve of such intense competition. However, the cost of creating capacity and expanding networks is so prohibitive that, as a study on EU networks suggests, "as market conditions appear to be insufficient in most countries so far to trigger broad-scale NGA [Next Generation Access (Networks)] roll-outs in view of high investment requirements… and risks, identifying the right policy measures becomes crucial." It concludes, "public subsidies are the dominant policy alternative in white [unprofitable] areas, whereas access regulations can be the preferred policy in white or "grey" areas, where only monopoly structure or co-investment models lead to private investment."1 And this is for the Organisation for Economic Co-operation and Development.

The takeaway: good policies are essential, but are meaningful only if they are enforced. Otherwise, we all suffer the opportunity loss.

3. Global developments in sharing infrastructure

A major change globally has been a move towards sharing infrastructure. One motivator is broadband usage needs for greater capacity including for wireless delivery. The US pioneered a solution for better spectrum utilisation by permitting secondary sharing while primary holders retain rights of priority access. The FCC permitted commercial access to 150 megahertz in the 3550-3700 MHz band (3.5 GHz Band) in its ruling of April 17, 2015.² Work is under way in Europe on Licenced Shared Access, eg, in 2300-2400 MHz.

Another motivator for sharing infrastructure has been the financial challenge of providing rural and suburban coverage. Shared networks enable more effective and efficient coverage through multiple operators in such markets. Operators save on capital and operating expenses, while gaining access and higher profit potential. For users, better services improve financial prospects, convenience, and access to services that are otherwise inaccessible, including in areas like health care, education and skills development, and government services. Network sharing equipment is now available to support multiple operators and technologies to make sharing a reality.

We need to stop obstructing ourselves with our own rules. Our regulations must instead enable us to make the most of our capital and potential.

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Shyam (no-space) Ponappa at gmail dot com


1 "The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure - A Survey", Briglauer et al: http://ftp.zew.de/pub/zew-docs/dp/dp15003.pdf
2 Amendment of the Commission’s Rules with Regard to Commercial Operations in the 3550-
3650 MHz Band: https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-47A1.pdf

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Comments

ASHOK

This piece of advice is more easily tendered than acted upon, true, but governments must avoid painting themselves into fiscal corners where concern for the long term health, growth and profitability of each sector of the economy is subsumed because forbiddingly high commitments - universal food security, for example - have to be honoured. Early days yet, but the pendulum is swinging quite a bit towards populism.

March 03, 2016, Wednesday

Railway Takeaways for Digital India

Extending the approach of the Railway Budget to telecommunications and broadband.

Shyam Ponappa      

March 5, 2015

For the first time since the National Democratic Alliance (NDA) formed the government last year, we have something more than grand aspirational statements to go by. Last week's Railway Budget is the first indicator of possibly better days, after all the rhetoric. Perhaps the reservations of some former railway ministers and excoriating comments such as "dreams without substance" have a basis. But in my reckoning, there's a sense of coming to grips with reality based on a rational evaluation, and a systematic approach through problem solving. This was backstopped by a finely balanced Union Budget that supports infrastructure and growth.

Going forward, we need more explicit articulation of detailed steps for execution and inter-sectoral linkages, which would be highly beneficial for the overall economy as well as for the Railways. For example, on how aspects of the Budget relate to stalled and stranded power generation, how these relate to electricity transmission and distribution, and the resolution of non-performing assets (NPAs) of banks. Additionally, the financial discipline of cash flows could be extended to substantially benefit other sectors. As for the financing relating to the Railways, the expectation that the details will be worked out needs to be met soon to establish credibility.

Setting aside all normative criticism, however, what's most important now is that the Railways delivers on this Budget. This will require more resolute coordination and emphasis on implementation than in the past, for example, in contrast to the poor implementation of the Electricity Act of 2003, a good piece of legislation that's unfulfilled.

Extending the approach of realistic goals with explicit action plans and execution could benefit other areas of the economy and infrastructure. The elements include:

a) Toning down the rhetoric, avoiding grandiose statements and instead, defining realistic objectives. It may be argued that realism and understatement are difficult, even counterproductive, when political rivals indulge in a race to the bottom in terms of giveaways. This is true of state elections, as in Delhi, and at the national level, in the confusing if not irresponsible allocation of substantial funds to the debatable benefits of the Mahatma Gandhi National Rural Employment Guarantee Act. The difficulty is that it needs responsible voters to act against opportunistic populism to discourage such gaming strategies in favour of better governance, but it will also need credible candidates with sound party positions and sustainable policies.

b) A willingness to depart radically from past practices for better results. For instance, no new trains were announced in this year's Railway Budget, a major, responsible departure from an otherwise pernicious customary indulgence.

c) An effort to develop a user-centric, outward-oriented strategy for improving services. This is the opposite of a department- or ministry-centric approach, emphasising the "scheme"-driven perspective of the department/agency for limited, piece-meal targets, as against an overall system in the interests of users.

