Govt issues guidelines for spectrum trading by access service providers

The government today issued guidelines for spectrum trading, allowing telecom operators to procure radiowaves from other companies for meeting their requirements for mobile services and improve service quality.

The National Telecom Policy envisages a move towards liberalisation of spectrum to enable its use in any band to provide any service in any technology as well as to permit spectrum pooling, sharing and later, trading to enable optimal utilisation of spectrum through appropriate regulatory framework, an official release said today.

Spectrum trading leads to greater competition and provides incentives for innovation, better/new services being available to consumers at cheaper tariffs, better choice to consumer, etc. This also facilitates ease of doing business in India by allowing free play in the commercial decisions and leads to optimisation of resources apart from improving the spectral efficiency and quality of service.

After considering the recommendations of the telecom Regulatory Authority of India (Trai) on spectrum trading, the government has now decided to allow trading of spectrum between two access service providers, holding cellular mobile telephone service (CMTS) licence, with authorisation of access service in a licensed service area.

All access spectrum bands earmarked for access services by the licensor will be treated as tradable spectrum bands.

Only outright transfer of right to use the spectrum from the seller to the buyer will be permitted. Leasing of spectrum is not permitted.

Spectrum trading will be permitted only on a pan-LSA (Licensed Service Area) basis. In case the spectrum assigned to the seller is restricted to part of the LSA by the licensor, then, after trading, the rights and obligations of the seller for the remaining part of the LSA with regard to assignment of that spectrum will also stand transferred to the buyer.

Spectrum trading will be permitted only in the specified block sizes (band wise): 800 MHz spectrum band in block size of 2x1.25 MHz; 900 MHz spectrum in 2x200 KHz; 1800 MHz spectrum in 2x200 KHz; 2100 MHz spectrum in 2x5 MHz; 2300 MHz spectrum in 20 MHz in TDD; 2500 MHz spectrum in 20 MHz in TDD and 2x10 in FDD

Spectrum trading will not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.

Only that spectrum is permissible to be traded, which has either been assigned through an auction in the year 2010 or afterwards, or on which the telecom service provider (TSP) has already paid the prescribed market price. In such a case, entire spectrum would be tradable.

Both the licensees trading the spectrum should jointly give a prior intimation for trading the right to use the spectrum at least 45 days before the proposed effective date of the trading as per prescribed format to wireless adviser, wireless Planning and Coordination Wing of the Department of Telecommunications.

Both the licensees will also give an undertaking that they are in compliance with all the terms and conditions of the guidelines for spectrum trading and the license conditions.

Failure to conform with the terms and conditions of the guidelines for spectrum trading will give the government the right to take appropriate action which inter-alia may include annulment of trading arrangement.

The seller will have to clear all dues prior to concluding any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of trade will be the liability of the buyer. The government shall, at its discretion, be entitled to recover the amount, if any, found recoverable subsequent to the effective date of the trade, which was not known to the parties at the time of the effective date of trade, from the buyer or seller, jointly or severally. The demands, if any, relating to licences of seller, stayed by the court of law, will be subject to outcome of decision of such litigation.

Where an issue, pertaining to the spectrum proposed to be transferred is pending adjudication before any court of law, the seller should ensure that its rights and liabilities are transferred to the buyer as per the procedure prescribed under the law and any such transfer of spectrum will be permitted only after the interest of the licensor has been secured.

The relevant provisions in the NIA for auction of spectrum with regard to liberalisation of existing spectrum holding in 800 MHz/1800 MHz band will apply. In respect of other bands, where spectrum has not been acquired through auction, terms and conditions of liberalisation will be as decided by the government from time to time.

The terms and conditions attached to the spectrum under the provisions specified in the relevant Notice Inviting Application (NIA) document or otherwise shall continue to apply after the transfer of spectrum unless specifically mentioned in the guidelines.

Buyer will be allowed to use the spectrum acquired through trading to deploy any technology by combining it with their existing spectrum holding in the same band after converting their entire existing spectrum holding into liberalized spectrum in that band as per the prevalent terms and conditions.

The buyer should be in compliance with the prescribed spectrum caps declared from time to time. It is clarified that the spectrum acquired through trading shall be counted towards the spectrum cap by adding to the spectrum holding of the buyer. This will result in increase of spectrum holding of the buyer and reduction in spectrum holding of the seller.

A TSP will be allowed to sell the spectrum through trading only after two years from the date of its acquisition through auction or spectrum trading or administratively assigned spectrum converted to tradable spectrum.

In case of administratively assigned spectrum converted to tradable spectrum after paying the prescribed market price, period of two years will be counted from the effective date of assignment of administrative spectrum.

If the buyer is acquiring the seller's entire spectrum holding in a spectrum band, then it should fulfill the associated roll-out obligations within the balance time period for compliance subject to a minimum period of two years.

But if the buyer is acquiring only a part of the spectrum held by the seller in a spectrum band, then both the buyer and the seller will have spectrum holding in that band after the trade.

In such a scenario, both will be responsible for the roll-out obligations. There is no change in the roll-out obligations prescribed for the seller, even if it is holding a lower quantity of spectrum in that band post-trade. In addition, the buyer will also be required to fulfil entire roll-out obligations. Since there is no change in the roll-out obligations of sellers and there will be additional roll-out obligations for buyers, the buyer shall be given entire time duration to fulfill these roll-out obligations.

If the buyer has met some or all of its roll-out obligations through its prior spectrum holding in that band, it shall be taken into account and the buyer will not be required to repeat the required testing for roll-out obligations it has already met.

The seller should clear its spectrum usage charges (SUC) and its installment of payment due (in case seller had acquired the spectrum through auction and opted for deferred payment) till the effective date of trade and thereafter, the buyer should clear all these dues.

If any TSP sells only a part of its spectrum holding in a band, both buyer as well as seller will be required to pay the remaining installments of payment (in case seller had acquired the spectrum through auction and opted for deferred payment), prorated for the quantum of spectrum held by each of them subsequent to the spectrum trade.

A non-refundable transfer fee of one per cent of the transaction amount of trade or one per cent of the prescribed market price, whichever is higher shall be imposed on all spectrum trade transactions, to cover the administrative charges incurred by government in servicing the trade.

The transfer fee should be paid by the buyer to the government. The market prices should be equal to the auction determined amount prorated for the balance validity period of spectrum assignment. In case more than one set of market determined prices are available, the latest market determined price available at the time when the TSP wants to trade its spectrum holding, would be applicable. If the auction determined prices are more than one year old, the prevailing market price shall be applied by indexing the last auction price at the rate of SBI PLR.

The payment is to be made by draft in favour of Pay & Account Officer (HQ), DOT payable at New Delhi.

The amount received from trading shall be part of Adjusted Gross Revenue (AGR) for the purpose of levy of license fee and spectrum usage charges (SUC).

Existing rates as prescribed by the government from time to time for spectrum usage charge (SUC) will continue to apply on spectrum held by the buyer and seller. The spectrum held by buyer should include the spectrum acquired through trading. Spectrum acquired through spectrum trading shall be treated akin to spectrum acquired through auction.

Frequency swapping / reconfiguration from within the assignments made to the licensees shall not be treated as trading of spectrum. The conditions in the NIA shall govern frequency swapping/reconfiguration.

A licensee will not be allowed to trade in spectrum if it has been established that the licensee had breached the terms and conditions of the license and the licensor has ordered for revocation/termination of its licence.

The licensor reserves the right to modify the guidelines from time to time as it may deem fit.