Telcos slam Trai’s satellite spectrum pricing as unfair, call for comprehensive review

The letter, a copy of which has been seen by Mint, also refers to the trillions of rupees pumped in by India’s terrestrial internet operators in spectrum auctions over the years, and insists that satellite internet will compete with terrestrial services, rather than being complementary. 

Further, the letter says that the objective of using satellite services to bridge the urban-rural digital divide will not be met with the current recommendations, and has urged the Centre to form a committee for a comprehensive review.

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The concerns have come at a time when satellite internet service providers such as Starlink, Eutelsat OneWeb, Jio Satellite and Amazon's Kuiper, among others, are preparing to launch services in India. Currently, the recommendations of the Telecom Regulatory Authority of India (Trai) are pending with the department of telecommunications (DoT).

Trai had recommended administrative allocation of spectrum, as opposed to auctions, for satellite internet services. It said satcom companies will have to pay annual spectrum charges of either 4% of their adjusted gross revenue (AGR) or ₹3,500 per MHz, whichever is higher. 

To be sure, satcom operators will also have to pay an annual licence fee of 8% of AGR to the government, as per current authorization terms of the DoT.

Additionally, Trai has recommended an additional annual charge of ₹500 per subscriber for such service providers in urban areas. 

“The recommendation of spectrum usage charges—set at 4% of AGR—without any entry fee/upfront payment is inconsistent with the approach followed so far in case of administrative spectrum allocations, and is without any rationale, empirical analysis, international benchmarking or economic justification," S.P. Kochhar, director-general of COAI, wrote in the letter dated 29 May to telecom secretary Neeraj Mittal.

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The letter was also marked to Trai chairman Anil Kumar Lahoti, economic affairs secretary Ajay Seth, DPIIT secretary Amardeep Singh Bhatia, MeitY secretary S. Krishnan, and members of Digital Communications Commission (DCC). DPIIT refers to the department for promotion of industry and internal trade, and MeitY refers to the ministry of electronics and information technology.

A government official told Mint on the condition of anonymity that the same issue of level-playing field was raised by telcos during the consultations. “Trai took a note of all of that and its recommendations are based on facts," this official said. “Now, DoT (department of telecommunications) has to take a call." 

Queries sent to COAI, DoT, and Trai on Sunday did not elicit any response till press time.

Level-playing field, or not

Kochhar said in the letter that Trai has not given a clear rationale for the ₹3,500 per MHz charge. According to telecom operators, the price per MHz should be equivalent or at least comparable for both terrestrial and satellite internet services, especially when used to reach the same consumers for identical services.

“Equity and non-discrimination principles require that if spectrum for Satellite based services are to be assigned administratively rather than through auction, its pricing must reasonably reflect parity with auction-discovered rates applicable to terrestrial spectrum in comparable frequency bands," Kochhar said in the letter in response to Trai’s recommendations.

To be sure, telecom operators like Bharti Airtel and Jio have partnered with American satcom player SpaceX to distribute Starlink's satellite services in India. Still, the operators have flagged concerns over the sustainability of satcom services in case Trai’s recommendations are implemented in present form.

A key issue for the operators is Trai’s alleged underestimation of the potential capacities of satellite networks while possibly overstating those of terrestrial networks while arriving at the pricing, the operators have alleged. 

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“This resulted in a flawed foundation for the entire exercise," Kochhar said in the letter to the DoT. “Use of accurate capacity data from both terrestrial and satellite operators would have yielded a more transparent and reliable assessment of respective capacities of satellite and terrestrial networks." 

Trai in its recommendations said the network capacities of the major satellite services providers for providing satellite broadband in India is estimated in the order of 0.6 Tbps to 3 Tbps in the near-to-medium term compared to 168 Tbps for terrestrial networks. However, the telecom operators have said that companies such as Kuiper and Starlink are expected to have capacities of 51 Tbps and 83 Tbps over India.

