Managing Spectrum

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.

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 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 Trai has not provided this, here are indicative constructs:

Our policies for infrastructure should be in 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 (see graphic). This requires judgment in selecting, organising and prioritising issues. The example assumes that the least capital and operating costs (while maintaining high quality) are appropriate criteria for services in public interest.

These decisions will determine how issues of licensing and consolidation/acquisitions pan out. Questions on pricing remain, e.g., per cent 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 inter-disciplinary 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.

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*A rational spectrum allocation policy, BS, July 2, 2009

** Douglas A Galbi, Senior Economist, US FCC