Two Steps To Boost Broadband Usage

 

The first, fixing technology gaps, should be easy. The second warrants consideration for better services and to avoid undue disruption

Shyam Ponappa   |    January 7, 2021

Last month, the Cabinet announced a radical policy to expand Wi-Fi coverage across the country and to increase broadband internet access and usage. It sets out how anyone can establish public Wi-Fi hotspot networks in accordance with specified protocols, and resell broadband internet to users.¹

Media reports have been largely enthusiastic, though sometimes confusing, despite strong opposition by telecom operators and Internet service providers (ISPs), who may consider this an infringement of their licensed rights. The argument that they too can set up Wi-Fi hotspots on similar terms is specious, because it ignores their having paid huge sums already for these licensed, contractual rights.

The new policy enables any individual or enterprise to set up public Wi-Fi networks without a licence, and without any fees to the government. Until now only licensed telcos and ISPs could do so, after paying for licences, and in the case of telcos, for spectrum as well. This is why Wi-Fi without government charges seems cheaper. Some aspects of the policy are not clear, such as whether existing laws allow for reselling Internet services by subscribers (equivalent to subletting, which was prohibited), or how it will be commercially feasible and viable for small businesses. In other words, who will pay, and why, if they already have access to inexpensive cellular services. There is also the question of whether transnationals such as Google, Facebook, Amazon and so on would be permitted if they were interested in considering investment in connectivity, especially in corporate and dense commercial centres, and whether Indian corporations would have similar interests. But all of these are likely to need additional enablers as described below.

As ubiquitous broadband internet is an end-to-end service, its foremost requirement is for high-capacity, reliable connectivity throughout the chain. Without the “plumbing” that enables access to data flow and repositories, as with water, it is limited in its availability and reach. The policy change focuses on the last-mile at the user end, whereas our problems extend from the user all the way back to the fibre core or subnetworks. It is this middle-mile from the fibre to the kerb, or to the home or a customer’s premises before the user link, or from a gram panchayat to the village, that is also missing, and difficult to fulfill. A report by the Telecommunications Standards Development Society, India suggests most villages would be within 5-10 km from gram panchayats.

Accepting the need to improve broadband access:

One step is to fix the gaps in the communications chain that this policy addresses, namely, distribution at the user end, and technology gaps. Consider the most fundamental element of digital communications, connectivity. There seem to be incomplete links in communications networks in the planning and execution of broadband Internet service delivery of what is required, and where. Perhaps some of it is because of an expectation of markets being self-organising systems, which does not hold universally. Wireless solutions for the middle-mile are tantalisingly close, because the spectrum is available but not permitted in India. This is partly because of contention on treating some bands as open Wi-Fi or restricted to licensed telcos, or to broadcasting, or only 4G (details in footnote).² Only licensed operators need unconstrained access to these bands, on the lines of the Department of Telecommunications’ (DoT’s) regulations for 5 GHz Wi-Fi, modelled on the US Federal Communications Commission regulations.

The second aspect, for consideration and consultation because it contradicts the new policy, calls for a radically different approach. Yet, it is critical, because maintaining stability is imperative in such a crucial infrastructure service that affects so many areas of living, working, education, entertainment, leisure, governance and security. Especially now, with a pandemic and the looming non-performing asset constraints. We need to expand usage with minimal disruption. Would it not be more effective to remove government charges from telcos and ISPs, as for new entrants, and permit licensed operators in the industry to grow? The straightforward reasons are that they have the established market presence, capacity and experience. Some requisite regulations are in place. This would help maintain stability when we need it most. Operators have the rights and are likely to act on opportunities to expand, if only they had the resources and incentives. The resources would be partly from the savings from not paying licence fees, in line with the waiver of fees for new entrants. Take away all government charges and licence fees, and the operators are not only likely to invest in hotspots for many urban clusters and aggregates of rural users, we may also have a resurgent communications services industry.

