Retrospective clause may once again come into play for telcos

With the department of telecommunications (DoT) allocating telcos the crucial “backhaul” spectrum — for last mile connectivity between towers through microwave linkage — by an administered price mechanism, telecom operators could be staring at the possibility of once again paying retrospectively to the government.

This is because of a crucial rider inserted in the agreement: telcos will have to pay the auction-discovered price retrospectively if and when the earmarked spectrum is auctioned by the government. The clause was added because of the 2013 Supreme Court judgment, which directed the government to auction spectrum as it was a scarce resource.

However, the government continued to conditionally allocate the backhaul spectrum at a nominal price and on an ad hoc basis.

But with the impending launch of 5G services, the issue has once again come to the forefront. The question is whether the government should auction E and V spectrum (which offer very high speeds but in a limited coverage area) as demanded by the telcos, or give it at a nominal price as demanded by the tech firms. If it does the former, telcos might have to shell out market rates for the backhaul and VSAT spectrum from the day it is allocated.

Telecom operators like Reliance Jio say that the E and V bands can be used both for backhaul as well as for access services to 5G customers. Therefore, they should be auctioned.

On the other hand, Broadband India Forum, whose members include Google and Facebook, is opposing the move and demanding that like elsewhere in the world, the bands should be delicensed and offered at a nominal price to help in the proliferation of broadband through wifi.

Those who support this view point out that telcos are willing to pay retrospectively so that they can corner this spectrum (which is free or nominally priced across the world) in order to kill new competition, especially in wifi broadband.

Despite many months of discussions, the DoT has still not taken a call on the contentious issue of E and V bands. The Telecom Regulatory Authority of India, though, has recommended that the bands be given to telcos at a nominal price.

A move to clear the air on administered spectrum was made by DoT under the aegis of a former secretary, who drafted a policy on how administered spectrum should be given out to bring in transparency in the allocation process. However, the policy failed to be endorsed by the law ministry, which said that it was not in consonance with the SC ruling that laid down that spectrum should only be auctioned.

Opinion in the government is divided on the interpretation of the judgment for the allocation of spectrum. Some contend that a clarification should be sought from the SC on whether the ruling was limited only for access spectrum (which connects customers) or for all kinds of spectrum (such as backhaul, which connects two towers).

Many point out that the SC itself has said that spectrum should be used for public good. Says a senior executive involved in the matter: “All over the world E and V bands are given at a nominal fee, as it helps in the proliferation of wifi and broadband. It also incentivises smaller entrepreneurs who get the spectrum to offer wifi services in local areas and customers get a choice. So it is for the common good and should not be auctioned.”

Some experts concede that though the government might lose some revenue by not auctioning the bands, maximising revenue is not the intention of the telecom policy at all. “By auctioning, the big boys who have the financial muscle want to corner all the spectrum. This will discourage small-scale entrepreneurs to play a role in the massification of broadband through wifi hotspots. The big boys want a monopoly of a few and are ready to pay for it.”

While Reliance Jio has over 70 per cent of its towers on a fibre backhaul, its rivals have only 30 per cent linked with fibre and rely heavily on microwave linkage. Also, unlike its rivals, Jio has been in operation for only five years, so the retrospective burden of payment could be much less in the case of Jio than it would be for its competitors. Business Standard