Spectrum trading to be a reality soon

Thu, 30 Jan Pre-Open

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The telecom sector has been plagued by multiple issues. Apart from the 2G scam fallout telcos have had to deal with intense competition and several regulatory issues. While the competitive intensity may be abetting, there are now signs that the regulatory hurdles may also be reducing for the sector as a whole.

Recently, the government cleared the way for the auction of the spectrum belonging to all those operators whose licenses were cancelled by the Supreme Court of India. The earlier two auctions were a disaster from the government's point of view, due to the very limited participation by telcos. However, things are looking up for the sector. The reduction in the reserve price for the spectrum has revived interest for the auctions this time around.

In another move which would greatly benefit the sector, the regulator TRAI has finally put in place, the guidelines for trading of spectrum between 2 telcos. The new rules, as reported in the Hindu Business Line, provide a lot of clarity for spectrum trading. A telco will not have to ask for permission from the government before buying/selling spectrum. The seller will however, have to forego the spectrum entirely. That is to say, the ownership as well as the usage rights and obligations of the spectrum will pass on to the buyer. Leasing of spectrum has not been allowed.

This is a progressive change in policy by the regulator. If an operator is facing difficulties, in maintaining the quality of service in one circle, it can buy additional spectrum from another player. The seller is also free to choose the mechanism of the sale which could include auctioning the spectrum. All spectrum bands which have been allocated for access services can be sold under the new policy.

To avoid any misuse of the policy, a few important safeguards have been added. There will be a lock-in period of two years before any traded spectrum can be re-sold. Also, only that spectrum bought through auctions or which has been bought after payment of the full market price can be traded. This means that the spectrum which has been allocated administratively cannot be traded. This policy is expected to benefit smaller telcos which have been struggling to acquire spectrum. It will also help to improve quality of service and could also encourage rational bidding at future spectrum auctions.