Telcos Need Three More Bold Decisions

Users and service providers are swimming against the tide even after the abolition of retro tax.

Shyam Ponappa    |   August 24, 2021

Undoing the retrospective tax amendment affecting Vodafone Group and Cairn Energy among others was an excellent move, and proves what the government can do. In this spirit, two more shackles must go for us to fully exploit telecom and digitisation:

a) Adjusted gross revenues (AGR) for telecom operators need to be defined rationally as licence-related revenues by policy and legislation.

b) Spectrum allocation and pricing need a complete revamp. Appropriate policy and legislation can enable spectrum use as a resource for the common good, paid for by a share of revenues for usage instead of auctions. This will make spectrum costs an operating expense, and will not require enterprises to make up-front capital investments, as with other resources: Electricity, water, and leased land.

Like the retro tax, these self-imposed constraints have restricted telecom and digitisation support, limiting our capacity. It is like swimming against the current, whereas policy changes can remove these limitations, enabling service providers and users to swim with the current. Removing all three would do that, putting India’s telecom and broadband into a much higher trajectory in realising our overall potential.

The government must frame policies for the public interest in communications and digitisation in a fair, transparent way, to break out of the absurd situation of pricing spectrum at five times the Organisation for Economic Co-operation and Development nations, whose per capita income is 15-20 times higher. This will help us resolve the contradictions of the lowest-priced broadband with the highest cost structure, and atrocious service quality.

Policies to Clear Impediments

AGR: The overreach in the AGR definition is a self-created obstacle. The Department of Telecommunications (DoT) left the term undefined in the licence agreements in 1999. It was to be defined with the Telecom Regulatory Authority of India’s (Trai’s) recommendation, but when finalising licence agreements in 2002, the DoT ignored the recommendation that AGR should include only revenues from cellular mobile services. The operators’ appeal before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) in 2003 was upheld in 2006; the DoT appealed in the Supreme Court. The SC refused to intervene, but ruled that the DoT could pursue its concerns with the TDSAT. The TDSAT in August 2007 accepted most of the recommendations made by Trai. And so it went, with many disputes and appeals by the UPA as well as the NDA governments, until a TDSAT judgment in 2015 overturned previous TDSAT orders, excluding only capital receipts. Later, an SC judgment in 2019 even included capital receipts.¹

The following instances illustrate the absurd claims, contradictions, and orders:

• The government had informed the SC in a hearing in 2011 that non-telecom revenues were not to be included in the AGR.²  Yet, the TDSAT judgment of 2015 citing this statement ruled exactly the opposite, excluding only capital transactions.
  
  
• The SC’s judgment of October 24, 2019, dismissed the Trai and TDSAT recommendations of 2006 and 2007, and extended the definition of AGR to all non-telecom revenues. Previously, various courts had reportedly set aside such claims in 2006, 2007, 2011, and 2015.³
  
  
• Thereafter, in what appears as inappropriate discrimination in the absence of explicit policies, the SC in 2019 excluded public sector dues amounting to Rs 2.7 trillion from GAIL, Oil India, Power Grid, and so on. Expressing outrage at such demands on PSUs, the SC insisted that private operators must pay their dues of Rs 1.47 trillion. No wonder the DoT and the rest of the government seem confused, because like the retro tax amendment, these actions appear to be arbitrary.

Therefore, the government must frame a policy definition for AGR informed by Trai recommendations that is rational, in the public interest for better communications, fair, non-discriminatory between state-owned and privately-owned companies, and transparent.  This will satisfy the SC condition of due process according to government policies.

Spectrum Allocation & Pricing

Current technology favours giving operators shared use of spectrum and networks across all technologies, because coverage and capacity increase at lower cost. Yet, because wireless communications evolved from a time when mitigating interference was the primary technological concern, the method adopted was of exclusive spectrum assignment (“allocation” in common parlance) of distinct bands to each operator. This method, initially a technological necessity, then became the customary practice because governments in many countries sought high fees from spectrum auctions. Many countries suffered as this burden led to the collapse of the sector for a decade.⁴  India was one of these, because the meteoric rise of our mobile telephony stalled, and is now so shoddy. The damage is pervasive, because of inadequate communications infrastructure that affects many areas, such as energy and water management, education and skilling, healthcare, and productivity across sectors —commerce, transportation, hospitality and tourism, manufacturing, agriculture— and in mitigating environmental impact.