Extending these principles to Digital India

Consider how these might apply to another flagship concept - Digital India - in telecommunications and broadband. Networks and their elements, including projects like the National Optic Fibre Network, would be treated as integral components - stepping stones or links in a chain, and not the ends in themselves - of a systemic delivery process for what users need: a broadband connection to the internet, which becomes the goal. In addition to the access to general information, telecommuting, entertainment and e-commerce through the internet, additional content relating to government, educational and health services would also need to be made available over time. Viewed from this perspective, the requirement changes from achieving targets for the installation of "x" km of fibre or "y" pieces of customer equipment, or the auction of "z" megahertz of spectrum, some of which may be stranded or not working, to achieving targets for end-to-end connectivity with high-speed access to the internet at reasonable prices for the population of users. A classic example of dysfunctional targets was the subscriber-based spectrum allocation rule, which sought to cram the most users on the least spectrum - akin to stuffing a highway with vehicles, instead of getting them to their destination.

From this vantage, it becomes clear that policies should facilitate users' access and connectivity to the internet. Therefore, systems and methods for access through elements that provide connectivity - spectrum, fibre-optic cable, coaxial cable, or "twisted-pairs" for ADSL - must be devised in an integrated manner and made available at low cost.

Networks are useful only if they are accessible to end-users. Here's where the analogy of no new trains applies: for broadband, it could mean giving up spectrum auctions that fragment delivery capacity while draining away potential capital that could be invested instead in networks. Bundling spectrum and other last-mile access technologies with stranded backbone networks seems the obvious way to reach end-users. Where fibre can't be laid and maintained economically, the intermediate linkage over several kilometres could be through reasonably priced wireless, with technologies such as microwave links in the six-gigahertz, 11-GHz, 18-GHz bands and so on, local multipoint distribution systems in the 28-32-GHz bands, TV white space (unused broadcast spectrum, for example, in the 600-MHz band), satellites, or 4G (LTE). For India with its present state of infrastructure, governments must choose to favour delivery to end-users, collecting tolls and taxes at the back end, after the revenues and profits are made. This is how mobile telephony succeeded in India. Broadband can succeed in the same way.

Another concept applicable from the Railways (and roads) is common-carrier access: all trains have access to common rail networks, just as all licensed vehicles have access to road networks, with additional tariffs for high-speed links like expressways or for captive rail. This is the way to achieve Digital India quickly, by adopting common-carrier principles on payment, whereby people in cities as well as the countryside can study, telecommute and conference for work anywhere, get health care, information and entertainment, sell their produce and artefacts, vote, and access government services.

The wisdom of the Railway Budget approach needs to extend to Digital India.

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Shyam no-space Ponappa at gmail dot com

Extractive Charges on Spectrum & Petroleum

Are government levies on these critical inputs beneficial or detrimental?

Shyam Ponappa  |  

March 6, 2014

A spectrum auction last month ended with over Rs 61,000 crore (about $10 billion) bid for the 900 MHz and 1800 MHz bands. Everyone seems upbeat: the government at high bids, and operators at staking out spectrum so that they can continue offering their services. The public at large seems enthused. Is there reason for good cheer? Consider some of the outcomes and the likely consequences.

Outcomes

• Dominant operators, namely, Bharti Airtel, Vodafone and Idea, have won enough spectrum to continue building their businesses. So has a new potential contender, Reliance Jio.
   
• Winners must pay the amounts they've bid, in addition to making further investments in networks. Their financial compulsion will be to increase prices to amortise a payment of nearly Rs 18,300 crore, followed by the remainder to be paid in 10 annual instalments after a two-year moratorium. Competition will provide a countervailing effect against price hikes. The annual payment by all operators after two years will amount to about Rs 4,400 crore. To put this in perspective, Bharti's profits for FY 2013 were around Rs 5,000 crore and Idea's around Rs 800 crore.

• This perpetuates the approach of operators paying first for the right to use spectrum, then dividing available spectrum for their mutually exclusive use. The corollary is that unless operators choose to share some of their infrastructure, as some do for mobile towers, each operator must invest in its own infrastructure. In the absence of voluntary infrastructure sharing to the extent permissible, multiple investments are needed to build parallel networks. This is comparable to railways or transportation companies setting up multiple countrywide railroad and road networks, each for their own exclusive use. The result is a very capital-intensive approach requiring much more investment, while not being sufficiently remunerative.

Consequences

• To the extent that there are front-loaded government charges, operators have less capital for network investments.
   
• Resource constraints result in service deprivation in low-potential areas, as is prevalent now. In other words, urban areas may be well served, but not less densely populated rural areas where the majority reside. It is for the same reason that metro cities are better served by airlines or transportation services: the profit potential is higher.
   
• The lack of amenities in rural areas means there is continuing demographic pressure to migrate to cities. The overwhelming societal need for the provision-of-urban-amenities-in-rural-areas ("PURA") is entirely sidelined. Yet, these are the amenities people need most for economic empowerment, productivity and better living conditions.