Viewing it objectively, operators have already paid licence fees and auction prices for spectrum, resulting in government charges being 30 per cent of revenues for telcos, excluding income tax, unlike in any other industry. In addition, the 2G scam stalled the sector as a whole, because penalties against some perpetrators upended the industry, penalising everyone. Spectrum was restricted and expensive, thereby escalating equipment costs while constraining revenues. As a consequence, users are deprived of enabling facilities, restricting productivity.

This would remove potential threats of litigation for breach of contract, because of arbitrary changes in licensing terms. Problems such as “retrospective taxes” would still remain to be scotched, while management of spectrum and 5G would need equally radical changes in approach and policy going forward.

A gap created by these changes, which the new policy covers, would need resolution: Enabling community Wi-Fi networks, especially in rural areas, because they may be less commercially attractive, and more difficult to build and operate until supportive ecosystems grow. Incentives for rural extension would round out the rational support.

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Shyam (no space) Ponappa at gmail dot com

1. For explanatory briefs, see: https://www.medianama.com/2018/07/223-coai-pmo-wifi and 

https://wifinowglobal.com/news-and-blog/all-you-need-to-know-about-indias-new-wani-public-wi-fi-scheme/

Announcements - Press Information Bureau; Details - Department of Telecommunications:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=1679342

https://dot.gov.in/sites/default/files/202-_12_11%20Brief%20PM%20WANI_0_0.pdf

https://dot.gov.in/sites/default/files/2020_12_11%20WANI%20Framework%For 0Guidelines_0.pdf

https://dot.gov.in/sites/default/files/2020_12_29%20A%26S%20WANI.pdf

2. 60 GHz (V-band) for a few hundred metres at multi-gigabit speeds; 70-80 GHz (E-band) for 3-4 km; TV White Space in the 500-700 MHz bands for rural light licensing long hops (802.22), versus broadcasting for 500-600 MHz, versus 4G for 700 MHz.

Recapturing the Commons

Regulations that facilitate infrastructure with appropriate public resource use will enhance productivity.

Shyam Ponappa   |   March 7, 2019

Growth in the third quarter was disappointing, but there are signs of a cyclical recovery, with a Purchasing Managers Index for manufacturing at a 14-month high. For a significant upward shift of our growth curve, however, apart from lower interest rates, policy-makers have to be constructive. What might we wish for? Here are some suggestions.

Accept the reality that investible funds in India are insufficient for our needs. These include our stock and net inflow of capital, and profits available for investment. We can try to increase our productive capacity or choose business-as-usual, thereby staying below our potential. Why? Because our activities aren’t profitable enough to induce and sustain investment. We need investment —in hard infrastructure, such as transportation and logistics, electricity, water and sewerage, and communications, and in second-order infrastructure, such as security and law and order, health care, education and training, banking, finance and insurance. There’s also the need for reorganisation of markets and practices, e.g., in agriculture, infrastructure, and government procurement.

There’s little doubt that digital connectivity is invaluable for all these. While the imperative is clear, the question is how to orchestrate achieving the desired results.

The telecom operators, alas, have low profitability, inadequate network coverage, and too much debt. Continuing as before means subpar access and productivity for all. We are all hamstrung, and even more so in rural areas. Because of the expanse an7d scattered users there, connectivity entails much higher costs with lower revenue potential.

Self-Organising Infrastructure – A Conceptual Flaw Without Regulatory Support

Meanwhile, there are conceptual flaws in our approach. The National Optical Fibre Network (Bharat Broadband Network Limited or BharatNet) was conceived as a countrywide fibre backbone. The plan was for optical fibre links to 250,000 gram panchayat villages covering India’s approximately 600,000 inhabited villages. A major assumption, however, was that private operators would build access networks to villages and to users. This was unrealistic for a number of reasons. First, there’s the cost of covering sparse users over large expanses with low revenue potential. Second, the supportive regulations for wireless technologies to build the access networks were/are not in place. For example, even for the established 5 GHz WiFi range used globally for WiFi hotspots, restrictive policies meant that 5 GHz equipment could not be used effectively in India in urban or rural installations. This changed with new regulations for 5 GHz, but only four months ago in October 2018 (for details see https://organizing-india.blogspot.com/2018/11/a-great-start-on-wi-fi-reforms.html).