Technology needs wider swathes of spectrum for high data throughput. It is also able to manage interference much better. We cannot have effective coverage without better wireless access networks. As we move towards 5G and beyond, the emphasis on wireless communications will increase. This can happen through sharing of spectrum and facilities among operators, which will likely be the norm in 5G and 6G, providing a high multiplier to network usage, while considerably reducing capital investment needs countrywide.

The government has to frame policies that help to do this, by removing obstacles such as retro taxes, AGR, and capital expenditure on spectrum. Replacing an extortionary approach to the communications sector with a constructive emphasis on infrastructure support will get us there, as well as enhance government revenues.⁵  Policies can be framed to help achieve better health, education, skilling, productivity, and living conditions. The major changes of using spectrum as a shared resource with payment for usage through a share of revenues, in combination with undoing retro taxes and AGR, are the required steps. There are different ways to do this, and the government needs to steer the process through consultations to an acceptable way for us to move forward with 4G, 5G and beyond, for effective communications and digitisation.

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Shyam (no space) Ponappa at gmail dot com

1: https://www.theleaflet.in/agr-order-a-case-of-subjective-judicial-overreach/

2: https://dot.gov.in/sites/default/files/TDSAT%20Judgment%2023-04-2015.pdf

3: https://www.financialexpress.com/opinion/why-isnt-govt-at-sc-on-agr-ruling-threatening-of-telcos-like-airtel-vodafone-idea/1775075/

4: https://organizingindia.blogspot.com/2011/02/spectrum-auctions-jhatka-or-halal.html

5: https://organizing-india.blogspot.com/2020/08/configuring-indias-digital-ecosystem.html

A New Telecom Policy That Works

A sound NTP-2018 requires sustainable, integrated policies that address our realities.

  Shyam Ponappa   |  August 3, 2017

The government finally announced in July that a new telecom policy (NTP-2018) in consultation with stakeholders would be in place by March 2018.  There’s been some jockeying for one-up statements thereafter, suggesting the risk of being sidetracked. The need for competent, supportive policies in the public interest must be focussed and driven, and not be allowed to fall prey to being hijacked by bluster, nor be diverted towards maximising government revenues, crony interests, or electioneering tub-thumping.

A quick review of the sector and potential demand indicates what’s needed to fulfil our requirements. Telecom operators are saddled with Rs 4.6 lakh crore of high-interest debt. This has resulted from aggressive bids spurred on by spectrum auctions, aggravated by shrinking revenues and price wars. Meanwhile, urgent concurrent needs for network investment for greater reach and delivery, and for realising more of the potential for extensive and intensive usage, languish — for want of capital, enabling policies, and orderly markets. This has resulted in a crisis in what could have become the most successful communications market in the world. Instead, India’s communications sector is partly on the brink of collapse because of retrogressive policies and practices, unsustainable financial models, the fallout of scandal, and disruptive competition.

The best way forward is for all government agencies, not just the Department of Telecommunications, to define objectives jointly, and devise policies through consultations to enable an effective and robust sector. Here are suggestions for what to aim for and what to avoid in developing NTP-2018.

Objectives for NTP-2018

1. Networks: maximise capacity utilisation/throughput

Maximise the utilisation of networks by increasing throughput. This requires exploring alternative forms of organisation and management to exploit invested capital for public interest objectives, e.g., through consortiums, perhaps with government participation to ensure national security and the common good.  Orderly markets are essential in communications (as in all infrastructure), and competition, while essential, is not constructive beyond a point, unlike in fast-moving consumer goods or non-capital intensive sectors.

