Prioritise public good over earning revenue

Auctioning of satellite spectrum may not be the right choice for India. Here are a dozen good reasons for the country to reject the idea

Auctions are an effective, open and transparent method of allocating scarce resources in many, but not all, circumstances. One cannot for example think of auctioning a shared resource like air, water or roads. Similar is the case of the satellite spectrum. There are over a dozen strong reasons for India to shun the idea of putting satellite spectrum to any form of auction. Space activities are an area of high strategic thrust for India and it is therefore important to have a clear appreciation of the various facts about the issue of satellite spectrum auction.

Mobile spectrum and satellite spectrum are different and the latter is not an auctionable resource. Firstly, satellite spectrum is a shared resource unlike terrestrial mobile spectrum which can be partitioned into small or large chunks that can be exclusively allotted to particular users and therefore the latter can be auctioned. The satellite spectrum is more akin to shared common resources like air, water, roads, etc. and it is unfeasible and impractical to consider auctioning it.

Satellite spectrum is a shared resource, unlike terrestrial mobile spectrum which can be partitioned into chunks that can be allotted to particular users.

Mobile spectrum is auctioned by putting different chunks of frequency bands as separate auctionable quantities, which can be allocated to different winners. Satellite communication is completely different and follows different international norms and principles. Unlike terrestrial communications, where spectrum is allocated exclusively to the operator for a given area, satellite spectrum is shared amongst multiple operators in different orbital slots and hence does not even meet the fundamental prerequisite for auction. The sharing of satellite frequencies between operators is what results in large capacities being available over a given geography.

The perils of auction

Auctioning will reduce efficiency and destroy the value of the satellite spectrum since it will result in the fragmentation of the satellite spectrum. This in turn will decrease throughput and data speeds in proportion to the fragmentation. In effect, this means a significant reduction in the efficiency of spectrum usage which goes against the most basic objective of any spectrum policy of enhancing the efficiency of usage and increased economic value.

It is important to understand that spectrum management is very different since the satellite spectrum has no national territorial limits and is coordinated and managed by the UN agency-International Telecommunications Union (ITU), and is subject to their Radio Regulations for satellite networks to operate without harmful interference. ITU define sharing conditions/criteria for satellite spectrum in their Radio Regulations (Article 9 of RR).

Spectrum for satellite services is authorised for ‘right-to-use’ by all nations and is allocated at charges that essentially cover the cost of administration.

Spectrum for satellite services is authorised for ‘right-to-use’ by all nations across the world and is allocated only by administrative process, at charges that essentially cover the cost of administration.

Unworkable and complex rules: Satellite spectrum, if auctioned, would require a very complex and complicated set of rules for the coordinated operation of different satellites in the same spectrum band. This would be a veritable nightmare for spectrum administrators and as a result, no administration world over has ever auctioned this satellite spectrum.

International Learning: No administration has auctioned shared satellite spectrum; there have been a few cases of the auction of orbital slots but almost all of these proved unsatisfactory and were discontinued. For example, the US auctioned orbital resources for domestic DBS usage but discontinued the practice and enacted the Orbit Act in 2000 to prohibit auctions. Brazil too discontinued auctions and enacted a law to administratively assign spectrum in the year 2019 via Article 172 of Law No. 13,789 of 3 October 2019 as it put domestic satellite operators at a disadvantage. Similarly, the auction in Mexico failed and was discontinued in 2014, while Thailand scrapped the auction in 2021 since it got only a single bidder. UAE auctioned exclusive usage in L and S bands for mobile satellites.

Anti-competitive situation: Satellite spectrum, if auctioned, could create gatekeepers with chunks of spectrum. It should be noted that such gatekeepers could block the entry, both of additional terrestrial or satellite operators and create a serious anti-competitive environment. This goes against the spirit of enhanced competition and powerful and big players could effectively use this to block new entrants and fair competition. This is a serious concern.

Higher cost of services: Being mainly for rural, remote, and less affluent areas and for situations like disaster management, the pricing of satellite services has to be especially affordable. Auctions would inevitably result in exorbitant spectrum prices and significantly increase the cost of satellite services which the end consumer has to bear and this is in contradiction to the vision of the Prime Minister and the Government of India. Satellite services are like social welfare services and need to be nurtured in the public interest.

Investment risk, uncertainty: Any enterprise wanting to plan and establish a constellation of satellites for providing broadband services in India cannot predict the cost of advancing these services unless there is prior participation and assignment of spectrum in an auctioning process. Hence, building and launching satellites can only be done after an auctioning process. This also means that the outcome of the auction may make it unfavourable for establishing Indian space assets to invest in a constellation for providing services, given the economics of spectrum and NGSO space assets. No investment can be sought for establishing space assets to provide broadband services due to the increased risk and uncertainty.

Impact on development: Satellite broadband is being deployed to serve the unserved and underserved areas of the country. For example, the government’s decision to connect far-flung islands and border areas of the North-East through satellite broadband would be jeopardised if the spectrum bands for the satellite to deliver broadband were to be auctioned to service providers, who would like to use it for either terrestrial purposes or any other application. Such a move would be counter-productive to the digital dreams of the country and run contrary to the objectives of inclusivity and Sabka Saath, Sabka Vikas.

Impact on space startups: India presently holds barely 2% of the global revenues of the satellite sector. To meet the goal of achieving 10% of the sectoral revenues globally by 2030 and emerge as a leading digital economy, the role of budding startups is extremely important. This sector, comprising 104 startups, including 200 proposals under scrutiny, has started growing aggressively thanks to initiatives of IN-SPACe, ISRO, NSIL and DoT. If satellite spectrum is auctioned, it would inevitably stifle the growth of the sector as well as the existing satcom players who would not be able to bear the exorbitant prices of the spectrum that will be driven by deep-pocket entrenched companies.

A common misunderstanding is that the Supreme Court has mandated spectrum auctions in all situations. Instead, the apex court said in its advisory jurisdiction in the Presidential Reference in the 2G case that, “Auction, as a method of disposal of natural resources, cannot be declared to be a Constitutional mandate under Article 14 of the Constitution of India.” The Supreme Court of India further stated that “Auction may be the best way of maximising revenue, but revenue maximisation may not always be the best way to serve the public good.” The Minister for Communications and Electronics and IT has also stated unambiguously that the public good is, without a doubt, enabling ubiquitous digital connectivity to empower the citizens and facilitate digital inclusion.

Level playing field argument not applicable

Vested interests push for satellite spectrum auction on the ground of a level playing field with terrestrial mobile operators. However, the latter aspect arises clearly from Article 14 of the Constitution which provides that equal treatment is guaranteed but only for entities placed in similar circumstances. Mobile operators and satellite operators are unequal in many ways.

Mobile operators have several rights like the Right to Interconnection, Right of Way, Right to Numbering Resources, etc. which gives them unique market powers. They serve the rich urban and other affluent sections and operate in a completely different layer of high revenue realisation. Satellite operators do not have these and are in a very weak commercial position serving the public interest of connectivity in remote and far-flung places where terrestrial connectivity cannot reach. They also help in disaster management. As per abundantly available case law, unequal cannot and should not be treated as equals. It would be grossly wrong and unjust if satellite operators were subjected to auction for spectrum just as the mobile operators.

India should, like other governments, use satellite broadband as a potent tool to bridge the digital divide and prioritise public good over earning revenue by using the administrative method and cost recovery principle instead of auctions for allocating and pricing satellite spectrum.

By TV Ramachandran

TVR is the President of the Broadband India Forum

(The views expressed are personal)

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