Other wireless technologies for intermediate- and last-mile links are still blocked, and need enabling regulations.

• The 700 MHz band: No operators bid for this given its high price, although it is very useful for covering distances of 5-10 km, and can penetrate walls and foliage. This band together with the 500 and 600 MHz bands could be used to connect gram panchayats to nearby villages. A study of inter-site distances in 14 states shows that most villages would be covered with this range (see Chart below).
  
  
  Study of Inter Site Distances - Gram Panchayats and Villages

• Source: https://tsdsi.in/wp-content/uploads/2019/02/Krishna-Ganti-Day-1-5th-Session-1.pdf

• The 500 and 600 MHz bands are allocated for TV, and therefore are part of the “tragedy of the unused commons”. Only a small fraction is used for broadcasting in India because of limited free-to-air TV and better alternatives. As they are earmarked for broadcasting, they are not used for telephony either.

• The 70-80 GHz band (E-band) is effective for short-range links covering more users at 3-4 km, but not permitted in India, although it is light-licensed in many countries with nominal fees, e.g., the USA, UK, Russia, and Australia. While ideally our regulations should align with global norms, there are exorbitant charges on operators (reportedly 37 per cent, plus corporate taxes), a debt overhang from spectrum auctions, huge investment needs, and relatively low revenue potential. Compelling arguments to let operators use the E-band with unlicensed access, with registry on a geo-location database to manage interference, to be reviewed after some years. The additional traffic will generate revenues from which government collections will increase.

• The 60 GHz (V-band for distances up to 1.6 km): the Cellular Operators Association of India (COAI) opposes making it licence-free as in most countries, and wants it assigned to operators for access and backhaul. For the same reasons as for E-band, operators could be allowed unlicensed access, with a review after some years.

Market Structure and Organisation

A larger problem is that legacy structural and organisational issues need concerted efforts to take requisite policy initiatives. This is perhaps a greater, more urgent need for ubiquitous connectivity.

Successive governments have struggled with revival plans for BSNL and MTNL, somewhat analogous to Air India and Indian Airlines in aviation. Governments have not provided sustained support for ambitious connectivity objectives. There is sometimes inadequate understanding of fast-changing, technically complex enterprises, and episodic attention is given to large enterprises that need timely capital- and skill-intensive decisions (and decision-makers in place), and the upgrading of skills and operating practices. BSNL and MTNL are declining, with bailouts, market disruption through price-cutting, and inability to deliver profits. This is a huge opportunity cost on citizens. However, it is conceivable that with appropriate leadership, and organisational and capital backing, these enterprises could contribute effectively to ubiquitous connectivity, rather than being a drag and/or a disruptive factor. This could happen, for instance, if an alliance were possible with private sector operators providing leadership, organisation and capital, while state ownership concentrates on safeguarding the public interest.

Bharti Enterprises’ Chairman Sunil Mittal has suggested an alliance with Vodafone for an optical fibre network. Bharti and Vodafone already have a joint venture, Indus Towers, providing passive infrastructure services to operators. If regulations enabled active infrastructure from a consortium including BSNL and MTNL, it would leverage the infrastructure while reducing the capital requirements, and increase delivery capability. The entire thrust of regulations could be oriented to facilitating service delivery, leveraging capital, equipment and human resources.

The regulatory approach should aim to facilitate access equitably to public resources that belong to citizens, and not to create obstacles.