2. Spectrum allocation and management: Maximise throughput

Maximise wireless throughput to facilitate connectivity, by: a) Making more spectrum available, (b) In large, contiguous bands, (c) At less cost. Explore pooled usage and secondary sharing of spectrum by operators/consortiums as appropriate (consult with operators and experts).

3. Financial approach: Use revenue sharing

Use revenue sharing to compensate for spectrum and network rights, usage, and all government charges, as was done with licence fees in NTP-99.

Pitfalls to avoid

1. Palliative “default solutions”

It is easier to tinker with policies as they are than to undertake major systemic change. An easy way out would be to fall back on the received wisdom of competition and free markets, hoping to muddle through. For instance, the government set up an inter-ministerial group (IMG) to reduce financial stress in telecom. This group has apparently recommended extending payment schedules from 10 to 16 years, and cutting interest rates from 12 to 8 per cent.1 These sops could become the basis of NTP-2018, leaving the market to shake out, hoping consolidation will remedy inadequate coverage and delivery.2 This will merely reschedule operators’ payments over a longer period. The structural problems will remain, with insufficient network coverage, barriers to technology, less likely benefits from innovation such as “wireless fibre” and small cells with lower radiation, with hyper-competitiveness still a drag.

2.  Rely on consultations and avoid preconceived ideas

Statements such as that NTP-2018 will be app-directed and not connectivity-directed appear inappropriate or misinformed. This is because connectivity remains our most critical need for more effective delivery of services. Connectivity is deficient not only in rural and semi-urban areas, but even in dense urban areas. In fact, ignoring connectivity is typical of India’s approach to and failure in building networks and infrastructure (incomplete systems because of gaps, or with stranded assets, or that fail in end-to-end delivery). Simply put, our requirement is for more user-access and backhaul/networks to enable higher, more widely available access and throughput. This is India’s communications infrastructure need, whether it is broadband or Narrow Band Internet of Things (NB-IoT). Everything else follows.  Otherwise, it’s like trying to deliver more water without a network of pipelines, or more electricity without adequate distribution networks.

3. Anti-competitive disruption

While disruption is a reality in our communications sector, its jurisdiction has become contentious between the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI). The CCI reportedly asserted that the Competition Act of 2002 defines “predatory price”, “dominant position”, and “relevant markets”, which fall in its domain, and that it has applied this framework over the last eight years across sectors including telecom.3

Turf issues are not unique to India, and have been resolved in many countries.  Secretary General Pradeep Mehta of Consumer Unity & Trust Society (CUTS) points out that in 2011, a committee recommended amending the Competition Act to include mandatory consultation between the CCI and sector regulators where necessary.

A puzzling question if the telecom sector was in fact being monitored: Why was such disruption permitted? From press reports, it’s unclear whether there are no appropriate regulations, or whether the CCI’s and/or TRAI’s assessments of dominance and predatory pricing rely on precedents from developed economies without appropriate changes for our circumstances. To illustrate, consider the notion that market share is a key criterion for dominance, or Significant Market Power (European Commission).  However, in a developing economy, a large conglomerate investing in a new sector could have SMP even with zero market share, simply because of its size and resources, and economic power (attributes in Section 19(4) of The Competition Act). The European Commission also mentions privileged access to financial resources, economies of scale and scope, and barriers to entry. 

A sound NTP-2018 requires sustainable and integrated end-to-end policies for our realities, not academic or silo-based orthodoxies.

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Shyam (no space) Ponappa at gmail dot com

1: “Govt panel for sops to ease financial stress in telecom sector”, BS, July 25, 2017:

http://www.business-standard.com/article/economy-policy/img-readies-sops-to-ease-telecom-stress-117072401632_1.html

2: “Short-term turbulence”, BS, July 29, 2017:

http://www.business-standard.com/article/economy-policy/short-term-turbulence-in-telecom-sector-117072900022_1.html

3. "CCI tells Trai to consult it on predatory pricing, market dominance issues", BS, July 28, 2017: 

http://www.business-standard.com/article/companies/pricing-market-dominance-its-remit-cci-tells-trai-117072800069_1.html

Broadband Reforms for Local Manufacturing + Coverage

Published as "Broadband reforms for local manufacturing".

