After years of lull, Indian telecom sector is set to witness exciting times ahead. After enjoying supremacy for close to four years, Asia’s richest man Mukesh Ambani is set for a head on war with world’s richest man Elon Musk and Sunil Bharti Mittal, who owns Bharti Airtel, India’s second largest telecom company. The bone of contention is India’s space internet spectrum, that can be a game changer for the service providers as well as the government.
According to telecom regulator TRAI, urban areas in India enjoy more than double the internet connectivity that is available in rural regions, emphasising the divide between Bharat and India. The much talked about 4G and 5G spectrums lose potency where Bharat begins, hampering government’s vision to digitise the Indian economy.
The revenue share per user from the use of internet data saw a 10x increase in the last 10 years for telecom players in India, but for the revenues to grow from here, companies must conquer India's hinterlands.
While opening up India’s satellite internet to private players can resolve the problem, the government must take a crucial call before expecting investment from the world’s richest. The contrast in views regarding spectrum allocation by some of the major players has posed a difficult question to department of telecommunications (DoT): to auction or not?
DoT’s Contentious Plan
The primary bone of contention is around DoT’s desire to assign spectrum on the basis of an auction process. For India’s telecom department, spectrum auction has proved to be a great revenue generator in the past. In the 4G spectrum auction that took place in 2021, DoT netted Rs 77,814.80 crore. In the 2015 and 2016 auctions, DoT bagged Rs 1,13,932.2 crore and Rs 64,809.12 crore, respectively. Although it would not be fair to compare international mobile telecommunications (IMT) spectrum auction to potential bidding for satellite spectrum, experts agree that an auction can fetch a big amount for the government.
However, world’s richest man, Elon Musk has objected to the auction route as he believes that satellite spectrum should be treated as a shared resource unlike terrestrial spectrum that is auctioned for IMT purposes. Musk’s SpaceX, which has its own satellite internet service called Starlink, wrote to TRAI, asking for administrative allocation of the spectrum. Similar sentiments were shared by OneWeb and Canadian satellite operator Telesat.
Several industry bodies also agree with this point of demand. “Administrative assignment of the [satellite] spectrum will allow multiple operators to share the spectrum, resulting in most efficient use of a natural resource like spectrum. For consumers also, because of better competition, it will eventually result in lower costs,” says Bharat Bhatia, president of ITU-APT Foundation of India (IAFI).
Standing squarely against this argument is India’s leading TSP helmed by Asia’s richest man—Mukesh Ambani’s Jio Platforms.
In February 2022, Jio joined hands with Luxembourg-based satellite solutions provider SES to form Jio Space Technology Limited. The joint venture has already acquired the GMPCS licence from DoT. While demanding auctions for spectrum assignment, Jio presented the Supreme Court’s landmark judgement on the 2G allocation case as an argument in its favour. In 2012, the apex court had noted that in the distribution of natural resources, the State should follow a just, non-arbitrary and transparent procedure.
“When it comes to distribution of natural, public resources, the thumb rule has been in favour of auctions because it brings with it great transparency,” says Seema Jhingan, partner at LexCounsel.
However, those who argue in favour of administrative allocation of spectrum also bring up past Supreme Court judgements to their defence. In the same 2G allocation case, a bench of GS Singhvi and Asok Kumar Ganguly laid down that the State should follow a non-discriminatory method when it comes to the distribution of spectrum. “In the case of satellite spectrum, since stakeholders vary greatly in terms of financial might, it would be discriminatory to follow an auction method,” says T. V. Ramachandran, president of Broadband India Forum (BIF).
Another commonly used argument against auctioning of satellite spectrum is that it goes against the best practices followed by countries around the world. TRAI mentioned in its paper that four other countries had resorted to competitive allocation of spectrum for space-based communication—Brazil, Mexico, United States, and Saudi Arabia. But many respondents pointed out that except for Saudi Arabia, other countries discontinued the auction practice because of its unfeasibility.
Out of the 64 initial responses from stakeholders, 47 were in favour of administrative allocation, while 14 preferred an auction method. Three did not explicitly mention their stance on how to go about spectrum allocation.
Fight Among Domestic Operators
Amidst this divergence of views on the best way to assign satellite spectrum, one thing that stands out is that there is no consensus even among domestic telecom operators. While Jio and Vodafone Idea have expressed their support for the auction process, Airtel prefers administrative allocation. Airtel’s parent organisation Bharti Group is the single largest shareholder in OneWeb. The London-based company provides satellite internet with the help of over 600 low Earth orbit (LEO) satellites.
The difference of opinion between India’s two leading telecom companies is nothing new. In the 2010 4G auctions, little-known Infotel Broadband Services Pvt Ltd (IBSPL) emerged as the only player with pan-India 4G spectrum licence. Soon enough, Mukesh Ambani’s Reliance Industries took over IBSPL, and rebranded it as Jio Infocomm Ltd. Under its new avatar, it became clear that the entity will offer voice telephone services and not just wireless broadband services, going against the presumptions of competitors like Airtel.
In 2016, Jio made a disruptive entry into the telecom market, offering free-of-cost service to new subscribers. This did not go down well with Airtel, and it filed a complaint with the Competition Commission of India (CCI) against Jio’s alleged ‘predatory’ practices. But since the CCI did not find Jio in a dominating position in the market, the case did not go Airtel’s way. In the following years, Jio made its way up to the top in the telecom market.
