Spectrum is one of the most valuable assets in the telecom industry. At the same time, it is a scarce resource. Thus, the way this asset gets allocated is of great significance and interest.
Over the past few weeks, the Indian telecom market has seen the unfolding of a strong debate around spectrum allocation in the E and V bands. E and V band spectrum has significant commercial value. While radiowaves under the E band fall in the 71-76 GHz and 81-86 GHz brackets, those under V band fall in the 57-64 GHz bracket. Given the range of these two bands, the airwaves can transmit data at very high speeds. Thus they are the most conducive for providing high speed broadband services, especially in remote areas, and for better in-building coverage. Further, these bands will play a critical role in the proliferation of 5G services in India.
Owing to the important role that these spectrum bands will play in the near future, telecom players, tech giants and internet service providers (ISPs) have been arguing over the approach that should be adopted to allocate this spectrum. The bone of contention is whether spectrum in these bands should be delicensed and administratively allocated or put up for auctions. While ISPs and tech giants are in favour of the former approach, telecom operators prefer the latter.
Proponents of auctioning
Telecom operators are pushing for the auctioning of spectrum in the E and V bands. As per telcos, there is no merit in delicensing the spectrum in these bands as it has significant commercial value. A move towards delicensing will not be viable for the government from a monetary viewpoint. Also, such a move might put telcos at a disadvantage vis-à-vis ISPs and other tech giants.
Notional loss to the exchequer
Industry players have highlighted that since spectrum in the E and V bands comes with high throughput capabilities of 10-25 Gbps, it will be crucial for 5G backhaul. In addition, 5G technology relies heavily on radiowaves with smaller ranges that support higher speeds, and these bands fit perfectly in the equation as they are known to be good and effective for short distances. Moreover, spectrum in these bands is critical in a 5G scenario given the current level of OFC deployment in the country, which is abysmal compared to global standards.
Since E and V band spectrum will play a critical role in the provision of 5G services, telcos have concluded that delicensing of this spectrum will lead to a loss of revenue for the government.
Non-level playing field for telcos
Telcos have expressed that such a move will create a non-level playing field for licensed telcos as it will allow ISPs and other players to provide 5G-type services without much investment in the network. This will impact the revenues of telecom service providers. In view of this, telecom operators have urged the Telecom Regulatory Authority of India (TRAI) to recommend to the government to allocate spectrum in the E and V bands only through transparent auctions with licensed access service providers. Moreover, the Cellular Operators Association of India has remarked that any decision on delicensing or administrative allocation of E and V band spectrum would be in contradiction to the prevailing policy framework and would be legally untenable.
Proponents of delicensing
Contrary to the telcos’ perspective, ISPs are of the view that spectrum in the E and V bands should be delicensed as these bands are more relevant for the high capacity services offered by these companies.
According to the Internet Service Provider Association of India (ISPAI), a first come, first served approach should be adopted for the allocation of spectrum. The industry body has highlighted that not only will this approach help drive broadband penetration in India, but it is, in fact, in agreement with TRAI’s recommendations. Earlier, in 2015, TRAI had recommended that the E and V bands be delicensed, and the allotment be on a first come, first served basis and link to link.
Supporting the ISPs’ case, the Broadband India Forum (BIF) has contested that spectrum in the E and V bands is not the same as spectrum for access services, and therefore it should be delicensed and not auctioned. Further, the BIF has opined that auctioning of spectrum in these bands would be in disagreement with international best practices.
According to the advocates of the delicensing approach, the claim that auctioning of spectrum will bring monetary value to the government is incorrect. ISPs and technology companies are of the view that unlike access spectrum, E and V band spectrum will not fetch much revenue for the government. This is because E and V spectrum has very poor propagation characteristics.
Industry analysts have pointed out that the value of a spectrum band depends on various factors such as its propagation characteristics. Lower frequency spectrum is more valuable than higher frequency spectrum as the radiowaves riding on the former travel further, thereby requiring fewer base stations, which translates into lower operational costs. In the case of E and V band spectrum, the value is low because the airwaves fall in the 71-76 GHz and 81-86 GHz (E band) and 57-64 GHz (V band) brackets.
The root cause
Competition is the underlying cause of conflict between the two schools of thought. In the past, giant tech players like Microsoft, Google and Facebook have expressed interest in providing broadband using delicensed spectrum.
Telecom operators are against the delicensing of the E and V bands as such a move would enable the entry of technology companies into the broadband market and of ISPs into the 5G services area at a very low cost. Once the spectrum gets delicensed, tech players will not have to spend any money on buying the required airwaves for providing services to consumers, thus reducing a significant portion of their operational costs. Telcos say that this will not be fair to them as they have already spent huge sums of money in acquiring access spectrum to offer the same kind of services.
Meanwhile, ISPs have alleged that telcos, through representation against the delicensing of this spectrum, are trying to establish their monopoly in the wireless media space. In the event of an auction, the telcos will be able to outbid the ISPs. The ISPAI is of the view that the allocation of spectrum, which has use cases across sectors, cannot be the right of a few. It has noted that such an allocation would be anti-competitive in nature and would be inconsiderate of the needs of other licensed operators such as ISPs, and national and international long distance operators.
The way forward
While both the groups have been lobbying actively on this issue, the final decision on the matter is still awaited. As per popular industry view, the government might take a middle route.
According to industry sources, the Department of Telecommunications has ruled out both auction and administrative allocation of the spectrum. Rather, what is expected is a light-touch licensing approach, which is, in fact, in agreement with TRAI’s earlier proposed recommendations. Back in 2014, TRAI had proposed that both E and V bands be offered to service providers with light-touch regulation and allotment should be on a link-to-link basis. As per TRAI’s recommendations, the government could charge Rs 10,000 per annum for an E band carrier of 250 MHz. Further, the government could offer an initial promotional discount of 50 per cent for three years from the date of allocation of the first carrier in this band. Meanwhile, as far as charging of V band carriers was concerned, TRAI had suggested that it be Rs 1,000 per annum per carrier of 50 MHz. TRAI had also noted that the prices would be reviewed every five years based on deployment and usage.
Apart from the aforementioned approach, some industry experts have suggested that the government could possibly divide the V band into two parts and then allocate 7 GHz on a licence-exempt basis for high speed broadband access at gigabit speed. Meanwhile, the remaining 7 GHz could be allocated for data backhaul. Alternatively, the E band could be used for backhaul and the V band entirely for gigabit Wi-Fi.