Broadband in India needs reforms for local manufacturing and for infrastructure expansion and utilisation.

Shyam Ponappa 

  |   June 1, 2017

India’s markets are at the heart of what attracts investment and economic activity, with mobile phones and broadband services comprising a significant share. In exploring their magnitude and supply chains, an obvious need emerges for policies and incentives for local manufacturing of components and handsets to boost domestic supply and create employment. Another avenue for deriving local benefits is extending the coverage of digital platforms, expanding the market through policies and incentives facilitating broadband infrastructure. Policy support can help both to extend networks using fixed and wireless technologies, as well as to increase capacity utilisation.

Reforms affecting both supply and demand are needed to fully and equitably provide ubiquitous coverage and exploit digital platforms for public welfare. Such reforms would mitigate the lower revenue potential of rural populations. Enabling steps could include allowing active sharing of spectrum and networks, providing more unlicensed spectrum, financial incentives such as tax credits and spectrum charge rebates for rural infrastructure, and standardised right-of-way charges.  

India’s Mobile Handset Market

“A billion smartphones will be sold in India in [the] next five years.”

This estimate is from a report by IIM-Bangalore and CounterPoint Researchers.1 The report notes that India became the second-largest global smartphone market in terms of number of users in early 2016, and still has enormous growth potential even as demand for smartphones elsewhere is waning. In the next five years, almost a billion smartphones and half a billion feature phones will require components worth $80 billion (Rs 5.2 lakh crore). These will have to be imported if they are not produced locally. The report estimates that in 2016, about 50 local units assembled over 180 million mobile phones valued at $9 billion (about Rs 59,000 crore), about 70 per cent of the $13 billion sold. However, the local value addition was only $650 million (Rs 4,225 crore, or 7.2 per cent). This underscores an urgent need for policy changes, considering that emerging manufacturers in these sectors such as  Brazil and Vietnam have value added of nearly 20 per cent and over 30 per cent, respectively, while champions such as South Korea and Taiwan add above 50 per cent, and China has 70 per cent local value added. 

In early 2016, India’s domestic smartphones had a 40 per cent market share, but by the quarter ending March 2017, Chinese brands dominated, with a share of over 51 per cent, while local brands dropped to under 14 per cent.2

According to the IIM-B/CounterPoint Researchers report, Indian manufacturers import most of their components, and there are few incentives for R&D or to attract component suppliers to form local ecosystems. Further, the existing incentives will become ineffective once the goods and services tax (GST) is introduced, because they will all be subsumed under GST. Accordingly, the Broadband India Forum in association with EY have suggested (a) refunding the GST to manufacturers for handsets and (b) extending this policy to components could provide an appropriate manufacturing incentive.3 This needs to be done without delay.4

The report also proposes a phased approach to maximise local value added, aiming for 30 per cent by 2020, and more thereafter. Early phases suggested are moving from assembling chargers and other such accessories to high-value components such as printed circuit boards, cameras and display units. The researchers suggest that chargers, batteries and cameras can in fact be manufactured locally, contributing to components valued at an estimated $15 billion by 2020. If these proposals are adopted and executed, it will reduce imports and create jobs, deriving local benefits from India’s market opportunities. Moreover, it will help create an R&D capability in India for this sector, which can over time become a supplier to global markets.

The prerequisite for these improvements is policy reforms on matters such as duties on components (including the refund of GST) and incentives for suppliers to set up in India. The report also suggests that policies need to be framed for effectively funding institutions and corporations for research to build intellectual property and skilled professionals. 

Extending Digital Infrastructure & Utilisation

There is a parallel need for policies supporting the extension and coverage of digital platforms, of the sort achieved in migrating from up-front auction fees to revenue sharing with the New Telecom Policy in 1999 (NTP-99). These require convergent action within the government and its multifarious departments and agencies, or in some cases by coordination and resolution among stakeholders, i.e., in addition to the agencies of government, the judiciary, the operators and vendors of equipment, the press and media, and the public. 