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Shyam (no space) Ponappa at gmail dot com

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

(Fixing) India's Systemic Flaws

We need breakthroughs in tax claims and coal and spectrum allocation, but most of all, in societal accord

Shyam Ponappa  |  November 6, 2014

On the face of it, several developments augur well for the economy. But major systemic flaws persist that must be overcome.

Some gains have resulted from Prime Minister Narendra Modi's direct selling and "heavy lifting", as in eliciting Japanese investments. Others, such as the drop in petroleum and commodity prices, are attributable to extraneous factors. The positive developments that seem to be coalescing into a glow on the economic horizon include:

• The revival of stalled projects.
   
• A reduction in raw material costs, with oil prices now well under $90 a barrel.
   
• Significant investments from Japan's SoftBank in Snapdeal and Ola; other significant investments and announcements in e-commerce, for example, Flipkart and Amazon.
   
• The implementation of electronic toll collection (ETC) on our highways. Introduced between Ahmedabad and Vadodara on National Highway 8 (NH-8) in 2013, the ETC became available last week between Delhi and Mumbai on NH-8. It is expected to be available on all national highways in the next two months. Vehicles with prepaid tags can drive through without slowing down, whereas until now, all vehicles had to stop to pay tolls. The productivity gains will be enormous, with fuel savings across toll stations estimated at Rs 60,000 crore (see BS, October 30, 2014 and BS, October 31, 2014 for details).

But all is not entirely well. The fiscal deficit is at 80 per cent of what was budgeted for the full year; there was a decline in projects completed in the September quarter; and there is uncertainty about growth rates.

The real issue, though, is that major systemic flaws persist, resulting in growing economic and operating constraints. There are the problems of retrospective tax claims, of coal allocation and of spectrum allocation. In the societal dimension, there are continuing indications of disharmony, resulting in wariness and insecurity about whether we have a unifying or divisive top leadership, let alone rank and file. Proceeding with business as usual with the present ineffective ways will lead to continuing and increasingly overwhelming detrimental effects. Each of these areas needs breakthroughs to achieve convergent, synergistic results.

Coal

Over 60 per cent of stalled projects tracked by the Performance Management Group in the Cabinet secretariat are power projects, held up because coal is not available. Coal-mining rights are to be auctioned on the lines of spectrum. What are the likely outcomes?

While the government was jubilant about funds collected from the auctions, this created enormous capital and operating constraints for the communications sector. This is because the Rs 1.05 lakh crore bid for spectrum became unavailable for network construction and operations, and the limited bandwidth available to each operator adds to costs and restricts delivery capability. Growth in network capacity has deteriorated to the point where we have higher levels of dropped calls in metros, with continuing poor broadband access countrywide. The effects on productivity are ruinous.

What can we expect from mining rights auctions? If the results are as for the spectrum auctions, we'll have high treasury collections, high life-cycle project costs affecting critical inputs like electricity, steel and aluminium, and a reduction in investment in mining operations and downstream manufacturing. These are logical outcomes: the consequence of higher costs is either higher prices, or financial under-recovery leading to collapse, and capital used for auctions is unavailable for investment. Instead, what we really want from the mining allocation is inexpensive electricity and efficient production of industrial materials, such as steel and aluminium.

The financial insolvency of our state electricity boards reflects the magnitude of the problem. Even the story of Gujarat's electricity distribution raises questions for the rest: Gujarat's average farm tariff is under Rs 1 a unit, compared with a non-farm tariff of Rs 4-5 (see "Farmers pay 56 paise per unit of electricity"*). The high cost of providing these connections is unviable with the low revenue of 56 paise a unit. This is why there is a backlog of about 400,000 farmers waiting for connections despite Gujarat's "surplus" of over 2,000 megawatts. Distributing electricity at such low rates is simply unsustainable, and the situation is much worse in states providing free electricity.

A possible way to approach this is to appoint two or three individuals with the integrity and competence to work with the government, industry and experts to develop an allocation plan. If this "beauty-parade" approach seems too utopian or academic for India, please be aware that this is precisely how land acquisition was actually done for the Calcutta Metro around 1982 after years of delay, and for part of the Bangalore Metro in 2006.

