India’s Approach to Satellite Spectrum Allocation – Is Auction Necessary?

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By Dean Tan | 1Q 2023 | IN-6799

India is set to auction its satellite spectrum in the same fashion as terrestrial spectrums, possibly the first in the world. This insight explores the rationale supporting and against this mechanism. How this could affect the development of the satellite industry in India and what implications there could be from such mechanism?

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India Continues to Press for Auction Mechanism for Satellite Spectrum Allocation

NEWS


At the recently held Broadband India Forum summit on SatCom, Telecom Regulatory Authority of India (TRAI) has continued to press for auction as the means for satellite communication (satcom) spectrum allocation, which spans 27.5 GHz to 28.5 GHz. As of now, there are no details released as to how TRAI will be handling the spectrum auction. The hopeful outcome of adopting spectrum auction is to, in TRAI chairman’s, PD Vaghela, words, “to actually encourage and promote investment in the sector, and not increase any burden.” Spectrum within a country’s territory belongs to its citizens and they have the right to see services and/or a financial return from its use. India will be the first country to adopt the spectrum auction mechanism should it go ahead, opening the debate on the mechanism of spectrum allocation for the satellite communication industry.

A Divided Industry Reactions - Who is Right?

IMPACT


With the continued press for auction as the way forward, the industry has mixed reactions on TRAI’s and the Indian government’s intentions. Among the three key terrestrial players, Reliance Jio and Vodafone Idea are in support of using auction as the means to allocate spectrum in satellite communications, while Bharti has expressed their concern of undergoing auction for satellite communication spectrum. The Broadband India Forum (BIF), an industry association, has also voiced their concern of spectrum auctions being counterproductive for the satellite industry. It will not be until May 2023 before details of the proposed satellite spectrums auction will be recommended by TRAI. Satellite communications spectrum has been historically allocated on an administrative basis as opposed to the terrestrial network operators with their spectrum auction.

Auctions are known to be more transparent than the administrative allocated option. This has been the argument for the terrestrial networks who earn millions by providing services from the monopolized right to access these spectrums. Through these auctions, the terrestrial operators are subjected to requirements such as the number of base stations built or population coverage. For the supporters of using auction as the mechanism, they have argued the “same service, same rules” principle needs to apply. That satellite operators providing broadband services need to follow the terrestrial way of spectrum allocation, via auction. A key concern is that satellite operators could provide broadband for the users in a geographical area so long they have the rights to do so. Thus, for the terrestrial operators this would mean competition.

However, a key difference between satellite and terrestrial spectrum allocations comes from satellite’s frequency reusability and the need to ensure non-interference to other services. Terrestrial network operators, given the smaller radius of coverage compared to satellites, can redeploy the same frequency over an area more easily. For satellite operators, having limited spectrum access can reduce their capacity. Therefore, satellite operators share the same frequency bands for multiple satellites to provide their services. This is done through coordination both domestically as well as internationally (e.g., the International Telecommunication Union). Through this coordinating mechanism, satellite operators have been able to achieve greater throughput and data speeds over a geographical area. Disallowing the reuse and sharing of spectrum, by auctioning and giving to one entity, will result in an acute shortage of frequencies, reducing the throughput rate and data speeds.

Auction to Attract Investment - Will it Really Do So?

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"But it should not kill the sector. That is very important. Any system that we will be bringing is to actually encourage and promote investment in the sector, and not increase any burden. I mean, that is the biggest challenge which we have, and we are conscious of that fact," Vaghela said.

The chairman of TRAI has said the outcome they are aiming for is not to ‘kill’ the sector but to encourage and promote investment. A key part of this is also to ease the administrative burden for satellite operators through streamlining of licensing and documentation. Thus, it is worth considering if the auction truly aligns with what they hope to achieve.

Firstly, an auction is a mechanism which generates maximal revenue due to its bidding process. The spectrum will go to the bidder with the highest bid amount. For terrestrial operators, spectrum investment forms a key part of the overall market as it is fundamental. As such, taking in the same light, satellite spectrum auction could also generate greater investment but only for the access to the spectrum, not the value-adds or key technologies that comes from the satellite communication technologies just yet. In this case, the bidders with deep pockets would naturally obtain an advantage.

Second, does auction help to ease the administrative and operational requirements on both the satellite operators and the government? To move away from the current administrative allocation and coordinated approach, it is expected that the framework could deliver the coordination between terrestrial operators, satellite operators, and satellites in different orbits. There would be a need for both satellite operators and the government to maintain an administrative workforce to ensure the enforcement of the framework. Additionally, with the spectrum in the hands of a single entity, the competition commission will need to keep a keen eye on any anti-competitive practices. Any disputes would thus necessitate a legal and neutral third party for resolution.

Third, does auction help to spur the growth of the satellite communication industry in India? It depends how the funds from the auction could be used to help in Research and Development or capabilities upgrade for the local industry. This can come in the form of supporting a local supply chain supplies to the satellite operators, be it on the domestic or international front. At the same time, costly investment in acquiring the spectrum could also result in satellite operators having reduced funds for other value-added initiatives such as research or service improvements.

Currently, it seems India is set to utilize auction as the mechanism for satellite spectrum allocation. It would be premature to conclude as details have yet to be released by the Indian regulator, but the discussion items highlighted above remain valid. There have been studies done by researchers as well as industry bodies (e.g., GSMA) on the pros and cons of auctions for efficient and effective use and valuation of spectrum. For India, whether they are committed to what it hopes to achieve will depend on how their eventual auction framework and policies impact the satellite industry, raising taxation income for the Indian government and the potential benefits for the Indian economy and society. If spectrum auctions are truly the way forward, it would be advisable to draw insights from the terrestrial spectrum auctions.

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