There are some issues that relate to the Telecom Regulatory Authority of India’s (Trai) recommendations over the years that need decisions on implementation. An example is access to broadband services through cable networks. The government’s position on additional charges as a share of revenues conflicts with cable operators’ unwillingness to pay additional charges, and perhaps the cost of the devices for conversion. The effect of this deadlock is that the entire set of cable network users have to use another means for broadband connectivity. As this policy change will affect the competitive dynamics of wireless service providers, it is a candidate for coordinated, participative resolution. Some Trai recommendations may benefit from review, such as open access (like Wi-Fi) on 60 GHz.

Other examples are: 

• Enabling additional bands of unused spectrum such as 60 GHz and 70/80 GHz for wireless gigabit links, and 
• Enabling the sharing of entire networks, including the radio access network (and therefore spectrum) among operators.

The promise of digital platforms is immense, and both these streams of reforms need to be taken up and completed for India’s digital platforms and markets to deliver on their considerable potential.

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Shyam (no space) Ponappa at gmail dot com

1. “Mobile Phone Manufacturing: A Practical Phased Approach,” by Pathak, Chatterjee and Shah: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2874689 

2. http://www.idc.com/getdoc.jsp?containerId=prAP42557317 

3. http://www.communicationstoday.co.in/index.php/daily-news/6710-broadband-india-forum-with-ey-releases-the-research-paper-on-incentivizing-domestic-handset-manfacturing-under-gst

Added after publication - June 6, 2017

4. For a detailed exposition of the GST question and why raising customs duties on imported equipment/components is not feasible because of the terms of the Information Technology Agreement 1997 under the WTO, see: https://www.linkedin.com/pulse/incentivising-manufacturing-mobile-phones-india-parag-kar  

Developments in Spectrum Sharing

New ways to share spectrum can revolutionise broadband in India

Shyam Ponappa / New Delhi December 3, 2009

As the Telecom Regulatory Authority of India (TRAI) deliberates on spectrum and licensing after the hearings ending December 2, some important points are worth highlighting. Spectrum is public property and, therefore, need not add a layer of cost (through auctions and such other artifices), provided it is available to network builders, and these networks are available to operators for their customers on payment. The question is whether the government should give spectrum free, or for an up-front price, i.e., a hefty spectrum fee, or through a progressive revenue-sharing arrangement as for telecommunications. This can be to network builders for their use, or to operators, to pool through either their own arrangements or through network builders-cum-operators.

One way to think about communications networks is to consider an analogy with road networks. The road network is accessed by paying road taxes and special tolls as required, e.g., when using a toll bridge or highway. The rest of the time, once a transport operator pays road taxes, the fleet’s vehicles have access to the entire public road network.

In the same way, it should be feasible for operators to access communications networks. These networks may be the operator’s own, or the public network, i.e., the Public Switched Telephone Network, paying as they go. In other words, whether operators use their own or others’ networks should be immaterial as long as they pay the tariffs, which result from a mesh of interconnection agreements. In this manner, network builders/service providers can use the spectrum as part of their “plant” for wireless transmission, just as they use optical fibre and copper wire for wire-line transmission.

Networks are already being built and operated by network builders-cum-operators. According to The Economist on developments in network operations, initially in New Zealand and then extended on a much larger and broader scale in India, “The vendors... gain economies of scale because they build, run and support networks for several Indian operators. Ericsson’s Mr Svanberg says his firm can run a network with 25% fewer staff than an operator would need. Bharti’s operating expenses are around 15% lower than they would be if it were to build and run its network itself, and its IT costs are around 30% lower, according to Capgemini.”*

Meanwhile, a momentous experiment in spectrum sharing is taking place in America. A company called Spectrum Bridge has developed a database-driven model for dynamic spectrum allocation in unused spectrum bands, the “white space” in the TV bands. This is in the 200 to 600 MHz band, with considerable advantages in propagation over distances, through foliage and walls, without attenuation as experienced at higher frequencies.