Spectrum

The spectrum constraints, meanwhile, show in the high levels of dropped calls because of congested lines, and the slow rollout of networks into rural areas. This slowness is because of the unfavourable economics: of high cost and difficult execution, with lower revenue potential. What we want from spectrum allocation is access to broadband networks at prices that will result in productivity gains. Instead, we have neither adequate broadband networks, nor sufficiently widespread access for productivity. A better solution is pooled networks with mandatory shared access on payment, with the government getting a share of revenues.

Ecosystems

Apart from inadequate infrastructure, logistics, finance and regulations, all of which must be well-orchestrated to achieve supportive ecosystems for investment and operations, the tax-claims fallout continues to undermine growth prospects. While the Vodafone problem may be finally resolved, the closure of Nokia's manufacturing facility in Chennai because of tax claims undercuts all the sales talk. Each sector needs a supportive ecosystem, integrated with the rest.

Social Disharmony

Above all, social disharmony seriously affects our capacity for collective action. Social coherence is essential for constructive development. The leadership's effectiveness in reaching out and inspiring constructive aspirations can help to harmonise and channel citizens towards desirable common goals. Such collective initiatives would reduce our fractiousness and infighting, making win-win outcomes more possible.

The solutions in all these areas need to be path-breaking, based on integrity, trust and bold, collaborative action. We have to learn these ways.

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                                                                              Shyam (nospace) Ponappa at gmail dot com

*http://indianexpress.com/article/cities/ahmedabad/farmers-pay-56-paise-per-unit-of-electricity/

Comments (2):

• karthikeyan
  Tax Havens can be created , for NOKIA alikes ?? :)
  06-11-2014 08:22:27 
• 
  ashok
  The state of the power sector can make or break Make In India. Worthy of attention at the highest levels of government. 2. Whether spectrum or coal, the government can meet the industry half way by taking its entitlement as a revenue stream rather than an initial lump of capital.
  05-11-2014 22:45:12

For a Telecom Revival

Positive steps on telecom and broadband need to be bolstered with more for a resurgence

Shyam Ponappa   |  December 5, 2013

The government announced momentous decisions subject to Cabinet approval on telecom policy on December 3*. There are some major pluses: increased spectrum made available, and higher market shares allowed through acquisitions. Less constructive for the sector are decisions like acquirers having to pay for spectrum above a floor (4.4 MHz for GSM and 2.5 MHz for CDMA) at market rates unless the spectrum was won through auctions. While there are positive decisions, more are needed for true resurgence in this sector.

Perhaps there's also a need to curb the inappropriate application of direct-democracy to complex issues. This refers to choices influenced by uninformed but vociferous public opinion, whereas the requirement is for logical conclusions based on knowledge and understanding of the facts, domain expertise, and skill in problem formulation, solution design and implementation. The underlying constructs may include factors like technology; economics and its dissimilar sibling, finance; society's organisation, capacity and inclinations; and the law. This is especially true for infrastructure, a recognised weakness in our economy. The issue is that misdirected policies can result from the indiscriminate application of old frames of reference, customary practices, or just following the herd.

Consider the state of telecom and broadband: how bad our services are, and how badly the sector is doing, despite the enormous potential. Decisions on spectrum have profound effects on how these services affect productivity and living standards, with inappropriate policies resulting in impediments and misdirection. This is especially important in developing economies because the opportunity losses are unaffordable, and recovery is difficult in the absence of robust institutions and processes. Negative examples like the drive to refarm 900 MHz spectrum and maximising short-term government revenues from spectrum make a mockery of government-for-the-people. "Refarming" refers to mobile operators having to give up most of their 900 MHz band holdings for redeployment of newer technology, primarily because more developed economies did so. Existing operators would lose much of this spectrum, unless they win it back through auctions or acquisitions. This is like taking away captive mines from established steel manufacturers to create a "level playing field".

