Accessing Space For Commercial Activities And Satellite Spectrum Allocation In India
INTRODUCTION
The Government of India has been actively working towards liberalizing the space sector (including under the FDI policy), as well as to enhance participation from private non-government entities in such sector. Achieving such goals requires policies which are favorable to business enterprises, along with balancing matters of public interest and national security. For an overview of private sector participation in India’s space sector, including with respect to the Indian National Space Promotion and Authorization Center (“IN-SPACe”), an autonomous agency within the Department of Space that acts as a single-window nodal agency for all activities concerning private entities in the space sector, see our note here.
Among potential areas of engagement for the private sector, telecommunications is an important focal point. A digitally inclusive future requires an increased use of satellites to ensure that network services can reach remote parts of the country, where connectivity is weak and network fiberization difficult.
The first step towards facilitating private participation in satellite-based communication services is a clear decision on the appropriate way to allocate satellite spectrum among non-government entities. Satellite spectrum refers to a range of radio frequencies used by satellites to communicate, which enables them to provide services to even the remotest of regions. Satellite spectrum is a finite resource. This important aspect requires the formulation of a framework which can ensure participation from several private sector entities so that services can be provided at competitive rates. For an overview of regulatory shifts in India’s satellite communication landscape, including in respect of FDI policy, the Telecommunications Act, 2023 (“Telecom Act”), the Indian Space Policy, 2023 (“Space Policy”), and satellite communication reforms pursuant to guidelines issued by the Department of Telecommunications (“DoT”) for establishing satellite-based communication networks, see our note here.
The recent debate among service providers regarding the appropriateness of auctions vis-à-vis administrative allocation with respect to satellite-based communication services has led to a concrete government stance. Thus, it appears that the decision in respect of spectrum allotment for satellite communication services, consistent with International Telecommunication Union (“ITU”) standards, is in favor of administrative allocation at present.
Repealing both the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933, but subject to certain conditions, the Telecom Act was published in the Gazette of India on December 24, 2023. Among other things, the Telecom Act includes satellite networks within its definition of “telecommunication network” and specifically deals with spectrum assignment. Importantly, the repealed laws neither mentioned satellite networks as a form of transmission or wireless communication, nor dealt with satellite spectrum allocation.
Section 4(4) of the Telecom Act states that the Central Government will assign spectrum for telecommunication through auction (i.e., through a bidding process) except for entries listed in the First Schedule of such Act – for which assignment will be done by administrative process (i.e., without holding an auction).
In this regard, Entry 16 of the First Schedule of the Telecom Act, dealing with spectrum assignment through administrative process, refers to certain satellite-based services such as “…Global Mobile Personal Communication by Satellites, National Long Distance, International Long Distance, Mobile Satellite Service in L and S bands.”
However, the details of the administrative allocation process are yet to be finalized. Meanwhile, there have been several developments leading to the government’s current position in favor of administrative allocation of spectrum with respect to satellite-based communication services.
This note discusses the dynamics and background with regard to the debate between auctions and administrative allocation and provides an overview of recent developments.
THE DEBATE: AUCTION VERSUS ADMINISTRATIVE ALLOCATION
Spectrum assignment can be done through two methods – auction or administrative allocation. On the one hand, auctions constitute a process where several companies bid for spectrum frequencies, and the company that offers the highest price with the best terms of service, while fulfilling all pre-defined eligibility criteria, is assigned such frequencies.
On the other hand, administrative allocation refers to a situation where the regulator selects the entities to which spectrum frequencies are allotted, based on similar eligibility criteria. This process may involve terms and conditions for the sharing of spectrum with other qualified entities.
Historically, auctions have served as the preferred means of assigning government resources in India, including on account of the 2G judgement of the Indian Supreme Court. In this writ petition, a two-judge bench held that an auction provides a more transparent and reliable method of allocating a finite government resource relative to other/alternative mechanisms, including for the purpose of ensuring adherence to the principles of equality and public welfare, as embodied in the Indian Constitution. Moreover, the Supreme Court suggested that auctions deter anti-competitive trends in the market, such as the formation of monopolies and duopolies.
However, pursuant to a special Presidential Reference with respect to the 2G judgement, a five-judge bench of the Supreme Court clarified the following:
- In the 2G judgement, the Court specifically evaluated the validity of methods adopted in the distribution of spectrum during a relevant period. Accordingly, the Court’s recommendation with respect to auctions for the purpose of alienating a natural resource was not intended to serve as an absolute or blanket statement applicable to all natural resources at all times.
