Should Private Networks Bid for Spectrum?

Having netted a whopping Rs.1.5 Lakh Crore from its most recent round of 5G spectrum auctions, the government is now wondering whether it should follow the same route in the case of private captive networks or merely pass on the airwaves in an administrative fashion. Towards this end, the DoT has approached the Law Ministry to ascertain their views. 

For the record, last June, the Union Cabinet had approved a direct allocation method for enterprises seeking to set up their private captive networks though there was no clarity around the specific manner in which the spectrum allocation would proceed. Now a report in the ET quotes unnamed officials to suggest that the Department of Telecommunications is rethinking. 

To auction or not to auction is the question

The report says the DoT is looking for more clarity around the process from the law ministry, especially in the light of the Supreme Court’s order that auction should be preferred over direct allocation of spectrum meant for commercial use. Of course, one could argue that private captive networks do not offer commercial telecom services, but the mandarins are just being wary of falling foul of the Apex Court over this matter. 

Furthermore, the telecom operators who had shelled out hard cash for the spectrum allocation do not take kindly to the direct allocation route. They believe that such moves would distort the level playing field around telecom business, causing tech players a backdoor entry into the highly lucrative B2B 5G services. 

Telecom giants fear loss of B2B business

On the other hand, the technology companies and others who are looking to use their captive networks believe that securing the airwaves through the allocation route is fine. Their point of view being that enterprises should not be coerced in any manner into purchasing spectrum from the telecom companies, who’ve got spectrum allocated from the auction round. 

The DoT had issued early guidelines around private networks whereby enterprises seeking to set up captive networks could lease spectrum from telecom operators or procure it directly from the government. In addition, they also have the option to collaborate with telecom operators to roll out their private networks. 

Given that the two key players in the 5G space happen to be Reliance Jio and Bharti Airtel, the department appears to be treading cautiously The report quoted another official as saying that this could potentially snowball into a major controversy if later it turns out that private networks were benefitting commercially by acquiring spectrum without an auction. 

Both parties have valid arguments

Several companies such as GMR. L&T, Tata Power, Tata Communications and Infosys had sought spectrum for their captive networks. All of them had applied for spectrum allocation across multiple bands in response to the DoT’s efforts that sought applications in order to understand the demand for spectrum in the country. 

Industry experts argue that an auction for private spectrum use could be absurd, given that such networks would be set up in a single location. Auctioning spectrum for exclusive use would also be inefficient, they argue while pointing out that the Supreme Court too had clarified that auctions weren’t a constitutional principle that’s appropriate in all situations. 

On their part, the telecom players had represented to the government that allowing direct spectrum allocation to enterprises would hurt their bottom lines, claiming that enterprise services were expected to constitute between 30 and 40% of their 5G-based revenue. Now, it appears as though the ball is in the Law Ministry’s court.