There are differences, of course, between spectrum and mineral resources. Unlike minerals, spectrum is not depleted by usage, the time taken to develop a new mine is usually more than to deploy a new network, and so on. But refarming will entail significant costs for new networks with many more base stations. This will take years, requiring interim arrangements to avoid service disruption to existing users. It seems like an enormous burden, in effect cross-subsidising newer technology for the high-end user segment. 

How bad is the situation for the industry? Take indicators like profitability, debt, and spectrum costs. Chart 1 shows Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) as a percentage of revenue for mobile network operators in India, Indonesia, Malaysia, China, Thailand and Singapore, with India being lowest at 20 per cent.

Chart 1: Mobile Network Operators’ Profitability - APAC

Source - GSMA + BCG: http://www.gsmamobileeconomyindia.com/GSMA_Mobile_Economy_India_Report_2013.pdf

Regarding indebtedness, two Indian operators have Debt/EBITDA ratios at 4 and 6, well above acceptable levels. Others, whose debt is in line with Asian operators, are less able to service it because of lower revenues. While some urge that leveraged companies in difficulties be allowed to fail, the magnitude is such that there is a serious risk of destabilising the economy.

Spectrum reserve prices in India are much higher than in other countries (Chart 2), despite the average revenue per user (ARPU) being much lower in terms of purchasing-power parity (PPP), rendering investments unattractive.

                                            Chart 2

Source - GSMA + BCG: http://www.gsmamobileeconomyindia.com/GSMA_Mobile_Economy_India_Report_2013.pdf

It is because of this stressed situation that the authorities, the industry, and the public need to reconsider their basic approach to spectrum needs. One reason for the forced refarming is supposedly that 900 mHz spectrum is needed for more efficient technologies. Another is that some operators with no 900 mHz spectrum are at a genuine disadvantage in terms of in-building coverage. Of course, the most compelling reason may be simply the government's need for revenues to cover its deficit, despite the enormous negative consequences to the long-term public interest. The question is whether there have been adequate efforts to explore less disruptive alternatives to achieve the objectives of reliable, inexpensive communication services.

Spectrum Bands & Ecosystems

As of May 2013, the prevalent frequencies in LTE networks in Asia were as shown in Chart 3.


Chart 3: Spectrum Bands in LTE Networks (Asia) May 2013

Source: Wireless Intelligence
http://www.mobileworldlive.com/asias-apt700-band-plan-leads-the-way-to-large-scale-4g-lte-growth

The most common were 1800 MHz and 2.6 GHz networks. The 2.3 GHz band used in India (and China) is not very widespread, while 900 MHz is barely there. Bands that are not widely used are unlikely to benefit from scale economies. From this perspective, it is more logical to refarm 1800 mHz for LTE rather than 900 MHz, and the now widely adopted 700 MHz band.

The adoption of the APT700 band across Asia (including India), Latin America and Europe opens up the possibility of evolving into the largest LTE ecosystem with significant scale economies. As Verizon's established 700 MHz band in America differs from the APT700 band, the availability of devices may be a concern.

However, the fact that many countries have adopted the APT700 band improves the chances of quick development of equipment, starting with Telstra's planned trials in December 2013/January 2014.

For the resurgence of telecom and widespread access to broadband, the current positive moves to cut reserve prices somewhat, allow spectrum trading and consider uniform spectrum usage charges are not enough. Public opinion tends to view these steps as favouring telecom operators, or as sops to one operator or group. However, policies need to be formulated from considerations of the public interest, including that of users, the industry, and the government. Regarding auctions, there needs to be rethinking on the lines of the Swedish approach of bids for network investment and rollout, perhaps with incentives for faster delivery.


shyam [no space] ponappa at gmail dot com

* http://www.business-standard.com/article/economy-policy/m-a-rules-for-telecom-cleared-113120400012_1.html