- In the 2G judgement, the Court had in fact contemplated situations where a method other than auctions might be conceivable and/or desirable.
- Despite being a preferred method, auctions cannot be considered a constitutional requirement for allotting natural resources. Accordingly, every other method of allocating such resources cannot be struck down as unconstitutional.
- Auctions are just one of several price discovery mechanisms. Since multiple variables are involved, a form of competitive bidding cannot constitute either an economic or a constitutional mandate.
- Ultimately, the alienation of natural resources is a policy decision, and the means adopted for such disposal is an executive prerogative. However, when such policy is not backed by a social or welfare purpose, and precious/scarce natural resources are alienated in favor of private entrepreneurs for commercial pursuits or profits, the adoption of a means other than those that are competitive and revenue maximizing may be considered arbitrary and/or unconstitutional.
- Auctions may be the best way of maximizing revenue, but revenue maximization may not always be the best way to serve the public good. In this regard, the ‘common good’ is the sole guiding factor with respect to distributing natural resources.
- Where revenue maximization is not the objective of a policy of distribution, the question of auctions would not arise. In that case, revenue-based considerations may give way to developmental considerations.
- The Court cannot conduct a comparative study involving various methods of distributing natural resources and suggest the most effective mode among them. Eventually, the methodology related to the disposal of natural resources is a matter of economic policy. Therefore, it is not for the Court to assess the efficacy of auctions vis-à-vis other methods of disposal.
Accordingly, the Court relegated the power and obligation to decide the appropriate method for allocating a natural resource upon the executive – based on market conditions, the surrounding facts of each case, and the constitutional principles of equality, public good, transparency, and effective market competition. Accordingly, there is no express bar on administrative allocation, including in terms of assigning spectrum for satellite-based communication services.
PAST DEVELOPMENTS
National Digital Communication Policy, 2018
The National Digital Communications Policy, 2018 (“NDC Policy”) was formulated with an aim of enhancing the country’s digital infrastructure and reducing barriers to entry for global players. Among other things, the NDC Policy noted that continued expansion of mobile and broadband connectivity required access to cutting-edge technologies like satellite communication. As one of its goals, the NDC Policy acknowledged the need to (i) make new spectrum bands available for satellite-based commercial communication services, and (ii) rationalize the charges payable for the use of such services. Further, the NDC Policy called for a review of the existing satellite communications policy in India, including for the purpose of ushering in a competitive regime in light of international developments and the socio-economic needs of the country. With respect to spectrum allocation for satellite communication systems and approvals related to such systems, the NDC Policy recommended streamlining of the administrative process.
National Frequency Allocation Plan, 2022
The National Frequency Allocation Plan, 2022 (“NFA Plan”) was released by the Government of India to address the allocation of radio-frequency spectrums in the country for different radiocommunication services. The NFA Plan was based on the provisions and principles of the Radio Regulations, an international treaty of the ITU, to which India is a signatory. Among other things, the NFA Plan calls for enhanced satellite spectrum allocation to ensure smoother and more extensive telecommunication services in India.
NORMS, GUIDELINES AND PROCEDURES UNDER THE SPACE POLICY
The Space Policy calls for the engagement of non-government enterprises with respect to commercial activities in space and states that such entities are essential to use space for the development of technology and to provide socio-economic benefits to the country.
In May 2024, IN-SPACe issued norms, guidelines, and procedures (“NGP”) for implementing the Space Policy in respect of authorization for space activities. Pursuant to such NGP, IN-SPACe authorization is required for undertaking space-based communication services in India.
In addition, the NGP covers various other aspects for authorization, including in respect of the following:
1. Establishment and operation of remote sensing and amateur satellite systems;
2. Providing access in terms of available Indian orbital resources to Indian entities;
3. Dissemination of space-based earth observation and remote sensing data;
4. Operation of space transportation systems;
5. Establishment and operation of ground systems;
6. Liability-related aspects; and
7. Registration of space objects.
Authorization Requirements
A non-Indian entity which seeks IN-SPACe authorization will need to apply through an Indian entity, which could be its subsidiary, joint venture or partner. The NGP provides detailed qualifications for seeking such approvals.
All entities must submit an application that undergoes a preliminary assessment by IN-SPACe, followed by a detailed scrutiny to ensure compliance with national and international regulations.
