IN April 2007, the Telecom Regulatory Authority of India (TRAI) received a reference from the Department of Telecommunications (DoT) to make recommendations on the basis of a review of telecom licensing norms. It was also asked to examine the issue of capping the number of service providers in the telecom circles.

Although the TRAI was not specifically asked to make recommendations on spectrum-related issues, it felt compelled to examine them as they were inextricably linked to licensing norms and the number of service providers. It released a 178-page report on August 29. In June, it issued a consultation paper on the subject, eliciting views from stakeholders. Two sets of concerns evident throughout the report are: the TRAI’s eagerness to further competition and its attempt to “take into account the legacy of policy” so that the industry’s growth is not disrupted by sudden policy changes. The TRAI recommended that there be no cap on the number of service providers in each circle because capping may strengthen monopolies.

The TRAI observed that the availability of spectrum on transparent and fair terms is a necessity for protecting consumer welfare. It pointed out that the so-called subscriber-base criteria, adopted currently for spectrum allocation, suffer from “a number of limitations and problems”. For instance, it observed, although operators in Mumbai and Delhi were allotted similar amounts of spectrum resources, the network conditions in the two metros varied considerably.

The failure of the criteria to reflect actual conditions had resulted in some operators “over reporting [their] subscriber base”, apparently to corner more spectrum.

The TRAI’s conclusion was far-removed from what the dominant industry players would like people to believe. The regulator pointed out that several new and emerging techniques in mobile telephony enabled operators to utilise spectrum resources more efficiently, either by “re-farming spectrum” or by using the resource more intensely.

It also pointed out that the capital expenditure of operators working with a spectrum constraint would be higher than those who had excess spectrum. Since this did not provide a level playing field, the TRAI observed that “spectrum assignments should not be based only on subscriber base growth”, as is the case now. It recommended that the allocation of spectrum be delinked from the award of licence. If this is accepted, many applicants may well get the licence but not the spectrum needed to run the business.

The TRAI’s analysis of spectrum usage reveals that some operators are able to serve three times the number of subscribers they are required to serve using the spectrum allocation criteria. It also observed that there are operators who have excess spectrum relative to their subscriber base.

The TRAI observed that operators catering to larger number of users relative to the norms have done so by using state-of-the-art spectrally efficient technologies and by investing in more equipment. It recommended that the operators who “are having more spectrum than their usage should be asked to surrender the additional spectrum in a specified time frame”. It also remarked that “hoarding of [the] scarce resource” should invite “heavy penalties”.

The TRAI assesses that mobile operators can make do with substantially lower quantum of spectrum resources if they are forced to tighten usage. It recommended the setting up of a multi-disciplinary committee to frame new spectrum allocation criteria. It also suggested that representatives of the DoT, the TRAI, the Government’s Wireless Planning Wing, the Cellular Operators Association of India and the Association of Unified Telecom Service Providers of India be included in the committee.

However, since the issue cannot brook delay, it suggested that the subscriber-base criteria be almost doubled at each slab of allocation of spectrum. For instance, while an operator with 0.3 million subscribers in Mumbai and Delhi is entitled to an allocation of 2x6.2 MHz, the TRAI’s revised criteria sets the subscriber threshold at 0.5 million for spectrum allocation. At the higher end, the TRAI’s revised criteria are even more stringent. An operator with a subscriber base of 2.1 million is currently entitled to 2x15 MHz of spectrum; the TRAI has recommended giving this slab of spectrum only when the operator’s subscriber base crosses 5 million.

The TRAI did not recommend the auctioning of spectrum for 2G (second generation) services because it would “raise the issue of a level playing field”. It ruled that setting a cut-off date for auctioning may be difficult because different o