TRENDING : #VishalSikka

Telecom spectrum refarming may shoot tariffs up by 27 paisa per minute

If we assume that these additional costs cannot be absorbed by telecom operators, which is likely given their low profitability, we could expect tariffs to go up

Mohammad Chowdhury
Published: 19, Oct 2012

Mohammad Chowdhury is PwC's Telecom, Media and Technology consulting leader across Australia, SE Asia and New Zealand. Until recently he built the practice in India where he became one of the most quoted industry experts in the country. Mohammad has served as an adviser to telecom sector reform in Saudi Arabia, Zimbabwe, Ethiopia, Slovakia, Poland and Slovenia and during 2015 as national telecommunications adviser to the Government of Myanmar. Previously in his career he has conducted significant strategic roles at Vodafone and IBM. He is quoted regularly by the Financial Times, Wall Street Journal, BBC, CNBC, TV-18 and NDTV. Mohammad has worked in 83 countries, lived in 7 and speaks 6 languages. He has a BA in Politics, Philosophy and Economics from Oxford University, an MPhil in Economics from Cambridge University, and strategy training from Harvard Business School. He was born in London, has family origins in Bangladesh, and is married with two sons.

After a brief lull which lasted for some months, the old chestnut of spectrum refarming has reappeared this week in India’s telecom radar. The question on most minds is this: Is refarming good or bad, and if it is good, what is the point of doing it?

In most countries, telecom regulatory authorities propose refarming at a point when they see a potential for more efficient use of spectrum compared to its present usage. This typically happens when an industry reaches an inflexion point in the shift of traffic from voice to data, and therefore wants the 900 MHz band to be dedicated to carrying data (which is more efficient than the 1800 MHz band, for instance).

The UK has recently introduced a policy of partial refarming of spectrum amongst its four telecom operators. Whenever refarming has happened in other countries, the programme normally had three features: A reason, consultation, and a phased implementation. These paradigms must apply equally to India to ensure a reasonable outcome.

In India at the moment, a compelling case for spectrum refarming hasn’t been put forward. It is not clear whether the 900 MHz space has to be vacated by its current occupants in order to make way for other uses. (It is also not clear what the other uses could be.)

More consultation would help: Usually regulators follow a process of allowing stakeholders (including operators) to engage in this over a period of time. And finally, refarming is done in stages spread out across a few years, instead of having large amounts of spectrum vacated all at once.

Full spectrum refarming as proposed by the Telecom Commission appears to be risky. Firstly, it could lead to higher prices and poorer quality of service, since operators will have to dismantle and rebuild their network at a high cost, and move traffic to the 1800 MHz band, which in many areas has weaker propagation qualities than the 900 MHz band.

We’re told by the industry that full spectrum refarming would lead to the replacement of the active equipment on about 287,000 sites across India; it would also require the construction of an additional 172,000 sites to service extra 1800MHz band needs. If we assume that these additional costs cannot be absorbed by telecom operators, which is likely given their low profitability, we could expect tariffs to go up. How much: Almost 27 paisa per minute!

  • Satish P

    I am not sure about the actual cost the 900 MHz players will incur in moving to 1800MHz for a voice network. But I am sure if they are given the opportunity to use the spectrum on any technology (2G, 3G or 4G) they will be the first to refarm and make no noise about it. Most of the Service providers (esp. the incumbents) will soon move to Base Stations with Software Defined radios and multi-band antennas as they have both 2G and 3G licenses and in some cases even BWA. So I really dont buy this argument from the 900MHz players that to move to the 1800MHz will be a huge task for them. Yes it may cost them but that is their vision anyways.

    on Oct 31, 2012
    • Mohammad Chowdhury

      Yes, you are right - the actual cost is quite hard to work out. However generally there is a difference between natural and timely migration of network technology and being made to move in wholesale chunks by regulatory diktat - the danger is that the refarming that is being suggested may end up being sub-optimal and unecessarily costly. This in turn would then impact the least advantaged customers, since the impacts will be felt in tariffs, and in rural roll out. Like all regulatory intervention, it has to be an intervention that improves the natural outcome of market and technological forces - and its not evidently clear how the current refarming proposals are doing that.

      on Nov 10, 2012
  • Syed Hussain

    What's the solution then? You can't stop consumers having high speed data while assuring good voice quality? I must be missing something ....she'd some lights on it. Thank you.

    on Oct 25, 2012
    • Mohammad Chowdhury

      The solution every regulator desires is one where both good voice quality and high speed data are made available to as many as possible, equitably and at good value. In India, voice continues to be important due to the sheer size of the minutes base across hundreds of millions of customers. And data will become moreso once more and more connected devices come into use (such as more smartphones, and tablets). To balance both, a much more measured approach is required with a spectrum plan for 1800, 900 and other bands, plus more economic pricing of it. A rush to refarming without all this in place is risky.

      on Oct 26, 2012
  • dilip

    very helpful article i m also work for telecommunication industry, so i got nice info from this articles

    on Oct 19, 2012
    • Mohammad

      Dilip - thanks, I hope you continue to find the posts helpful!

      on Oct 19, 2012
2G or not 2G? The Thirst for Indian Spectrum
It's Diwali, but don't expect any fireworks