The cabinet recently approved the long-awaited guidelines on spectrum sharing, which will allow telecom operators to pool their spectrum holdings for use in a specific geographic area. While the industry has welcomed the guidelines, experts are of the view that there will be limited instances of spectrum sharing. Owing to restrictive clauses in the guidelines, the industry believes that telecom operators are more likely to enter into spectrum trading agreements rather than spectrum sharing. Industry experts share their views on the spectrum sharing guidelines, their significance in the Indian market, their expected impact, and the technological and operational challenges associated with spectrum sharing...

What are your views on the recently approved spectrum sharing norms?

Pankaj Agrawal

Since there are a number of restrictions, we expect limited cases of spectrum sharing taking place.

• Rationale for sharing: We believe that access to sub-GHz coverage spectrum should be a higher priority than additional capacity. To enhance their capacity, operators will be deploying long term evolution (LTE) in the 1800 MHz band. We also expect operators to use the spectrum they currently have in the 2100 MHz band as well as the additional spectrum they may acquire in this band in the upcoming auction. Therefore, sharing will not be a mainstream model for capacity augmentation.
• Limited instances of sharing: Identifying markets where both operators have spectrum holdings in the same band is difficult as their footprint across the 900 MHz, 1800 MHz and 2100 MHz bands remains fragmented.
• Operational and financial requirements: The payout of additional government fee and other operational considerations will restrict the opportunities for sharing.
• Competitive considerations: Apart from the 850 MHz band, operators’ inclination for sharing spectrum in the 900 MHz band will be influenced by competitive considerations as well as spectrum availability with both parties.

We believe that the current spectrum demand and supply scenario is much more suitable for trading than for sharing.

Kunal Bajaj

In terms of trying to liberalise the industry further, the spectrum sharing guidelines are a step in the right direction. However, their implementation will limit the overall impact, if any, on the industry.

Inderpreet Kaur

We have seen various regulatory bodies shifting their spectrum management policies and regulations in favour of more flexible and liberalised models in order to meet the demand and supply requirements posed by new mobile communication services.

The recently approved spectrum sharing norms by the authorities will help in addressing the long-standing issues related to the efficient use and management of spectral resources, thus helping operators in improving coverage and the quality of services delivered to the customers.

While the recently introduced norms are carefully drafted to address competition issues, restrictions in the form of the length of spectrum sharing agreements and additional costs levied in the form of service charges will limit the interest of operators who are looking to acquire adequate spectrum in order to offer data services.

Sourabh Kaushal

Spectrum sharing is a great move that will help telecom operators, both large and small, address some of the key issues faced by them, such as spectrum scarcity/network capacity constraints, congestion, coverage and higher capex/opex. Globally, operators, especially of 3G and 4G networks, have used sharing to benefit from wider network coverage and save costs both in terms of capex and opex, especially in rural areas.

What is the significance of spectrum sharing, especially in the Indian market? Which operators (pan-Indian, regional, dual-technology licensees) will benefit the most from it and why?

Pankaj Agrawal

The only operators that we see using spectrum sharing in a meaningful way will be the 4G entrants, while for other operators sharing will be on an opportunity basis with trading expected to be a preferred option.

Kunal Bajaj

The benefit of spectrum sharing will primarily be realised when operators who have not deployed a specific kind of technology in a specific band in a particular circle start rolling out new networks. This is because one of the mandates under the spectrum sharing guidelines is that the radio network has to be common or operators have to share the same spectrum. For instance, an operator who has recently acquired 3G spectrum in a particular circle instead of creating its own network infrastructure can choose to share spectrum with an operator who already has 3G in that circle. Therefore, rather than operating on 5 MHz of 3G in two separate networks each operator can operate on 10 MHz of 3G in one network. The benefit of such an arrangement will accrue only when the 5 MHz holdings of the two operators are contiguous. Therefore, spectrum sharing can certainly be advantageous in terms of saving capex and improving efficiency.

Spectrum sharing can be beneficial for all operators that are looking to expand their footprint. If Uninor, Reliance Communications or Aircel decide to move into the 3G or LTE space, they will first have to acquire spectrum which can be shared. These operators can deploy a shared network instead of deploying the network themselves. This will not only benefit the new entrant, but will also be useful for the other operator who already has the network because it can lead to better utilisation of the same asset. Further, they get the advantage of increased spectrum being added to their network.

Inderpreet Kaur

Spectrum sharing has been implemented in various countries including Mexico, Australia, New Zealand and the US. Spectrum sharing and trading norms have varied across these markets based on underlying market structures. However, there are a few examples where spectrum sharing has worked for both the government and operators.

The situation in India is even more complex mainly because most of the available or assigned spectrum is either fragmented or unliberalised, with staggered expiry dates. What further limits the opportunity for operators is the spectrum cap requirements placed on various bands. Offering quality 4G LTE services requires 2x5 MHz of continuous spectrum. However, the current scattered spectrum assignment in most of the key data bands, for instance 1800 MHz, limits the number of telecom circles where operators can leverage spectrum sharing to offer LTE.

