Modi Govt May Allocate Valuable Spectrum on First Come, First Serve Basis

The DoT plans on using an underhanded method, through the creation of a new category of users, to allot V- and E-band spectrum on a FCFS basis and at an administered price.

New Delhi: In a decision that appears to run contrary to the Supreme Court’s order on auctioning spectrum, the Department of Telecommunications (DoT) has proposed the allocation of 7,000 MHz of V-band and 10,000 MHz of E-band spectrum without conducting auctions.

According to people with knowledge of the matter, a final decision will be taken by the Telecom Comission next week. The currently proposed allotment, however, would use the ‘first-come, first-serve’ (FCFS) method, which in the past has been controversial due to its role in 2G spectrum scam under the UPA-II regime.

Given the backdrop of the 2G case and the Supreme Court’s subsequent order in the matter, the Narendra Modi government had also pledged that spectrum and other public resources will be auctioned in the future.

However, contrary to its stand, the decision to allocate V-band spectrum will now be taken up by the Telecom Commission (TC) in its meeting on May 1 for final approval. The TC is the highest decision making body within the telecom department. Its members include Niti Aayog CEO Amitabh Kant, Department of Economic Affairs secretary S.C. Garg, and DoT secretary Aruna Sundararajan.

In November 2017, The Wire reported that the DoT was considering allotting the highly valuable spectrum without auctions. After the report, the telecom department has appeared to have camouflaged the allotment process by creating a new category of users – ‘captive commercial users of MWA and MWB Spectrum’ for backhaul of telecom service providers .

It has approved that the spectrum for this new category should be allotted to operators on FCFS basis at an administered price.

Spectrum in E-band and V-band is a part of MWA and MWB spectrum. It has very high potential for commercial use.

Industry observers say that the fact that an FCFS policy is being reintroduced closer to the 2019 general elections will also raise many eyebrows as a handful of leading business houses will likely benefit immensely.

“How can someone use the word ‘captive’ for backhaul spectrum?” asked a former member of the telecom commission, who declined to be identified. “It means that all spectrum can be categorised as captive as it is for use of only crores of subscribers of an operator. The fact is that both backhaul and access spectrum are important part of network and operators generate revenue using them. In any case, the Supreme Court order is very clear that any spectrum for commercial use should be allotted only through auction.”

The Supreme Court had clearly laid down that the government shall allocate spectrum to private players only through an auction process.

In order to justify its decision, the new draft telecom policy, which is expected shortly, will likely say that the spectrum in E-band and V-band should be allotted without auction. The draft policy will then seek views from the stakeholders and customers.

“In the first place, how can you take public opinion on an issue that is against the Supreme Court verdict,” said the former TC member quoted above. “Through intense lobbying some telecom operators and companies like Facebook will easily influence the decision.”

It is difficult to quantify the real loss to the exchequer if spectrum in V-band and E-band is given on FCFS basis, as the real value can be realised only through an auction. However, if we go by the methodology adopted by former CAG Vinod Rai under whom the national auditor had calculated notional loss, the size of potential revenue loss could be at least Rs 4,77,225 crore from V-band and another Rs 7,00,000 crore from E-band.

In October 2016, the government sold 965 MHz of spectrum in various bands ranging from 800 MHz to 2,500 MHz for Rs 65,789 crore. The price achieved through auction for 1 MHz of spectrum was Rs 68 crore. In the V-band, 7,000 MHz of spectrum is available. Hence, loss to the exchequer could be to the tune of Rs 4,77,225 crore. Similarly, loss in E-band would be about Rs 7,00,000 crore.

“In the 2G judgement, the Supreme Court has made it mandatory that spectrum, which is a scarce natural resource, would be allocated by the government only through a transparent auction process. This would achieve both fair competition and maximising revenue for the state,” said Pranav Sachdeva, who was a lawyer for the petitioner Centre for Public Interest Litigation in the 2G case and in the subsequent presidential reference.

“This was affirmed by a Constitution bench judgement related to allocation of natural resources in which the Constitution bench said that as far as Spectrum is concerned, it can be allotted only by auction.”

In its February 2, 2012 judgement in the 2G case (Centre for Public Interest Litigation, (2012) 3 SCC 1) the Supreme Court verdict says:

96. In our view, a duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first come- first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty-bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process.

The constitution bench affirmed this order when the government sought presidential reference. Presidential order by the constitution bench clearly says:

83. …. we are convinced that the observations in Paras 94 to 96 could not apply beyond the specific case of spectrum, which according to the law declared in the 2G Case, is to be alienated only by auction and no other method.

A few DoT officials, however, appear to be deliberately misguiding decision makers by citing the non-spectrum natural resource allocation part of the judgement with spectrum allocation (which can be done only through auction).

Earlier, former TRAI member D.P.S. Seth had told The Wire, “Supreme Court is very clear that spectrum should be allotted only through auction. Delicensing it doesn’t seem to be the correct approach.”

It may be noted that when DoT sought TRAI’s opinion on this issue, the regulator didn’t give its opinion.

It simply stated:

“From letter dated 08.06.2015 it emerges that the main issue is that in view of the judgement dated 02.02.2012, whether spectrum can be allotted by a means other than auction… It is for DoT to take a policy decision as to whether it is legally tenable to allocate spectrum by any other mechanism (viz. administrative) than auction in consultation with the Ministry of Law”.

Spectrum in V-band and E-band is becoming important in view of the explosion of broadband services. It is used for providing both the high speed access services at data transfer speed of up to 7 Gbps and for backhaul spectrum.

Manoj Gairola is the editor of TelecomTiger.