Impact of Spectrum Refarming on Tariffs

Abstract

The Telecom Regulatory Authority of India recommended in April 2012 that spectrum held by incumbent operators in the 900 MHz band be refarmed and substitute spectrum be provided in the 1800 MHz band so that the vacated 900 MHz band can be liberalized and auctioned for provision of IMT services without distorting the level playing field between incumbent and new operators. This paper presents a method for calculation of expected change in tariffs as a result of these recommendations. It also presents a critique of the methodology adopted by Mason (2012) wherein it was reported that refarming would result in a 30 paisa increase in tariffs. The paper is limited to the above and does not delve into whether or not the recommendations on refarming should be accepted by the Department of Telecommunications; or the nature of the consultative process adopted by Telecom Regulatory Authority of India. As per the results of methodology adopted, and in complete contrast to the results of Mason (2012), there will be a 1.6 paisa reduction in tariffs if the licenses expiring between 2014 and 2016 are refarmed. Similarly, there will be a 1.7 paisa reduction in tariffs if the licenses belonging to Private Sector Undertakings are additionally refarmed. Further, the paper demonstrates that there is significant incentive for most private incumbent operators with spectrum in the 900 MHz band to willingly migrate to the 1800 MHz band.