Once again, in its foray into the satellite internet market, Jio has taken a contrarian bet against its traditional rival Bharti Airtel. While Bharti-backed OneWeb offers satellite broadband from a constellation of 618 satellites in the low earth orbit (LEO), Jio has opted for a combination of geostationary (GEO) and medium earth orbit (MEO) satellite constellations to provide broadband services. Jio’s partner SES has 70 satellites across the two orbits, and since it’s at a higher altitude than LEO satellites, it is expected to cover a broader geographic area with a smaller number of satellites.
Amidst this battle among major domestic operators, fears of small players have been raised by stakeholders. In Jio’s ascent to the top in India’s telecom market, several smaller players had to shutter shops. If India bucks the trend around the world and decides to go ahead with an auction method of assigning satellite spectrum, several stakeholders are concerned that space-based communications will become exclusionary in nature.
Concerns over Exclusivity
Since many players who serve different business interests require a stake in the satellite spectrum, there is a fear among industry watchers that auctions can lead to a wholesaler-retailer model.
“In the auction model, if a player acquires a large stake, we’re looking at smaller players trying to buy their required spectrum from this larger player,” explains Santosh Tiwari, India partner at EY-Parthenon.
Satellite television broadcasters are sceptical of such an arrangement if it comes to that. The present TRAI consultation is looking into the auctioning of C-band, Ka-band and Ku-band spectrum, among others. In the recent 5G auctions, some part of the C-band, which is important for direct-to-home (DTH) TV broadcast, was already auctioned off. Back then, DTH operators had raised concerns around interference from TSPs, and further auctioning of Ku-band will exacerbate this issue, say DTH operators.
“Auctioning, by limiting participation/users, would increase concentration amongst dominant players, creating gatekeepers who could corner spectrum, rent-seek from broadcasters, DTH Operators, and create artificial entry barriers,” noted Tata Play in its response to TRAI. Tata Play accounts for 33 per cent of the overall DTH market in India. Similar concerns were raised by Dish TV India and NXT Digital as well.
Interestingly, the two leading cable TV operators in India—Hathway and DEN—lent their support to the auction method. Together, the two players have control over 45 per cent of the cable TV market in India. Reliance Jio holds a majority stake in both DEN Networks and Hathway Cable.
The possibility of a spectrum ‘wholesaler’ can also be a nightmare for satellite operators who fail to get a stake and for start-ups in the space sector because they don’t have deep pockets to afford bidding for required spectrum. Laura Roberti, director for spectrum and market access at Telesat, tells Outlook Business, “If India goes ahead with auctions, either the amount of spectrum or the number of players will be artificially limited. The player who does not win will have to negotiate with the operator who wins the spectrum. This only leads to a further lack of transparency, non-efficient use of the spectrum and anti-competitive practices.” On the consumer’s end, such a situation could result in higher prices and poor services.
The auction method will be especially unfair to budding space start-ups, feels Tushar Jadhav, co-founder of Manastu Space, a Mumbai-based start-up that builds satellite components. He says, “Auctions will be a sure-shot way to kill the communication angles of space start-ups. It will prevent more companies from coming in [the sector]. It will impact earth observation satellite start-ups as well as those in telecommunications space.”
With over 140 registered space start-ups in the country, equitable access to satellite spectrum can go a long way in helping young start-ups find their feet in the sector. “There are so many space start-ups coming up in India. It’s a virgin sector and it’s all about young entrepreneurs who don’t have much money, but they have brilliant ideas. They depend on good, viable costs. That sector will be severely stifled if an auction takes place,” adds T. V. Ramachandran of BIF.
Equitable Access For All
It is crucial for the government to not fumble the deployment of satellite internet services which will have an impact on the growth of start-ups, broadcast services and internet reach. A 2021 report by UK-based Plum Consulting estimates that close to 900 million people in India can be impacted by the deployment of satellite internet services.
Satellite broadband brings connectivity to previously unconnected places, which can trigger further economic activities in those areas. According to a study done by the World Bank and International Telecommunication Union (ITU), a 10 per cent increase in broadband connectivity can directly result in a 0.8-1.5 per cent hike in the nation’s GDP.
Notwithstanding how the government plans to rake in revenue from satellite-based connectivity, it is more important to ensure that technological access is not denied to anyone.
Coming through the auction model, Jio had disrupted the telecom sector when it entered the market with its lucrative free unlimited calls and high-speed internet plans in 2016. As per reports, average internet usage per month increased to 11GB from 700 MB due to Jio’s impact. The penetration of internet increased from 9 per cent in 2015 to 25 per cent in 2018 which warrants some credit to Jio’s low-cost services.
However, while Jio consolidated the market in its favour, several other telecom operators, including international networks, were forced to shut shops. Aircel, Telenor and Docomo left the market while Vodafone was forced to merge with Idea. If the government goes ahead with the auction route for satellite, it could allow one player to monopolise the sector which might hinder the entry of foreign players like Starlink.
For the government to realise its vision of ‘Digital India’, it needs to improve internet connectivity. Satellite broadband provides an opportunity to bridge the digital divide which became acutely evident when India went through the Covid-19 pandemic. Now, the ball is in DoT’s court to prioritise connectivity in a manner that ensures equitable access—whether it achieves it through auction route or the administrative allocation will decide the king of Indian telecom industry.