The Department of Telecom is unlikely to allow all telecom operators to conduct spectrum swapping, and permit only those players who hold only auctioned spectrum to do so.
This move is likely to severely restrict the benefits and applicability of spectrum swapping as ‘subsidized spectrum’ allocated in earlier years is lying co-mingled with newer auctioned spectrum. To join auctioned spectrum together into large bands and use it for 4G, operators will have to get the old ‘subsidized spectrum’ out of the way by swapping.
However, DoT fears that allowing old, subsidized spectrum to be swapped will result in such spectrum being converted into 4G-capable, large chunks. This could lead to operators misusing such subsidized spectrum to launch 4G services without DoT’s knowledge.
The correspondence between the DoT and TRAI on this subject is in anticipation of the publication of spectrum trading rules by the regulator. It is expected that spectrum trading rules will be unveiled within the next 6-8 weeks.
If holders of subsidized spectrum are not allowed to participate in the swapping process, it may be bad news for certain players, especially CDMA operators like Reliance Communications and MTS.
This will be less of a problem for operators like Vodafone and Bharti Airtel as most of the spectrum they hold in 1800 MHz band is already contiguous. But for operators like Tata Teleservices, nearly all their spectrum in the 1800 MHz band is from the old regime (subsidized). To launch 4G in 1800 MHz, they will have to not only convert all their 1800 MHz spectrum into ‘auction priced’ model, but also convert ALL their spectrum in ALL bands (including CDMA in 800 MHz) into auction-priced spectrum.
Under Indian laws, subsidized spectrum (allocated before 2008) can only be used for 2G voice or EVDO services, not for UMTS (3G) or 4G services. One of the ways the government ensures that subsidized spectrum is used only for 2G services is by ensuring that the spectrum is divided into tiny chunks. 3G and 4G require large chunks of continuous spectrum.
As a result, allowing operators to rearrange their fragmented spectrum could lead to them launching 4G services without the knowledge and permission of DoT.
The telecom regulatory authority, however, urged the DoT to ensure that full rearrangement of spectrum is allowed so that everyone is able to club their spectrum into large chunks and obtain benefits of ‘trunking’.
In a letter to the TRAI, DoT said it has already decided that this will not be allowed.
It said: “It is noted that with reference to TRAI recommendations dated 23 April, 2012 on Auction of Spectrum, a decision has already been taken and has become part of the NIA conditions that: “Frequency reconfiguration i.e. rearrangement of spot frequencies in the same band, from within the assignments made to the licensees, may be carried out, with the authorization of WPC Wing, among the licensees, only when the entire spectrum held by them is liberalized. No charges will be levied for rearrangement of frequency spots.” It is informed that the above decision is a part of notice inviting application (of previous auction).”
TRAI, however, did not accept DoT’s contention, and urged the government to allow everyone to swap their spectrum and allow those who have bought spectrum via auctions to launch 3G and 4G services after swapping this spectrum even with those who hold subsidized spectrum.
In a similar vein, DoT said that anyone who buys 1800 (2G voice) spectrum from another player can use it for 3G and 4G only if they have converted their entire holding in that band into ‘auction spectrum’ or liberalized spectrum. Here too, DoT seems to be afraid that it would be difficult to monitor whether a player is only using ‘auction spectrum’ for 3G/4G or is cheating the government by using subsidized spectrum for the purpose in certain areas. On this matter, TRAI accepted DoT’s argument that in 1800 2G band, players be allowed to launch 3G/4G only if their entire holding in that band is converted to ‘auction spectrum’.