Satellite Operations
Indian entities can establish and operate satellites using either Indian orbital resources or through new filings with the ITU via the Wireless Planning and Coordination Committee.
Non-Indian satellites can only provide communication services if authorized by IN-SPACe and must operate through an Indian entity. The authorization is valid for the satellite’s operational life or up to five years.
Establishment of Ground Facilities
Satellite Control Centers (SCCs) must primarily be located within India. However, foreign facilities may be permitted if they provide a significant business advantage and do not compromise national security.
Leasing and Compliance
Once authorized, operators of non-Indian satellites can lease their capacity to service providers without needing additional authorization from IN-SPACe. However, these providers must comply with regulations from relevant bodies like the DoT and the Ministry of Information and Broadcasting (MIB).
Timeline for Authorization
The entire application process for authorization is expected to be completed within 75 to 120 days.
In general, the NGP aims to foster a competitive environment in India’s satellite communication sector while ensuring compliance with regulatory standards and safeguarding national interests.
Telecom Act
While it appears that the Telecom Act has resolved, for now, the fundamental question with respect to the manner of allocating satellite spectrum, several important details related to such allocation remain unaddressed. To deal with such details, the Telecom Regulatory Authority of India (“TRAI”) has released certain consultation papers and recommendations discussing different aspects of satellite spectrum allocation.
TRAI CONSULTATION PAPERS AND RECOMMENDATIONS
April 6, 2023: Spectrum assignment for space-based communication services
The TRAI’s Consultation Paper on Assignment of Spectrum for Space-based Communication Services dated April 6, 2023 stemmed from the DoT’s reference seeking recommendations for liberalizing the space segment of the telecommunications sector for enhanced private sector participation in commercial communication services. At the time, the DoT was contemplating a regime where the allocation of satellite spectrum may be allotted through auction, after which the allotted spectrum may be shared with multiple service licensees.
Accordingly, the TRAI dealt with the question of exclusive spectrum allocation vis-à-vis a sharing-based mechanism. It concluded that the allocation of lower frequency bands would need to be exclusive due to the large beam width of antennae used. It also observed that for a sharing-based framework to be established, a coordination mechanism would need to be established for higher frequency bands to manage angular and altitude separation, along with the polarization of satellites, as well as to avoid overlaps. The TRAI also noted that private partnerships between different market players would be crucial for the allocation of spectrum band in the frequency range of 27.5-28.5 GHz because terrestrial mobile telecommunications services also need to access such frequencies.
Therefore, the TRAI proposed two mechanisms for auctioning satellite spectrum. Under Option 1, it proposed that a spectrum may be divided into smaller pockets, and each such pocket may be allotted to successful bidders. The terms of allocation might permit intra-band sharing within the spectrum cap applicable to each allottee. In this case, the market price would be determined if there are more than four bidders. Alternatively, Option 2 suggested that the auction model should create some scarcity to ensure true valuation of the spectrum. In this case, the auction rules should provide for a limited number of successful bidders and specify the periodicity of auctions to drive up the price.
Further, the TRAI deliberated on the impact of satellite spectrum allocation on competition in the telecommunications sector. It noted that if spectrum is allocated on an exclusive basis, after which a new entrant intends to enter such market, it would have to wait for the expiry of prior assignment to make a fresh application for spectrum allotment. Accordingly, the duration of spectrum assignment would need to be medium-term to ensure competition. Alternatively, spectrum may be exclusively allocated to an entity subject to the requirement of sharing with new entrants. In addition, for higher frequency bands that can support multiple entities, the spectrum may be re-auctioned after a fixed period, when new entrants can participate along with incumbents.
September 27, 2023: Spectrum assignment with respect to V and E bands, and microwave access and backbone
The TRAI’s Consultation Paper dated September 27, 2023 dealt with spectrum assignment with respect to V and E bands, along with Microwave Access and Backbone. Among other things, the TRAI noted that the V band had not been allocated for commercial satellite communication services in the range specified by the DoT in its request for recommendation. It also observed that E band spectrum was likely to have a greater demand in the future for high-speed bandwidth services.
April 24, 2024: Sharing of telecommunication infrastructure and spectrum, and spectrum leasing
The TRAI’s Recommendations on Telecommunication Infrastructure Sharing, Spectrum Sharing and Spectrum Leasing dated April 24, 2024 apply to telecommunication infrastructure as a whole, without excluding infrastructure related to satellite spectrum from their ambit.
