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Of price and loss

Published : Mar 11, 2011 00:00 IST



MEDIA reports of loss to the exchequer of around Rs.2 lakh crore, based apparently on the Comptroller and Auditor General's (CAG) estimates, which the implementation of the Antrix-Devas deal would have resulted in, are grossly misplaced. All these estimates have been based on sums accrued from the auctioning of the terrestrial part of the S-band spectrum. The spectrum auctioned by the Department of Telecommunications (DoT), as the background note issued by the Department of Space (DoS) mentions, is completely different from the space segment leased by the DoS. It is like, as Devas' CEO has pointed out, comparing apples and oranges. To appreciate this one must understand how pricing is done.

Spectrum allocations are different for different telecom networks. For cellular telephony, the spectrum is made available to carry signals between the cellular tower and the user handset and vice-versa. If two cells are spatially well separated, with at least one intervening cell, the same frequencies can be used in these two cells without the danger of interference. Therefore, the spectrum allocated to a mobile telephony service can be reused several times over in a large area. The consequent revenue that would accrue from the use of the allocated terrestrial spectrum are huge, especially if the network has a large subscriber base. This is true of the 2G networks in India in recent times.

In all wireless networks, the service provider pays spectrum charges to the Wireless Planning and Coordination (WPC) wing of the DoT. This is calculated on the basis of the number of transmitting stations. In the case of cellular operators, the very high spectrum fees paid upfront is essentially based on the number of handsets the network supports. However, since this cannot be known with any certainty, auctioning is resorted to in all wireless networks that are based on terrestrial spectrum, where frequency reuse and user base can be high. The furore over underpricing of 2G auction is, therefore, justified.

In contrast, satellite spectrum is coordinated by the International Telecommunication Union (ITU) and allocated to the Indian Space Research Organisation (ISRO) on the basis of its filing of proposed satellite system and its radiofrequency use. This spectrum belongs to ISRO and not to Devas or other customers leasing transponders that have been incorporated on-board based on planned use of the spectrum.

Limited frequency reuse is possible in satellite systems by beam separation, by proper shaping of beams especially spot beams, or polarisation discrimination. (In fact, the co-location of GSAT-6 and 6A would call for polarisation discrimination of the beams from the two satellites in the same frequency band.) In any case, the reuse factor is unlikely to be very large. But the reuse factor, whatever it be, will ultimately boil down to the number of transponders on board.

Transponder capacities are sold, like any other commodity, in the transponder market. The lease charges are determined entirely by the market depending upon beam bandwidth, coverage, power levels, and so on. Typically, it varies from $1 million to $3 million per transponder a year. This is what typically Indian communication and TV channels pay to operators of satellites over the Indian region, including ISRO, and this is what INTELSAT paid to ISRO for the custom-built transponders.

Unlike in the terrestrial wireless networks, where a service provider can buy part of the spectrum in an auction and then go about building out networks, satellite spectrum is coordinated by the ITU depending upon a nation's filing for slot and frequency, which, in turn, is based on planned services using the satellite spectrum. A country will not go about launching an expensive satellite just to grab a piece of the spectrum pie.

Satellite-based broadband network is an emerging technology in India, as indeed it is in most parts of the world. Auction may be talked about when the subscriber base grows and the market becomes stable. It is true that the S-band currently with ISRO has been identified as part of the ITU's IMT-2000 standard for 3G mobile communications technology, both satellite and terrestrial. Some countries are probably using this bandwidth for 4G technologies as well. This could happen in India, where 2G is still the mainstay, perhaps in about five years. A large user base for 3G, which is still distant, is a prerequisite for growth of 4G services.

The clamour for the freeing up of satellite spectrum for terrestrial services is essentially derived from this future scenario of dual use of the spectrum or even interoperability with a single device. The pricing scenario then would, of course, significantly change. In any case, appropriate amendments would have to be made to the SatCom policy and in the spectrum pricing for terrestrial use of satellite spectrum before allowing such interoperable satellite services. Devas will then have to apply for the spectrum licence and pay the licence fees worked out. One can, however, argue that Devas would be in an advantageous position to migrate quickly and incorporate these developments when they happen, but this could have been prevented through an appropriate contract. Unfortunately, the contract in question is unclear on this count, as the Space Commission too has noted.

These things are only slowly getting off the ground in this respect in Europe and in the U.S., where only in 2009 part of the satellite spectrum was freed up for terrestrial mobile telephony applications. Only very recently the U.S. company TerreStar announced a handset that can talk to both the satellite and the cellular tower. In fact, in 2005, when the Antrix-Devas agreement was signed, the future evolution of mobile satellite service (MSS) was not even clear.

So comparison of the price paid by Devas for leasing the transponder in satellite spectrum with prices paid in auctions of terrestrial 4G services in Western markets is grossly misplaced because, as pointed out earlier, frequency reuse factors are not comparable. Thus, the European Commission's sale in 2009 that has been cited, without mentioning that it was for terrestrial 4G services over 27 countries for 18 years, is not a proper comparison.

The other figures quoted too the BSNL/MTNL figure of Rs.12,487 crore for 40 MHz of S-band allocated for WiMAX and BWA, or Rs.67,719 crore obtained by the government from auctioning for 3G services are similarly misplaced.

R. Ramachandran

(This story was published in the print edition of Frontline magazine dated Mar 11, 2011.)



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