This system is being tried in Claudville, a rural community on the border of Virginia and North Carolina. As is likely to be true in rural India, using open spectrum that is unlicensed is impractical because of the distances, terrain and foliage. Fibre and copper lines are not only impractical, but also prohibitively expensive, a fact that people who suggest the use of existing wiring for broadband don’t seem to realise.

In this context, given the discussions on the possibility of spectrum trading as a solution going forward in the TRAI hearings, it is instructive to note that despite the US Federal Communication Commission’s secondary market initiatives taken in 2003, not much spectrum trading had actually taken place until Spectrum Bridge’s introduction of their tracking and trading model, SpecEx (see www.specex.com). Subscribers view available spectrum at a chosen location and frequency band with pricing details when they want to buy, or list available spectrum to sell by location and frequency band. Therefore, any recommendations by TRAI or decisions by the Empowered Group of Ministers (EGoM) or the government should take this into account in considering the path of market traded spectrum based on exclusively assigned bands. It would be unrealistic to expect such trading to take place simply because it is allowed, without other facilitating developments as have been achieved by Spectrum Bridge in America.

A second problem is that trading in spectrum can result in effects equivalent to land-grabbing in real estate. This serves less for effective communications than as an asset play for profit.

Like SpecEx for priced spectrum, www.ShowMyWhiteSpace.com is a free website that the company supports to show free TV white space (the “digital dividend” that is talked about) that can be used on the basis of open access to unlicensed or open spectrum.

In the trial at Claudville, Spectrum Bridge deployed the network with Dell and Microsoft contributing computer equipment and software to the local school. Teachers can now incorporate distance learning resources into the school’s curriculum.

Our policy-makers need to move beyond debates over slicing and dicing the spectrum to determine the smallest efficient band — 2.5 MHz for CDMA and 4.4 for GSM? Is 6.2 MHz all that any operator needs?... and so on. A direct solution is to not assign spectrum for exclusive use, and instead enable its use as a common resource that must be accessed by everyone who needs to communicate on the network, exactly as public roads are accessed by paying road taxes and tolls. If spectrum must be assigned nominally to operators for administrative reasons, they should be obligated to pool this spectrum for common access.

Once we are able to aggregate spectrum in the frequency range which allows propagation over distances and through natural and man-made obstacles — buildings, foliage, etc. — we will have the open “highways” for broadband for its widespread usage across the country. This can only be achieved at relatively low cost through a progressive revenue-sharing arrangement, which is what happened eventually for voice communications with the National Telecom Policy 1999.

These are complex technical and commercial issues, and require the concerted effort of stakeholders and experts to devise the most effective solution in the public interest. The TRAI hearings are the first step in this process.

shyamponappa@gmail.com

* ‘The mother of invention’, The Economist, September 24, 2009

Managing Spectrum

The Empowered Group of Ministers' goal should be nothing short of a broadband revolution

Shyam Ponappa / New Delhi November 5, 2009

In communications services, the high demand for spectrum compared with limited supply is well established. The Telecom Regulatory Authority of India (TRAI) estimates demand in five years at 580 MHz, with current assignment to commercial operators at about 160 MHz. In this limited amount, fragmented spectrum holdings reduce efficiency, and broadband growth and availability have been abysmal. Therefore, the policy alternatives evaluated should include ways to maximise utility through conserving resources and facilitating broadband Internet. The Empowered Group of Ministers (EGoM) needs this analysis to make informed decisions. The related issue of maximising utility from facilities, i.e., sharing networks for maximum benefit while conserving capital, thereby resulting in lower prices, likewise deserves serious consideration. For this, they need inputs on the benefits and costs of coordinated policy reform to promote broadband through incentives and penalties.

Having said that, it is for the officials providing support to the EGoM to structure, analyse and prioritise issues and provide the requisite information to facilitate informed decisions on complex choices. This requires appropriate inputs on technology as well. Efforts on all these aspects seem inadequate, with the EGoM being simply not adequately informed.

The TRAI recently began a consultation process, addressing a host of issues relating to 3G, Broadband Wireless Access (BWA) and licensing. A major deficiency is that no purposive goals and objectives are indicated, nor is there a facilitating logic to the structuring of issues (57 wide-ranging questions, with roughly three weeks for comments).

