In 2021, the Department of Telecommunications (DoT) sought recommendations from the Telecom Regulatory Authority of India (TRAI) on auction of spectrum for space-based communication services. Till date, TRAI has not issued its recommendations on the subject matter owing to lack of information from DoT regarding the frequency bands and quantum of spectrum available in each band to be put to auction and associated information in respect of satellites. In view of the time required to provide the aforesaid information, on 27.11.2021, DoT approved the roll out of 5G spectrum, while the issue of satellite spectrum allocation came to a standstill.
This brings to us an important issue, should satellite spectrum be auctioned at all?
While India has no instance of satellite spectrum allocation, to understand the above issue, it is necessary to rewind back to the 2G spectrum allocation, which for the first time, set a precedent on auction of spectrum in India.
2G Spectrum Allocation and the Judicial Aftermath
In 2007, TRAI recommended that in future, all spectrum excluding the spectrum in 800, 900 and 1800 MHz bands in 2G services should be auctioned for its efficient utilization (TRAI Recommendations). TRAI recommended that in the aforesaid 2G bands, allocation through auction may not be possible as the service providers were allocated spectrum at different times with varied quantum of spectrum. Therefore, it was difficult to decide the cutoff date after which 2G spectrum ought to be auctioned, as it would impact the level playing field for new entrants. Prior to these recommendations, from 2003 till 2007, unified accesss service (UAS) licenses were issued to telecom operators on first- come- first serve (FCFS) basis, upon payment of entry fee fixed for 2001 cellular license, on a case to case analysis, subject to spectrum availability.
Interestingly, TRAI Recommendations also emphasized that the spectrum allocation criteria, pricing methodology and the management system suffered from deficiencies which needed to be addressed to ensure spectrum efficiency. However, no corrective action was undertaken by the DoT nor the Ministry. The Ministry, in fact, abruptly reduced the cut-off date for receipt of new applications for UAS license. Further the policy of FCFS was opted for processing applications received up to 25.09.2007. The Ministry even rejected the suggestions received from the then Prime Minister who requested adoption of a fair and transparent method for grant of license through auction in view of scarcity of spectrum. Per the Ministry, auctioning spectrum to new applicants would be arbitrary, unfair and discriminatory as new entrants would be deprived of a level playing field. Additionally, Ministry unilaterally decided to retain old rates of 2001, without any indexation for license applicable in 2007.
2G Spectrum allocation was challenged in a batch of matters before the Supreme Court (Court) in Centre for Public Interest Litigation and Ors. v. Union of India and Ors., WP (C) No. 423 of 2010. (2G Case) The procedure adopted for grant of UAS license was arbitrary, illegal and violative of Article 14 of the Constitution. Petitioners argued that spectrum, a national asset, could not be allocated on a FCFS policy without any advertisement or auction. Further, the preponing of cut-off date was arbitrary and resulted in elimination of large number of applications.
The Court opined that State, as a legal owner of the natural resources and as a trustee of the people is empowered to distribute the state largesse. However, the process of distribution must be guided by the constitutional principles of justice, fairness, equality and larger public good. Auction or inviting tenders surely are methods for fair disposal of public goods however, they are not the invariable rule. In case of compelling reasons there can be a departure from auction.
In view of the arbitrary executive decision, the Court held that a duly publicized auction conducted fairly and impartially would have been ‘perhaps’ the best method for distribution of 2G spectrum, and would have maximized economic benefits for India. Retaining the entry fee as applicable in 2001, without any indexation, resulted in huge economic loss to the country. Further, FCFS policy was fundamentally flawed, based on an element of pure chance, with inherent dangerous implications. Therefore, auctioning of spectrum was the most reasonable and transparent method in the 2G Case.
The act undertaken by DoT and the Ministry were held as arbitrary and violative of fundamental constitutional principles. Accordingly, licenses granted to private respondents on or after 10.01.2008 and subsequent allocation of spectrum to licensees were declared illegal and quashed.
Presidential Reference- Finality to Spectrum Auction?
The issue whether auctioning of spectrum is a constitutional/ legal mandate, did not rest with the above decision.
In April 2012, a Presidential reference[1] was made to opine on the 2G Case as the issues involved far reaching implications, raising questions of law of grave public importance (Reference)[2]. One of the key issues in the Reference was ‘whether conducting auction was the only permissible method for disposal of all natural resources across all sectors.’
The Court in Reference held that auction was mandated in the 2G Case in view of the peculiar facts involved therein. The 2G Case judgment did not suggest nor intend auction to be an absolute standard for alienation of resources. Moreover, if method of auction was held as the only permissible means of disposal of natural resource, the same would result in quashing of multiple statutes which prescribe methods other than auction. While every State action, including distribution of largesse, grant of contracts, etc., is to be tested on the touchstone of Article 14, auction as a method of disposal of natural resource cannot be held as a constitutional mandate as it cannot be applied absolutely in all circumstances.
The Court further held that reading of auction as a constitutional mandate would be impermissible as it would be contrary to principles under Article 39(b)[3] of the Constitution which require adoption of all methods of distribution that cater to the common good. Allocation of natural resources to the highest bidder may not necessarily be the only way to subserve the common good, and at times, may run counter to public good, opined the Court. Lastly, the potential for abuse in other methods of resource allocation could not be the basis for considering auction as a legal/ constitutional mandate as there was an equal potential for abuse in auction.
Satellite Spectrum: Auction or Allocation?
The Reference unequivocally clarifies that auction is not the legal mandate for public resource allocation. It is the executive’s wisdom and decision in adopting the most efficacious methodology for allocation, guided by the overarching principles of transparency, fairness and reasonableness of the procedure, while catering to the larger public good.
Whether satellite spectrum should be auctioned or licensed through other economically viable methods such as through administrative route etc., will ultimately be an executive decision, guided by the aforesaid principles of: (a) maximizing the greater good and (b) adopting a fair, reasonable and transparent method of allocation.
Interestingly, satellite spectrum allocation has been a contentious issue, with certain telecom operators favouring auction and satcom players preferring allocation through administrative route. Merely because telecom/terrestrial spectrum is allocated through auction, cannot be reason enough to support satellite spectrum auction. Contrary to auction, internationally, satellite spectrum allocation has been through payment of license fee.[4] Given the fact that satellite spectrum is utilized for greater public good, in terms of use by defence forces or for public radio etc., its allocation through auction, solely to maximise revenue, may not be the most effective method of allocation.
It is only when DoT provides clarifications to TRAI, followed by TRAI’s recommendations or when TRAI floats a public consultation paper seeking comments on the subject matter, India will move a step closer towards making its right choice on satellite spectrum allocation.
[1] Article 143(1) of the Constitution of India
[2] Re: Special Reference No.1 of 2012
[3] “39. The State shall, in particular, direct its policy towards securing –
[4] https://www.thehindubusinessline.com/info-tech/spectrum-for-satellite-broadband-services-to-be-auctioned-not-allocated/article37804619.ece
