Satellite Spectrum - Administrative Assignment is in the true spirit of the SC Judgment
The core values of the SC's 2G judgment will get compromised if we blindly auction airwaves without analysing the principles behind the judgment.
The day before yesterday the TRAI concluded the open house on the assignment of spectrum for space-based communication services. It was clear from the discussions that the TRAI is constrained by the DOT’s reference to its intention to auction space-based spectrum for satellite service on an exclusive basis (clause 1.4b, page 5, CP dated 6th April 2023). TRAI’s problem has been further aggravated by the fact that DOT also wants TRAI to explore the feasibility of sharing auctioned spectrum among multiple service licensees - analogous to having the cake and eating it too. In this article, I will like to discuss the reason for DoT insisting on auctions as a means for assigning satellite spectrum and how the core values of SC’s 2G judgment will get compromised in case the airwaves for satellite services are assigned through auctions.
Presidential Reference
Before we proceed further, let’s understand the background under which these deliberations are taking place. In 2012, when the SC’s judgment on the 2G case called for the assignment of all spectrum through the process of auction, the GOI through the President of India, under article 143(1) of the constitution, filed a reference to the SC for clarification and restoration of the powers of the executive on deciding the criteria of allocation of all natural resources. In response to this reference, the SC issued a detailed clarification that restored the powers of the executive in regard to the allocation of natural resources. However, while doing so it made the following key mentions. The most important one (Clause 62) is reproduced below for ready reference.
62. We are, therefore, of the view that as long as the decision with respect to the allocation of spectrum licenses is untouched, this Court is within its jurisdiction to evaluate and clarify the ratio of the judgment in the 2G Case. For the purpose of this stage of argumentation, it needs little emphasis, that we have the jurisdiction to clarify the ratio of the judgment in 2G Case, irrespective of whether we actually choose to do so or not. Therefore, the fact that this Reference may require us to say something different to what has been enunciated in the 2G Case as a proposition of law, cannot strike at the root of the maintainability of the Reference. Consequently, we reject the preliminary objection and hold that this Reference is maintainable, notwithstanding its effect on the ratio of the 2G Case, as long as the decision in that case qua lis inter partes is left unaffected. Therefore, we are convinced that the observations in Paras 94 to 96 could not apply beyond the specific case of spectrum, which according to the law declared in the 2G Case, is to be alienated only by auction and no other method.
Note the phrase - “as long as the decision with respect to the allocation of spectrum license is untouched, this court is within its jurisdiction to evaluate and clarify the ratio of the judgment in the 2G case”
Hence, in plain and simple reading it appears that Clauses 94 to 96 of the SC’s 2G judgment did NOT get nullified by the outcome of the presidential reference. This means clause 96 of the verdict stays applicable (reproduced below).
96. In our view, a duly publicized auction conducted fairly and impartially is perhaps the best method for discharging this burden, and methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty-bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process.”
This explains why the DoT is hell-bent on auctioning the spectrum for satellite services on an exclusive basis.
2G Judgment Principles
Now if we drill down into details, we will conclude that the principles that drove the SC to call for the auction of all spectrum if applied to satellite spectrum, will lead to a totally different verdict. And is legal parlance, when a judgment is sighted, it is always mapped to the context of that specific situation, as the situations might not be similar in nature. The 2G judgment then had specific reasons for calling for auctions of all airwaves, and the same is not applicable if one sees it in the context of the assignment of spectrum for satellite services. Why? Let’s discuss.
Supreme Court - The first-Come-First-Served policy involves an element of pure chance or accident (Clause 94).
Analysis - Not applicable in the case of satellite spectrum, as whoever wants it can get it (quite unlike its terrestrial counterpart). There are no queues to manage as there is no real scarcity. Yes, coordination needs to be defined and regulated, and since it is an evolving subject (as technology progresses) it is all the more important that the regulator keeps its rights secure (possible only in case of administrative assignment), otherwise, it will prevent the introduction of new technologies, thereby leading to a loss of efficiency and undermining innovation (as current technologies will leave plenty of room/opportunity for the introduction new technologies and services - like 6G in the same bands, especially in the higher frequency ranges).
Actually auctions of spectrum for satellite services will end up creating legal rights are will tie the hands of the regulator from using these bands in the future - bad for the country and the consumers.
Supreme Court - Whenever a contract is to be awarded or a license is to be given, the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition (Clause 95).
Analysis - The objective of transparency can be achieved when we assign spectrum for satellite services administratively but the same is not applicable for the terrestrial spectrum. To appreciate the rationale we need to understand why auctions are carried out in the first place. We carry out auctions to break the stalemate emanating out of excessive demand for limited resources and prevent non-serious players. But the spectrum for satellite services is not scarce. Even TRAI aggress to this fact see below (CP - Page 94).
3.132 However, satellite spectrum due to its characteristics of being amenable to nonrivalrous usage makes it relatively abundant in nature, and due to this abundance, the auction may not reflect its true value
When a commodity is not scarce (relatively abundant) and can be given to most who demand it (subject to fulfillment of eligibility criteria), then what purpose we are trying to serve by putting it in the block? How can transparancy get compromised if we assign it administratively? And same logic can be called to explain why there are no risk of a non serious player blocking capacity, as there are plenty of room available for those who pass the test on eligibility criteria.
Supreme Court - Alienation of natural resource/public property by methods like FCFS is likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for constitutional ethos and values (Clause 96).
Analysis - This was absolutely true in the case of the terrestrial spectrum where the demand was much higher than the supply (it is scarce). Given such a resource administratively will open opportunities for misuse and arbitrage. But the same is not true in the case of the spectrum for satellite services as it is relatively abundant as indicated by the TRAI.
On the contrary, assignment of spectrum for satellite services through auctions by creating artificial scarcity will make true the fear of the supreme court (clause 96), as the winners will leverage this opportunity to drive the market uncompetitive by preventing the leftover capacity (plenty will be available) to be used by others, and also blocking the opportunity for the regulator to introduce new technologies like 6G. And hence is harmful for the country and its consumers.
Conclusion
There is no doubt that auctions are the best means for the assignment of natural resources which are scarce and likely to be misused and blocked by non-serious players. Applying the same model for the assignment of spectrum for satellite services will lead to disastrous outcomes. It will block the entry of new players even when plenty of room will be available to support their entry.
Also, note - NONE of the auction models (specified in the TRAI-CP, and by others) will work, as the fundamental reason for using “auctions are a means of assignment” is “Scarcity”, and to exclude non-serious players. This is absolutely NOT the case for high-frequency spectrum bands. Testimony to this fact is the 26 GHz band auction. A year has passed the SPs have done no deployment in this band, and even if they do, a large quantum of capacity will always remain untapped - due to the low propagation characteristics of this band in a terrestrial setting.
It is also, clear from the above discussion that the administrative assignment of spectrum for satellite does not undermine any of the principles of the 2G judgment (which remains applicable even after the Presidential Reference).
Unless this intent (to auction all spectrum) is corrected now, we as a country will face disastrous consequences - it will result in huge wastage of spectrum and will limit our ability to roll out 6G (most likely will overlap the same spectrum bands). It will also limit the regulator's ability to intervene in these bands.
Last question to ponder? Do we use the same medicine to cure all ailments? If that was so then we don’t need doctors (regulators). Just keep a tab and gulp it with water every time we get sick. No point in wasting time and resources consulting a doctor. Let me know what you think?