Sourabh Kaushal

Spectrum sharing will help operators address issues pertaining to spectrum shortage, network coverage and quality of service. This is particularly true for sharing between a large operator (high revenue market share [RMS] and coverage) with a congested network and a small operator (low RMS) with under-utilised network/ limited coverage. While the large operator will be able to address capacity and congestion issues, the small operator will benefit from the better network coverage of the large operator. For instance, if two small operators (low RMS) with limited coverage get into a spectrum sharing agreement, it will lead to better population coverage at a significantly lower capex and opex. Therefore, it will be a win-win situation for both operators involved.

In addition, by pooling spectrum, operators will be able to achieve higher spectral efficiency and higher network capacity as compared to non-pooled spectrum. Spectrum sharing may also help some operators launch new technologies such as 4G services.

Given the tremendous growth in data traffic, how feasible is it for operators to share spectrum in the long run?

Pankaj Agrawal

The operator’s decision to use sharing for capacity augmentation will depend on the evaluation of other possible means for capacity increase.

• Deploying LTE on liberalised bands such as 1800 MHz and 2100 MHz to get additional capacity.
• Buying spectrum from auctions in the 2100 MHz and 2300 MHz bands.
• Optimising and refarming the existing spectrum with the 900 MHz band, which can be used for 3G and shifting GSM networks to the 1800 MHz band

The way the sharing guidelines are structured, and considering the current spectrum demand-supply situation, we believe that spectrum sharing will not be a preferred option.

Kunal Bajaj

Eventually, around five to six years from now, all networks will be shared when new networks will have to be deployed with various technologies. We will reach a situation where network sharing will drive spectrum sharing and it will not be the other way around. In my opinion, network sharing will be the most efficient approach to deal with the surge in data.

Sourabh Kaushal

With growing data usage, operators will require more broadband spectrum in order to increase their required network capacity. Spectrum sharing among operators will help address network capacity/ congestion and coverage issues in the short to medium term. However, in the long term, operators will have to acquire more broadband spectrum. This will provide long-term certainty and operators will not have to depend on their partners whose priorities may change with time, thus creating uncertainties.

What impact are these guidelines likely to have on the business strategies of service providers going forward? How will they shape industry dynamics?

Kunal Bajaj

The immediate impact on the industry will be quite limited as there are very few cases where spectrum sharing can be applied properly. While many operators are trying to overcome the coordination hurdles that come along with radio sharing, spectrum sharing will be limited to some specific circles with particular operator arrangements.

Inderpreet Kaur

Spectrum sharing policies alone will have a limited benefit or impact. For stable business practices and long-term benefits, the government should consider clearing its position on spectrum harmonisation.

Sourabh Kaushal

Spectrum sharing will help address the existing issues in the short to medium term; however, operators will have to develop their long-term spectrum acquisition plan. This is important as the operators will have rely on their own spectrum pool as the demand for capacity grows significantly with the increasing adoption of smartphones and data services.

What are some of the technological and operational challenges that service providers could face with regard to spectrum sharing? How can they address them?

Pankaj Agrawal

We believe that operational considerations regarding the structuring of contracts, including the following parameters, will be of much more importance than technological challenges:

• The calculation of bilateral payments on a recurring basis, based on voice and data usage and site utilisation
• Decisions regarding which party will bear the capex for the network roll-out, especially in the 2300 MHz band, and how the site opex will be shared.
• Contract management, governance and revenue assurance, including government payouts

Kunal Bajaj

The first challenge is that operators will have to share the radio network. The second challenge is that the true benefit of sharing will only be realised if operators have contiguous spectrum. In addition, there are some commercial challenges pertaining to the cost of sharing, the increase in adjusted gross revenue that needs to be paid, the cost of liberalising spectrum, etc. It is easier to overcome these challenges when operators roll out new technologies and launch services on new spectrum because, in that case, operators will work with a completely new network. However, the sharing of spectrum by retrofitting the existing networks with existing subscribers will be very difficult.

Inderpreet Kaur

There are multiple challenges faced by operators while trying to combine their spectrum resources and offer a different service. For example, if operators are trying to combine liberalised and non-liberalised assets, there are additional charges to be paid and approvals required as per the guidelines. Besides, one has to consider the existing technologies in the band, and a migration plan needs to be in place if the involved parties agree to deploy a different technology after combining their individual spectrum.

Sourabh Kaushal

The challenges associated with spectrum sharing will vary based on the level of sharing. Some of the key challenges are aligning the existing network deployments of both the operators to benefit from spectrum sharing, managing the changing capacity requirements of both the partners, and finding a partner with similar/aligned objectives in the medium term.