Government of India Approves Trading of Spectrum Airwaves

Close on heals of the decision on spectrum sharing, the Union Cabinet chaired by the Prime Minister, Narendra Modi, has approved a proposal of the Department of Telecommunications on guidelines for spectrum trading arising from the recommendations of the Telecom Regulatory Authority of India (TRAI).

Together with the earlier decision, this is expected to transform the spectrum usage in the telecom sector.

Talking about this development, Arpita Pal Agrawal- Leader, Telecom sector, PwC India, said, “Allowing Spectrum trading is a very welcome move for the spectrum starved Industry and is long awaited. The rules and regulations surrounding this order will have to be studied to comment in detail but prima facie it should help alleviate to a significant extent the quality issues being faced by the Indian customers. The expectation is that regulations and compliance requirements on spectrum trading will be simplified enough for the benefits to actually accrue to the customers.”

Some features of the norms for spectrum trading:

1. Spectrum trading will be allowed only between two access service providers only outright transfer of right to use the spectrum from the seller to the buyer shall be permitted.

2. Spectrum trading will not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.

3. The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer. The Government shall, at its discretion, be entitled to recover the amount, if any, found recoverable subsequent to the effective date of the transfer, which was not known to the parties at the time of the effective date of transfer, from the buyer or seller, jointly or severally.

4. A licensee shall not be allowed to trade in spectrum if it has been established that the licensee had breached the terms and conditions of the licence and the Licensor has ordered for revocation/termination of its licence.

5. Spectrum Trading shall be permitted only on a pan-LSA (Licensed Service Area) basis. In case the spectrum assigned to the seller is restricted to part of the LSA by the Licensor, then, after trading, the rights and obligations of the seller for the remaining part of the LSA with regard to assignment of that spectrum shall also stand transferred to the buyer.

Further, relevant provisions of NIA with respect to spectrum assignment in part of the LSA, which were applicable to seller before the spectrum trade, will apply to buyer subsequent to the spectrum trade.

6. All access spectrum bands earmarked for Access Services by the Licensor will be treated as tradable spectrum bands.

7. Only that spectrum in the specified bands is permissible to be traded which has either been assigned through an auction in the year 2010 or afterwards, or on which the Telecom Service Provider (TSP) has already paid the prescribed market value (as decided by the Government from time to time) to the Government. In respect of spectrum in 800 MHz band acquired in the auction held in March 2013, trading of spectrum shall be permitted only if the differential of the latest auction price and the March 2013 auction price on pro-rata basis on the balance period of right to use the spectrum is paid.

8. Buyer will be allowed to use the spectrum acquired in 800 MHz/1800 MHz band through trading to deploy any technology by combining it with their existing spectrum holding in the same band after converting their entire existing spectrum holding into liberalized spectrum in that band as per the prevalent terms and conditions.

9. A Telecom Service Provider will be allowed to sell the spectrum through trading only after two years from the date of its acquisition through auction or spectrum trading or administratively assigned spectrum converted to tradable spectrum. It is clarified that in case of administratively assigned spectrum converted to tradable spectrum after paying the prescribed market value, period of two years will be counted from the effective date of assignment of spectrum.

10. Frequency swapping/reconfiguration from within the assignments made to the licensees will not be treated as trading of spectrum. The conditions in the NIA shall govern frequency swapping/reconfiguration.

The Indian Scenario

In India the spectrum assignment is made for a period of 20 years. During this period, some operators are able to acquire subscribers and grow at a faster rate as compared to other operators. This results in the spectrum lying un-utilised with some of the players while other operators face spectrum crunch as spectrum is a scare resource.

In India, unlike other countries, the availability of the Spectrum is relatively small. Therefore, Spectrum Sharing and Spectrum Trading are necessary to make up the inadequacy. It will not only improve the quality of service and but also help address the issue of call drops.

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party. This allows better spectrum usages as the idle spectrum from the hands of one service provider gets transferred to the other service provider who is facing spectrum crunch. This also improves customer satisfaction and services of the service provider acquiring spectrum.