Why in news?
- Vodafone and Idea are in merger talks.
- They are planning to ask the Department of Telecommunications (DoT) to relax the ceilings on spectrum ownership.
What is the spectrum cap?
- Energy travels in the form of waves known as electromagnetic waves.
- These waves differ from each other in terms of frequencies.
- This whole range of frequencies is called the spectrum.
- In telecommunication like TV, radio and GPRS, radio waves (electromagnetic waves) of different wavelengths are used. They are divided into bands based on frequencies.
- The spectrum cap is the limit of radio-waves a telecom operator can hold for providing wireless services.
What is the current rules?
- Spectrum cap rules are to prevent an operator from accumulating unreasonable amount of spectrum that might result in the monopoly of the operator.
- At present, a single telecom network cannot own more than 50% of the wavelengths in a single band and 25% of all the wavelengths assigned in a telecom circle.
Why the ceiling should be reduced?
- If these two telcos actually merge, the resultant entity would need to surrender a significant amount of spectrum under these current rules.
- Irrelevant - These restrictions were put in place when there were 8 - 10 networks in each circle to protect the smaller networks from the bigger ones.
- But this hyper-competition has been reduced leading to around four large networks in each circle. Hence the current rules become irrelevant.
- CCI - Though cartelisation amongst the networks is a genuine threat, but there is Competition Commission of India to ensure that it doesn’t happen.
- Quality - If the base of a network’s subscribers rises, its inability to buy spectrum will severly impact the quality of its service.
- Restricted choices - A smaller network can’t sell its spectrum since the caps restrict their choice. It can only negotiate with those networks which have spectrum way below the ceiling.
- Consumption increase- In the last few years, there is a steep rise in data consumption. So, the networks need more wavelengths. But their efforts are hindered by the caps.
- It also impacts the ease of doing business as the exits of network and consolidation are being difficult because of the cap.
- The government wants to leverage mobile networks for better governance which would also require more spectrum.
Source: Business Standard
