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Should Spectrum Sharing Charges Be Increased: TRAI Asks Telco
Spectrum sharing enhances spectral efficiency by pooling the spectrum holding of two licensees. What should the methodology adopted in pricing pooled spectrum of different licensees? Telecom regulator has asked the operators as it may add to their outgo.
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As per the 2015 guidelines for sharing of access spectrum, the Spectrum Usage Charge (SUC) rate of each of the licensees post sharing increases by 0.5% of Adjusted Gross Revenue (AGR). But telecom operators have been making representations seeking clarity that any incremental SUC rate post sharing should be applied only to the particular spectrum band which has been allowed to be shared between two licensees. They say SUC should not be applied on the entire spectrum held by the licensees, since sharing is permitted in a particular band.
In order to provide clarity on the matter, the Department of Telecommunications had requested the Telecom Regulatory Authority of India (TRAI) for its recommendations. As a result, TRAI, on April 22, has brought out a consultation paper on the issue.
Titled "Methodology of applying Spectrum Usage Charges (SUC) under the weighted average method of SUC assessment, in cases of Spectrum Sharing", TRAI wants the telecom operator to comment on a very specific question.
Whether the incremental 0.5% in SUC rate in cases of sharing of spectrum should be applied only on the specific band in which sharing is taking place; or to the overall Weighted Average Rate of SUC, which has been derived from all bands?
TRAI argues: "If two licensees pool their spectrum holding, spectral efficiency increases nonlinearly, i.e. data rate achievable with 10 MHz of spectrum block is much higher than two separate blocks of 5 MHz each."
TRAI argues if the SUC rate is left unchanged post sharing of spectrum, the Telecom Service Providers (TSPs) would be more willing to use spectrum sharing to improve their network in areas having congestion and to also fix coverage issues. "Therefore, it may be necessary to revisit the application and treatment of SUC post sharing of spectrum," TRAI says in its paper.
The stakeholders have to provide written comments on the paper by 20 May 2020.
Rationality For Increasing SUC for Shared Spectrum
TRAI says as spectrum is a scarce natural resource and with growing digitalization and uptake of Internet of Things (IoT), demand for spectrum has been increasing and will continue to rise. "To cater to the ever increasing data demand, it is utmost important that the spectrum is used efficiently," it says. Sharing of spectrum, TRAI adds, can also provide additional network capacities in places where there is network congestion due to spectrum crunch.
In its recommendations issued in 2014, TRAI had said: "...all the access spectrum will be sharable provided that both the licensees are having spectrum in the same band." It was also mentioned back then that SUC rate of each of the licensee post sharing shall increase by 0.5% of AGR.
"It can be inferred that since every spectrum sharing proposal is a separate proposal, which is specific to a spectrum band and Licensed Service Area (LSA), the incremental SUC of 0.5% applies to that particular spectrum band in the specified LSA," TRAI had said.
The regulator had argued in 2014 that it was not possible to monitor quantum of spectrum being shared at each site and segregate the AGR sitewise/area-wise. Therefore, TRAI had recommended that for the purpose of charging SUC, it shall be considered that the licensees are sharing entire spectrum holding in the particular band in entire LSA.
In the latest consultation paper, TRAI explains that the premise on which it had recommended increase in SUC rate by 0.5% was that the pooling of spectrum would increase the spectrum utilisation and additional capacity would generate more revenue. However, it adds, there are two issues that need consideration.
One: The SUC is ideally an administrative charge, payable to the Government towards the administrative cost for management of spectrum. As the TSPs are already paying SUC for the spectrum allotted to them as a percentage of AGR, the sharing of spectrum may not necessarily justify additional SUC burden on them.
The second issue is that the revenue earned by a TSP depends on many factors such as competition, customer profile, affordability level, cost of inputs, tariff, etc. In the last couple of years, the number of access service providers have reduced from 13 to 4 in an LSA. The overall AGR has also seen a reduction, says TRAI.
However, an increment in SUC rate upon sharing of spectrum would essentially result in increase in TSP’s outgo (through SUC levy) irrespective of whether there is an increase in revenue or not. It may be noted that if revenue of TSP(s) increases as a result of sharing of spectrum, the existing SUC rate will also result in increase in SUC payable, as the TSPs sharing spectrum are already paying SUC as a percentage of AGR on their respective spectrum holding.