1 August 2023
As satellite spectrum is becoming increasingly valuable for bridging the digital divide, questions about how it is licensed are starting to arise. India’s Telecom Regulatory Authority is considering a spectrum auction to align with a previous Supreme Court judgement. However, due to fundamental differences between how terrestrial and satellite spectrum are used, auctioning risks regulating this critical resource in a sub-optimal way. Andrew Wright and Razvan Todoran of Aetha Consulting consider the potential benefits and risks.
Recent advancements in satellite technology and enhanced launch capabilities have sparked a revolution in the satellite telecommunications market. Specifically, the utilization of Low Earth Orbit (LEO) satellites has proven to be a game-changer, as they can offer low latency and high-speed data transmission over vast regions. As a result, Indian satellite telecommunications is quickly becoming a dynamic and fast-growing sector, with new players such as Starlink and OneWeb, and others such as Amazon’s Project Kuiper planning to enter the market.
However, opinion is divided over how the satellite spectrum should be awarded. The Telecom Regulatory Authority of India’s (TRAI) latest consultation paper on the subject reveals two camps: supporters of auctioning the satellite spectrum (including two terrestrial mobile network operators: Jio Reliance and Vodafone Idea) and supporters of an administrative allocation (including the current and prospective satellite players: Starlink, OneWeb and Project Kuiper).
Deciding to auction satellite spectrum would be unusual. Almost all countries worldwide use an administrative assignment mechanism at the moment. In the last ten years, Saudi Arabia is a rare example of a market where non-terrestrial spectrum was auctioned, although on a limited scale (only 2×30MHz in the S band was included) and under some unique circumstances (the license for part of the spectrum could be upgraded to also include terrestrial services). Other countries, such as Thailand, Brazil, or Mexico, have auctioned orbital slots for geostationary satellites in the past, but the auctions did not include exclusive spectrum rights.
Figure 1: Recent auctions in the satellite communications industry
TRAI’s consultation paper was prompted by a request for recommendations from the Department of Telecommunications (DoT) and a decision of the Indian Supreme Court following the ‘2G auction scam’. The ‘2G auction scam’ was a scandal that came to light in 2010. It involved the sale of 2G spectrum licenses at significantly under market value to applicants with no experience in the telecoms sector on a first-come-first-served basis. Following the ‘scam’, a case against the main actors was opened with the Supreme Court. The Supreme Court effectively cancelled the licenses in 2012 and stated that “[…] while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction […]”. The ruling of the Supreme Court is meant to avoid another licensing scandal, but we believe applying it to satellite spectrum would have significant drawbacks for the industry.
In contrast to the terrestrial spectrum that is typically auctioned, satellite operators claim spectrum can be efficiently shared between them. Due to the use of directional antennas at both the spacecraft and the user terminal, multiple LEO constellations can operate using the same frequencies. The LEO operators coordinate with each other to avoid interference in a process guided by the International Telecommunications Union (ITU). On top of this, regulators such as the Federal Communications Commission (FCC) implement a spectrum-splitting mechanism whenever interference between two satellites occurs. This allows the satellite operators to use an entire band most of the time while offering a solution to interference events, which are expected to be transient and localised.
TRAI’s approach, based on the requirements of the DoT and the Supreme Court, would appear to create scarcity where there currently is none and prevent (or at a minimum jeopardise) the sharing of a resource that appears to be capable of being shared in other markets. This seems like the opposite of good spectrum management.
TRAI proposed two auction designs. The first one is a Simultaneous Multi-Round Auction (SMRA) where each operator bids for exclusive rights to a part of a spectrum band. Along with this option, TRAI is considering ways for spectrum to be shared between operators, such as mandating spectrum sharing for operators that acquired spectrum up to their cap. The other proposed design is a clock auction where the operators bid for a shared license for the full spectrum in a band and TRAI limits the number of licenses in that band.
While both design options are established ways of awarding terrestrial spectrum, we do not believe they are suitable for awarding satellite spectrum. In both cases, TRAI would artificially create scarcity – the operators would bid on the value of obtaining a regulatory oligopoly, created purely to enable an auction, rather than on the value they can realise from owning the spectrum. The SMRA would restrict operators to only some parts of a spectrum band, significantly impacting the performance of satellites designed to use multiple wide channels to operate efficiently. Additionally, supplementing the auction design with rules for sharing the spectrum creates a much more complicated licensing framework. These limitations translate into unnecessary obstacles for the satellite industry, which could play a significant role in bridging India’s digital divide. It would be a shame if the Supreme Court’s judgement in response to the ‘2G Scam’ were to lead to another important segment of the telecommunications market being regulated in a sub-optimal way.