This is because the TRAI has posed issues built up over the years in one burst, resulting in the equivalent of a “flash flood”. Instead, structured consultations on discrete sets of questions, as in the indicative example below, are likely to yield better results. However, given where we are — the usual how-far-to-go-in-how-little-time — an organised, logical presentation with relevant inputs would improve the chances of good decisions and outcomes. Here is a suggested road map.

GOALS & OBJECTIVES

The first requirement for the consultation process is clear objectives based on needs. As the TRAI has not provided this, here are indicative constructs:

Our policies for infrastructure should be in the public interest. In communications, these are:

• Ready access anywhere in the country to, a) good services and, b) at reasonable prices.
  
• The services can be thought of as “Broadband Internet” and “Voice and SMS”.

(Note: There are very different objectives for broadcasting, which is outside the scope of these comments.)

DECISION TREES & ISSUE MAPS

A decision tree is an alternative to wading through a welter of unstructured questions, starting with fundamental objectives, using a logical decision map/issue map as a framework. This requires judgment in selecting, organising and prioritising issues. The example at Exhibit A assumes that the least capital and operating costs (while maintaining high quality) are appropriate criteria for services in the public interest.

Exhibit A: Issue Map on Spectrum & Broadband





These decisions will determine how issues of licensing and consolidation/acquisitions pan out. Questions on pricing remain, e.g., percent of revenues for licences and spectrum charges, and the timing of fees (i.e., cash flow from a fiscal perspective). If the decision is to pool spectrum, there are critical questions on Administered Incentive Pricing. The same principles of concessions and incentives (i.e., subsidies) as for sectors like power and highways need to be applied. Finally, there needs to be rationalisation in non-commercial uses, e.g., governance and defence.


SPECTRUM & NETWORK EFFICIENCY=LOWER COSTS

Given our fragmented spectrum holdings, perceived scarcity and economic efficiencies of limited competition in networks, there is reason to explore an approach to conserving spectrum and consolidating facilities. Spectrum can either be given or licensed for exclusive use in bands to separate operators as is done now, or be made available in large (at least 20 MHz) blocks to all operators for common use. Alternatively, operators can be given incentives to pool licensed spectrum to create a common capacity. The same approach can be explored for networks (facilities that use spectrum); these too can be pooled and shared if individually owned. Operators do this in a limited way, e.g., sharing towers, but pooling can be organised and extended much further.

Ill-considered policies that increase competition for its own sake because of the predominance of doctrinaire “free-market” notions have displaced more appropriate market structures. In India, this has resulted in 12-14 operators per service area, compared with the global average of three-five. The economics of networks favour limits to competition, because networks lend themselves to a limited-player (monopolistic or oligopolistic) market.*

Interestingly, an economist at the US Federal Communications Commission has this to say: “…For what should competition be promoted? Promoting competition for particular services can have major implications for the evolution of regulation and the long-term competitive structure of the industry. Unfortunately, the ‘competition for what?’ question has not received adequate consideration.”**

The benefit of using contiguous bands of spectrum is that costs could be significantly lower for equivalent voice and data capacity because of less advanced technology and less density of towers and equipment. Likewise for shared networks. With competition and good regulation, the likely result is lower costs, both for Broadband Internet and for Voice and SMS.

CONCLUSION

An interdisciplinary consultation with stakeholders and specialists is essential to consider spectrum and sharing of facilities. Companies like Ericsson, Nokia, Motorola and Qualcomm as well as Google, Intel and possibly cable companies (Liberty Global?) should be invited. The EGoM’s goal should be nothing short of a broadband revolution. We need this for education and vocational training, health care, governance and economic productivity across the board.

* 'A rational spectrum allocation policy', BS, July 2, 2009: http://organizing-india.blogspot.com/2009/07/rational-spectrum-allocation-policy.html

** http://www.galbithink.org/interconnection.htm
Douglas A Galbi, Senior Economist, US FCC.

shyamponappa@gmail.com