Devas Case & Satellite Spectrum Auction
Devas case proves that satellite spectrum auction makes no sense as it unlocks very little value
The conclusion enumerated in the subheading might sound strange and surprising to most readers. However, both the connection and the context will become crystal clear as you read through this note.
Context
On 1st Aug 2023, the Ninth Circuit US Courts of Appeals gave a favorable judgment in favor of Antrix Corp - the commercial arm of the Indian Space Research Organization (ISRO). This judgment reverses the International Court of Justice’s Order, asking Antrix to pay $1.3 billion as compensation for unilaterally canceling an agreement (between Antrix & Devas), entered into on 28th Jan 2005 with a purpose for Devas to lease ISRO’s S-Band transponder capacity.
Controversy
Now, there wouldn’t have been any controversy if the agreement (between Devas & Antrix) was just limited to “leasing transponder capacity” alone, as Antrix had full jurisdiction to enter into such an agreement. But Antrix chose to expand the agreement to include the “terrestrial spectrum” as well. The intent (page 7 of SC judgment 17th Jan 2022), was to allow Devas to use the same spectrum (used by the satellite transponders) for deploying ground-based BTSs, thereby enabling Devas to integrate both signals - one emanating from the satellite and the other from the ground-based BTS, to offer multimedia/broadband services to handheld mobile phones. Devas also acknowledges this intent in their petition to the International Court of Justice (page 2 of their filing in ICJ, 3rd July 2012), reproduced below for ready reference.
“… Among other things, the Devas Agreement conferred on Devas the right to lease space segment capacity on two satellites designed to operate in a portion of “S-Band”, a part of the electromagnetic spectrum that the GOI has assigned to DOS. Devas thus was able to develop a proprietary integrated satellite/terrestrial system (including high-powered satellite broadcasting in the S-Band) to deliver multimedia services across India to mobile users….”
Cancellation
Though it is unusual for Antrix and Devas to enter into such an expansive agreement, however, the chances of it getting executed were totally destroyed when the BWA auction of the 2.3 GHz band (adjacent to S-Band) in the year 2010 delivered a value of Rs 12848 Cr for 20 MHz Block. At this price, the 70 MHz of S-Band spectrum (which Devas was targetting) would have cost Rs 45,000 Cr for Devas. This fact was also pointed out by CAG in its report dated 1st May 2012.
The GOI saw the problem in hand. It was unfair for them to allow an entity to offer similar services in a spectrum block that is 3.5 times bigger than what a BWA player acquired by participating in the auction, and that too at a fraction of the price.
Hence, on 17th Feb 2011, the Cabinet Committee on Security (CCS) decided to annul the Antrix-Devas deal.
Connection
Now the connection between the Devas Case and the current GOI decision to auction satellite spectrum for offering internet services emanates from the fact that Devas knew from the beginning that it will be impossible for them to reach the mobile phones unless they leverage the terrestrial part of the spectrum. It is because of this reason they structured their agreement with Antrix such that they can use the S-Band spectrum for the purpose of deploying ground-based BTS as well.
This clearly proves that using a spectrum for only satellite services can’t unlock value any close to when it is used for terrestrial services. This also proves that a lot of capacity lies unused when spectrum is exclusively used for deploying satellite services, thereby enabling Devas to plan to unlock the full capacity of spectrum by deploying ground base BTS.
Conclusion
Hence, Devas’ case proves that auctioning spectrum for ONLY satellite services makes no sense, and it can’t unlock value anywhere close to what can be unlocked if the same band is used for deploying terrestrial services. Also, a lot of capacity will lay waste which can’t be used if the auction locks the usage of the spectrum only for satellite services. This is why it makes no sense to auction spectrum for satellite services and the same must be given administratively so that in the future the regulators have the flexibility of leveraging the unused capacity for 6G - the spectrum for which is most likely to overlap with the spectrum bands that are currently being planned for satellite auctions.