The TRAI recommended that licensees should be allowed to share the active and passive infrastructure of their networks, including the core/backbone network. Such sharing can reduce operational costs and create synergies for the expansion of telecommunication services in remote areas of the country. However, the sharing of core networks should not be permitted if such sharing leads to less than two independent networks in infrastructure, including for the purpose of preventing a breakdown in telecommunication services on account of potential network failures.
Further, the TRAI recommended that licensees should be permitted to lease the spectrum that is allotted to them, or which is acquired through auctions or trading. The TRAI also suggested various conditions for leasing. First, the licensee should be permitted to lease a part of its spectrum only after completing a two-year lock-in period. Secondly, the licensee should not be allowed to lease more than 50% of the total spectrum allotted to it. Thirdly, sub-leasing of the spectrum should be prohibited. Fourthly, for the purpose of calculating caps, leased portions should be counted as part of the aggregate spectrum holding of the lessor. If a lessee intends to participate in a future auction or allocation, it should be allowed to do so, as long as it undertakes to keep the total spectrum allocation, including the leased portion, within the cap. Fifthly, the government should charge a non-refundable leasing fee of 1% of the lease transaction amount.
Such recommendations may influence the final conditions imposed by the DoT when it allocates satellite spectrum in the future.
September 27, 2024: Terms and conditions of spectrum assignment for certain satellite-based commercial communication services
The TRAI’s Consultation Paper on Terms and Conditions for the Assignment of Spectrum for Certain Satellite-Based Commercial Communication Services dated September 27, 2024 was issued in response to the DoT’s reference, where it changed its prior stance with respect to spectrum allocation, i.e., from auctions to administrative allocation, based on the Telecom Act.
A major question raised by the TRAI relates to the period for which the spectrum should be allotted to a licensee. Currently, the useful life of a geosynchronous satellite is 15-20 years, and that of a low-orbit satellite is 5-10 years. Considering that satellite communication technology is still at a nascent stage, allotting licenses for a longer period can prove counter-productive and commercially imprudent. However, allotting short-term licenses can cause uncertainty among service providers with respect to capital recovery.
Further, in case of non-geosynchronous satellites, multiple satellites in a constellation need to coordinate among themselves to ensure spectrum access for each of them. Moreover, the spectrum allocated for satellite earth station gateways will need to be accessed for terrestrial services as well, thereby requiring coordination between two entities. Accordingly, the TRAI has sought recommendations about whether a default spectrum-splitting procedure should be laid down as part of the allocation, or if entities should be allowed to come up with an agreement on their own.
With respect to rollout obligations for licensees, the TRAI had previously recommended that a licensee of a satellite earth station gateway should establish a network within 12 months of spectrum allocation. However, no such obligations were recommended for user links. The TRAI has sought recommendations on the advisability of imposing enhanced rollout obligations.
PROVISIONAL SPECTRUM ALLOCATION
Pursuant to a notification dated October 10, 2024, the DoT approved provisional satellite spectrum allocation in favor of eligible entities for the purpose of testing their services. The notification provides that for the purpose of enabling licensees to demonstrate compliance with security and technical conditions, satellite spectrum may be assigned on a provisional basis to entities that possess both of the following:
1. Satellite-based communication service license/authorization issued by the DoT; and
2. IN-SPACe authorization certificate for non-geostationary satellite orbit (“NGSO”) constellation, to be used by the licensee for the provisioning of capacity in India.
Such provisional spectrum assignment will be valid for a period of up to six months, or until compliances related to security and technical conditions are completed and demonstrated by the licensee, whichever is earlier.
Further, the notification specifies that no services are to be provided on a commercial basis. The data generated during the security compliance period needs to be stored within India, and the licensee is required to ensure the security, secrecy and privacy of such data. The licensee is also obliged to share the location of the server or data center, as well as its possession details, with the DoT. Moreover, explicit permission from the DoT is necessary to share the data generated during operations. The licensee must report deployment details of user terminals (such as name, address, and geo-coordinates) to the DoT on a fortnightly basis from the date of provisional spectrum assignment.
THE WAY FORWARD
The TRAI is expected to soon issue its recommendations with respect to satellite spectrum allocation; such recommendations are expected to cover the methodology of allocation, the frequencies to be allocated and pricing. The TRAI’s recommendations will then be evaluated by the Government. Given the stakes involved and the positions taken by various interested parties, this is likely to be a contentious process.