SC Judgment & Satellite Spectrum
The SC judgment's applicability was limited to the 2G spectrum and not anything beyond, as long as alienation spectrum for other services did NOT compromise the principles enumerated in the judgment
Whenever there is a question of the assignment of spectrum for commercial purposes, the SC’s judgment dated 2nd Feb 2012 becomes a point of reference for the proponents, who strongly believe that the same should be given to the service providers through the process of auction. As per them, not doing so will violate “Article 14” of the Indian Constitution, and will not be in the interest of the country and its consumers. On this note, I would like to investigate (both legally and technically) whether NOT auctioning spectrum for satellite services will be in contravention of the SC judgment.
The SC’s Conclusion
The Supreme Court’s key conclusion is extracted verbatim from the judgment below for ready reference (Clause 81, Page 92).
In the result, the writ petition are allowed in the following terms:
“……..(iii) Keeping in view the decision taken by the Central Government in 2011, TRAI shall make fresh recommendation for grant of license and allocation of spectrum in 2G band in 22 Service Areas by auctions, as was done for allocation of spectrum in 3G band……”
Note, the mention of the word “2G band”, which is very specific and unambiguous. The SC NEVER expanded the applicability of this clause to include “all spectrum”. And we all know the “spectrum for satellites” does NOT overlap with the “2G band”.
The Structure of the SC Judgment
The SC’s Judgment was structured with the intent to find answers to some important questions - triggered by the process undertaken in allocating 2G licenses. Answers to these questions culminate into conclusions - stated at the end of the Judgment. In this note, we will investigate each of these questions and find out their applicability to the situation of assignment of satellite spectrum by “administrative means” and NOT through the process of “Auctions”.
Validity of “First Come First Serve” Policy
SC says that -
“There is a fundamental flaw in the first-come-first-serve policy in as much it involves an element of pure chance or accident”
“Any person who has access to power corridor at the highest or the lowest level may be able to obtain information from Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a license or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim”
This is absolutely true when the resource in question, whose assignment is being made is scarce and would preclude others from running operations, in case the same is granted to someone who happened to position himself first in the queue due to his ability to access inside information.
However, Spectrum for satellite services is NOT scarce (TRAI acknowledges this fact in its consultation paper). The same block of “spectrum” will be assigned repeatedly / perpetually to whosoever wants it today and in the future, after defining/refining rules of coordination - like we operate roads, parks, etc. Hence, there are no queues here to manage, other than rules of coordination. Just like we do not auction the “right to access roads”, we need NOT auction “the right to access the airwaves for satellite”.
SC’s Intent was to allow “Flexibility”
In my humble opinion, the honorable judge was aware of this problem while he wrote his judgment which is why he included the following para (clause 76, page 86) reproduced below.
“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-serve when used for alienation of natural resources/public property are likely to be misused by unscrupulous people…”
Please note the usage of the word “perhaps”. The honorable Judge did NOT use the phrase such as - “the best method for ……”. This clearly shows an element of doubt in his mind and the flexibility he wanted to keep for the Government to deal with the assignment of spectrum for services like satellites - where making an “exclusive assignment” (like in the case of 2G, 3G & 4G) will be counterproductive and defeats the objectives/principles enshrined in the judgment.
Violation of Artcile 14 & 39(b)
Here the SC investigated the question -
“Whether the GOI has the right to alienate, transfer, or distribute natural resources/national assets otherwise than by following a fair and transparent method consistent with the fundamentals of the equality clause enshrined in the Constitution?”
Article 14 of the Indian Constitution is reproduced below for ready reference.
"The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India."
Article 39b of the Indian Constitution is also reproduced below.
“the ownership and control of the material resources of the community are so distributed as best to subserve the common good”
Now if you weigh these two Articles with the alienation of the 2G spectrum through the process of FCFS, you will see a clear violation. Why? The spectrum was scarce, and the same block could NOT have been assigned to multiple players simultaneously. Doing so on an FCFS basis will violate both the Articles, as neither “the right to equality” Nor “a fair and transparent process” can be followed. When you have 10 people lined up for 2 slots, how do you decide who to give?
Fortunately, the same is not applicable in the case of satellite spectrum, as the same block can be assigned to multiple players multiple times - today and in the future, as is being done internationally. Therefore, in the case of satellite spectrum, Article 14, and 39(b) are NOT breached and stays intact.
TRAI’s Error of NOT recommending auctions of 2G Bands
The SC came down heavily on TRAI for its recommendation dated 28th Aug 2007, which called for NOT auctioning spectrum bands for 2G bands of 800,900 & 1800 MHz band and the same to be given based on auction prices discovered in 2001.
I am totally in alignment with SC’s views, as to how can 2001 prices be applied to the allocation of resources in 2007 without taking into account the time value of money. Also, TRAI did not think through while making its recommendations. The reason - how did the TRAI plan to break the stalemate when many players applied simultaneously for the same blocks of spectrum that too when it was being given at a subsidy?
Hence, it was a no-brainer for the SC to call this recommendation wrong, and impractical to execute when spectrum resources are scarce and large queues are needed to be managed.
Fortunately, this does not apply in the case of “Spectrum for Satellite Services”. The same is neither scarce nor granted for exclusive use - making the applications easy to manage and without causing any practical difficulties as is being practiced by almost all leading economies all over the world.
Conclusion
Therefore, the SC’s judgment of 2nd Feb 2012 should NOT be applied in all situations of alienation of spectrum resources which does NOT call for management of queues, except when the spectrum resources have to be dolled out exclusively - leading to a demand that exceeds supply.
Nowhere in the world satellite spectrum is assigned exclusively. This is due to the reason of limited spectrum reuse capability of satellites vs. those using ground-based base stations (the total number of ground-based BTS is exponentially high compared to satellites hanging in the sky).
Hence, the alienation of satellite spectrum using administrative means will be fully transparent and in no way violates Article 14, and Article 39(b) of the Indian Constitution and is in line with the SC Judgment of 2012.