With this explanation, the operators have countered Trai’s argument that satellite internet services will be complementary to telecom operators.

On 9 May, Trai chairman Anil Kumar Lahoti said during a media briefing that after detailed examination of real competition vs level-playing field, Trai has found that “satellite services will be complementary and not competing with the terrestrial services".

“Since satellite spectrum is a shared pool, the two (terrestrial and satellite) cannot be priced at par," Lahoti said, adding that it has recommended to assign spectrum for five years as satcom is currently in a nascent stage, and their business potential would emerge after some years of operations.

Rivals, not partners

The telecom operators said with planned capacities of 29 billion GB data per month, companies like Kuiper and Starlink are well-positioned to serve a significant portion of India’s growing telecom data demand. This is greater than operators’ 23 billion GB current data traffic, according to the letter.

Trai’s recommendations create a substantial regulatory arbitrage, the letter said, as they fail to appreciate that in reality, satellite communication services are fast emerging as full-fledged competitors in the broadband market and the leading NGSO-constellation (non-geostationary) are actively targeting retail and enterprise users in all geographies, including urban and well-connected regions.

The operators also raised the issue of upfront spectrum cost committed by telecom operators, which stands at ₹1.93 trillion for Jio, ₹1.88 trillion for Airtel, and ₹1.64 trillion for Vodafone Idea. Unlike telecom operators, there are no upfront spectrum fee/entry charges recommended by Trai for satellite internet firms.

“In stark contrast, terrestrial operators are required to pay substantial upfront auction-determined charges, often amounting to thousands of crores—translating into an effective spectrum cost of 18% to 53% of present AGR. By comparison, the nominal fee of ₹500 per subscriber per year in urban areas recommended by TRAI will not address the significant regulatory imbalance arising from the absence of upfront charges," Kochhar said in the letter.

For targeted subscribers in unserved or underserved regions in rural and remote areas, the regulator has recommended that the government consider a subsidy for each fixed user terminal at an appropriate amount. The amount of subsidy may be decided by the government, Trai said, adding that the government can give the subsidy either through direct benefit transfer (DBT) to eligible subscribers or to the operators through Digital Bharat Nidhi (DBN) fund.

According to Trai, the one-time hardware cost for a user terminal ranges between ₹20,000 and ₹50,000.

“The additional proposal to subsidize user terminals or satellite operators through the DBN fund further tilts the level playing field against the terrestrial operator, especially given that a majority of the DBN levy is contributed by competing terrestrial operators," Kochhar said. 

To be sure, telecom operators contribute 5% of their AGR to the DBN fund, used to connect underserved areas and bridge the digital divide. 

According to the telecom operators, the Trai’s recommendations rely heavily on the objective of bridging the digital divide as a justification for recommending very nominal spectrum pricing for satellite-based communication services. “Despite relying on this aspect, TRAI does not recommend any mandatory obligations of minimum connections in rural areas before provision of services in urban areas," Kochhar said.

“Therefore, using the digital divide appears to be only to support ultra-low spectrum pricing framework at the cost of national exchequer instead of benefitting only the uncovered rural and remote areas," he said, adding that the rationale should have been applied equitably across all communication service providers, both satellite-based and terrestrial, rather than being limited to a single technology.

In the letter, the telecom operators have urged the government to form a committee to undertake a comprehensive review of the recommendations in their entirety, ensuring the process is guided by principles of fairness, transparency, and equity. The same should also give an opportunity to telecom operators to share their views regarding the same, COAI said in the letter.

According to the telecom operators, higher user terminal costs today do not justify lower spectrum pricing.

In India, over 85% of households lack fixed-line broadband access. “This large untapped market offers satellite operators significant potential for scale, which will, in turn, drive down equipment costs," Kochhar said in the letter.

To attract users, satellite providers are already aggressively reducing terminal prices. For example, in the US and other markets, providers like Starlink now offer zero-cost equipment under 12-month commitment plans, the telecom operators said.