The Telecom Regulatory Authority of India<\/a> (TRAI) recently released a consultation paper on \"Assignment of Spectrum for Space-based Communication Services\". It follows a seemingly loaded reference from the Department of Telecommunications<\/a> (DoT) seeking recommendations from TRAI on how satellite spectrum can be auctioned. Fortunately, TRAI's Consultation Paper is wider in scope and discusses other methods besides auctions.
Though not binding on the government, TRAI's recommendations and the subsequent DoT decision could seriously impact the satellite industry's economics. I argue below that auctioning satellite spectrum will exacerbate gaps and deficiencies in India's telecom market and further restrict competition when it should be expanding.
Experts point out that treating satellite spectrum like the one for cellular services is flawed. The two are used very differently. Cellular players need exclusive access to the spectrum, so the current practice of auctioning cellular spectrum makes sense. Satellite players share theirs. Therefore, the auction of satellite spectrum does not make sense. Indeed, countries auctioning spectrum for cellular services still allocate satellite spectrum administratively. It is an inefficient use of a valuable resource if spectrum that multiple players can use effectively is sold to a single highest bidder.
Auctioning spectrum will especially hurt satellite services<\/a> since the latter do not enjoy the economies of their cellular counterpart. Deploying satellite services and the required user terminals are both expensive. There is understandably much greater demand for cellular services, where global economies of scale have driven down the price of network equipment and user devices.
However, satellite services are still relevant. They can fill an important current gap in connectivity; they are cost-effective for rural and remote areas, where cellular services are often more expensive to deploy. Satellite communication also supports niche applications, e.g., in-flight communications, connectivity between bank ATMs, etc. The inclusion of satellite services in the 5G standards and their increasing use for broadband access have boosted the prospects for space communication. Increasing costs of deploying satellite services is to forfeit their new potential.
Higher costs of satellite services will further delay access to communications and broadband to unserved populations and areas that urgently need services. Thus, auctioning satellite spectrum will create additional barriers to deploying crucial technology instead of removing existing ones.
Worryingly, auctioning satellite spectrum will encourage speculation and hoarding of spectrum. Terrestrial players have a manifest incentive to do so, to foreclose competition from an alternative technology. They have the means to do so, as they account for over 99% of the telecom sector's revenues. Auctions can thus block out serious satellite players from the market.
Increasing the cost of deploying satellite services poses an often ignored challenge: India's near-total reliance on cellular technologies for telephony and broadband is a vulnerability. Unlike other major countries, India lacks the fall-back option of a nationwide fixed-line or satellite network. These alternatives lack the versatility and affordability of cellular and pose little threat to the latter's current market dominance. However, their niche strengths and functionalities can be critical in some cases and even life-saving, as experience with natural disasters has often shown.
Besides redundancy in its network, India needs competition – between diverse telecom players, technologies, or business models. Experience worldwide shows that competition in the market provides users with the best guarantee of superior services, choice and low prices. India's users and the economy have manifest stakes in a competitive telecom market.
The TRAI and the government have a vital role in ensuring sustainable competition in the market.
Alternative technologies lack the ecosystem of cellular mobile services. They cannot thrive without regulatory support. Asymmetric regulation is an important tool to mitigate the perils of market concentration. It involves regulating players based on market power. To promote fair competition, regulators wait for new entrants to achieve a threshold market share before subjecting them to burdensome regulation. Such reigning in of incumbents' market power and facilitating new entrants makes sound economic and regulatory sense.
It follows that the oft-repeated demand for the so-called \"same service, same rules\" is untenable. Some incumbent telecom players use this evocative phrase to advocate the same rules for any service irrespective of who provides it, the technology used, or the context or manner of its delivery. This phrase is also frequently employed to demand similar rules for providers of voice telephony and messaging services that can be provided using fixed, cellular, satellite or IP technologies. The argument is now being stretched to advocate identical rules for spectrum allocation, i.e. auction of spectrum for any wireless service, whether terrestrial or satellite.
As I have argued above, such a demand has no basis in economic regulation. Instead, there is an urgent need to preferentially reduce regulatory burdens on new players and technologies to promote sustainable competition.
This approach for boosting weaker markets is not new for India or its telecom sector. For example, TRAI mandated free interconnection between fixed and mobile networks several years before interconnection usage charges (IUC) were completely abolished. Similar steps are needed to seed a viable market for satellite communications.
Unfortunately, the DoT, too, is incentivised to promote auctions, given the large revenues generated for the government exchequer. The Supreme Court<\/a>'s judgment in 2012 in the 2G case, which mandated auctions for all future spectrum allocation, has complicated matters for risk-averse decision-makers. As the TRAI points out in the Consultation Paper, the Court has clarified that the auction mandate is not a constitutional principle that can be applied to all natural resources. However, the stakeholders seem to differ on whether this modifies the earlier judgement requiring mandatory auctions for telecom spectrum.
Ruling out administrative allocation or sharing altogether poses several challenges. Does it mean that the backhaul spectrum must be auctioned as well? Can Wi-Fi services continue to run on unlicensed, i.e. unauctioned spectrum? Can India delicense spectrum in the V bands, as many other countries are increasingly doing to promote new technologies? If not, India's users and industry could lose important opportunities their counterparts abroad already enjoy.
India cannot afford to carve an alternate untested path to auction satellite spectrum, especially if it reduces choice in technologies, services, or both.
The DoT must urgently make a new reference to the Supreme Court to appraise it of these risks and seek a more nuanced order on spectrum allocation. Expediting such a reference could ensure that satellite and other important technologies and services are not hurt or foreclosed. This step is key to resolving the damaging disputes that loom on the horizon and could harm the sector and its consumers.
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