Contrast this with Sweden's approach to broadband, for instance. Sweden is a pioneer in the use of 700 MHz for broadband. A loosely translated quote from Sweden's information technology minister reads: "A hundred years ago, it was the ability to build good railways, good roads and good physical infrastructure that laid the foundation for jobs and growth. Today it is also about fast enough build-out of good mobile telephony."1

Another instance of constructive intervention, and that too in a developed metropolis, is the London Enterprise Panel's approach, because London's broadband is considered insufficiently competitive. Funds "will be invested where the market is failing (particularly where this is proving a barrier to business growth)".2

In India, the efficient 700 MHz and 800 MHz bands have not yet been assigned except for limited 800 MHz spectrum for CDMA. These bands are most effective for broadband in rural and semi-urban areas. However, auctions and high reserve prices militate against their effective deployment at low cost, thwarting an apparent remedy for our deficient coverage. Also, GSM operators have just bid aggressively in the recent auction to survive, and are loaded with debt. Only the financially strong Reliance Jio, which has not bid as much, can offer high bids. Vodafone may also be able to do so. So, one problem is reduced bidding capacity, but a bigger problem is reduced investment capacity: the higher they bid, the less likely they are to provide countrywide broadband quickly at reasonable prices.

Petroleum Levies


Petroleum levies comprise another range of high government charges on critical inputs. In 2006, the taxes on petrol amounted to 52 per cent of the retail price, and on diesel, 30.4 per cent with Rs 45 to the dollar, (Delhi price: Rs 45/litre when Brent crude was $65/barrel). Tax collections now amount to around 30 per cent for petrol and 18 per cent for diesel, with Brent crude at around $110/barrel, and petrol in Delhi at Rs 74/litre. While the percentages collected are lower, the amounts collected are about 70 per cent higher than in 2006 because of the increase in the price of crude oil at a time when the economy is slumping.


There is a rationale for collecting reasonable charges to cover construction and maintenance, environmental impact mitigation and waste disposal (clean-up), and to provide incentives. But it's time our governments stopped being extractive, and rationalised charges based on objectives and policies in the public interest. Governments and politicians should be addressing these, instead of doles and giveaways. The aim should be to maximise life-cycle benefits, which can be optimised by reducing short-term capture in favour of longer-term accruals from growth, and from policies designed to deploy productive infrastructure including applying the principle of common carrier access.

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shyam nospace ponappa at gmail dot com


1: "Digital TV [700 MHz band] will now provide frequencies for cell phones", writes IT Minister Anna-Karin Hatt - Dagens Nyheter, February 27, 2014: http://www.dn.se/debatt/digital-tv-far-nu-lamna-frekvenser-till-mobilerna/

2: London Enterprise Panel - 2014-2020 European Structural & Investment Funds Strategy for London, January 2014: https://www.london.gov.uk/sites/default/files/London LEP ESIF Strategy 2014-20 (1).pdf


Questions and Answers

What should the government do?  How should spectrum be handled?

What the centre/states should do:

a) Mandatory common carrier access, i.e., open access to shared networks, with payment depending on extent of use.  Active infrastructure sharing.

b) This means that (i) networks are shared in their entirety, and (ii) spectrum, which is part of a network, is also shared.

It will immediately consolidate the networks, reduce redundant investments, and optimize carrying capacity/throughput.  This also implies reduced carbon footprint, and more capital available for extending coverage and services (instead of being sunk in right-to-use purposes).

In the case of electricity, the logic is:

‘Because a single high-capacity line minimizes both capital costs and losses to electrical resistance per unit of power carried, transmission and distribution are natural monopolies.’

http://www.econlib.org/library/Enc1/ElectricUtilityRegulation.html

A similar rationale applies to communications networks and services, allowing for multiple players for competition.

c) How should spectrum be handled?  Given over to the national network of networks administration on a pay-for-use basis.  Is this a ‘gift’ to telecom companies?  Only in the same way that government-acquired land given to highway authorities, ports, airports, industrial areas, and so on, are gifts to them.  There needs to be clarity on what constitutes infrastructure, and I’m of the firm opinion, I think without bias, that telecom/broadband networks are part of essential infrastructure. 

d) Then the question arises: what about windfall profits, or excessive profits. 

i. There should be no windfall profits because there are no arbitrage profits available, as any legitimate user can access the network on payment.

ii. In the event there are unforeseen windfalls, they can be recovered through the mechanism of windfall profits taxes [which should be allowed for], and the level of profits can and need to be regulated, whether by appointed regulators or elected public utility commissions.

e) All spectrum – including 600 Hz, 700 MHz, 800 MHz – should be rationalized and used in the public interest, including Defence.

f) Where states come in: right-of–way charges need to be rationalized.  Public services need incentives designed into their functioning and delivery, including schools, colleges, not just government services.