5G spectrum auction: Govt may course correct to attract higher participation in future bids

Even as the centre collected over Rs 1.5 lakh crore from 5G spectrum auctions, it may need to do some course corrections in terms of the reserve price and regulations to attract enhanced participation in future such bids.

“The basic auction for most of the spectrum was over on the first two days with most of it getting sold at the reserve price. Thus, the exercise can also be termed as an administrative allocation through auction,” president of ITU-APT Foundation of India, Bharat Bhatia told Business Today on Monday.

The auction for 5G airwaves that got underway on July 26, witnessed Reliance Jio and Bharti Airtel making fierce bids for especially the 1,800 Mhz frequencies. Monday was the 38th round of bidding.

A total of 72,098 MHz of spectrum was on offer in various high and low-frequency bands, out of which 51,236 MHz was sold. Fierce bidding was especially witnessed in Assam, Jammu & Kashmir and Northeast circles in the 800 MHz band, Odisha and Uttar Pradesh (East) circles in the 1800 MHz band, and Bihar, Haryana, Kerala, West Bengal and Punjab circles in the 2,100 MHz band.

“In an auction, you start from a low price and then – depending on the demand – the price goes up. That is what happened with the 1800 MH band. But, in the rest of the other bands, the spectrum was sold at the reserve price itself. That means the reserve price was higher than what the market wanted,” elaborated Bhatia.

Learning from the experience the government may keep the reserve price lower in the future. For instance, of the 700 MHz spectrum, only 10 MHz was sold. Thus, 15 plus 15 MHz has been left out, which will remain vacant till the next round of bidding. At this point, it is not known whether the government is going to utilise the 15 plus 15 MHz spectrum either through BSNL or sell it to companies who may want it.

Centre softens stance on telecoms sector

Research analyst at Ambit Institutional Equities, Vivekanand Subbaraman is of the opinion that the auctions were indicative of the government’s softening stance on the industry.

“From 2010, the government extracted taxes from the industry and telcos bled. This is the first time the government reduced spectrum prices and gave leeway to telcos on royalty through the spectrum usage charge waiver. To us it appears that the government has taken a consultative approach with the industry on pricing and 5G trials,” declared Subbaraman.

The 2022 auctions, thus, reflect a more balanced stance on part of the government.

“The near-term impact of 5G will be premiumisation and debottlenecking of networks, especially in big cities, riding on the enhanced mobile broadband applications of 5G. If one takes a three-to-five-year view of 5G, new applications riding on massive machine type and low-latency communication could evolve especially for industries,” added Subbaraman.

Meanwhile, industry experts have long argued for innovative solutions for the telecoms sector in a country of India’s size and diversity. One such solution could be the opening up of local area licensing.

This means that licenses can be auctioned only for putting up local area networks for places such as mines, R&D centres and industrial hubs.

“That would be the next big thing. This could be done through a shared spectrum also, particularly in 3.7 and 3.8 GHz. Countries like Germany, the US and Australia have already done it,” pointed out Bhatia.

Referring to payphone services offered by public call offices (PCOs) from the 1980s to 1990s, he added, “A similar concept is now needed for mobile services for local areas. And they will be more efficient as they would be focused on providing services in a very small area.”