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TRAI proposes steep price cuts for next spectrum auction, proposes new 5G band

TRAI has not only recommended a steep cut of 43 per cent in the base price for the premium 700 MHz band spectrum - coveted for high-speed data services like 4G - but also called for the auction of the "entire available spectrum".

twitter-logoBusinessToday.In | September 19, 2018 | Updated 22:22 IST
TRAI proposes steep price cuts for next spectrum auction, proposes new 5G band

India's bleeding telecom sector may have finally caught a break. The Telecom Regulatory Authority of India (TRAI) yesterday not only recommended a steep cut of 43 per cent in the base price for the premium 700 MHz band spectrum - coveted for high-speed data services like 4G - but also called for the auction of the "entire available spectrum".

The recommendation, if approved by the government, will lead to the country's biggest spectrum auction in terms of quantum of frequencies - a whopping 8,293.95 Mhz of telecom frequencies at an estimated total base price of Rs 5.77 lakh crore. That's over three times the size of spectrum put for sale in the previous auction in 2016.

Significantly, the telecom regulator's recommendations extend to the auction of 5G spectrum for the first time. While all the spectrum at present can be used for 4G and 5G services, experts have suggested use of higher frequency bands like 3300-3600 Mhz for the latter. So that is the 5G spectrum band proposed by TRAI at a pan-India base price of Rs 492 crore per megahertz unpaired spectrum.

It further recommended a limit of 100 MHz per bidder and a much longer lock-in period to avoid monopolisation of the suggested 5G spectrum band. According to TRAI, "the lock-in period for spectrum in this band for becoming eligible for spectrum trading should be 5 years" instead of the 2-year lock-in applicable for other bands.

So, if TRAI has its way, telecom operators bidding in the next round of auctions for the 5G spectrum - which is required to provide next generation of mobile services - will have to shell out a minimum of Rs 9,840 crore on a pan-India basis. But the good news is that the price suggested for the 5G spectrum is about one-third of what had been set for the 2G (1800 MHz) frequencies during the 2012 sale.

Back then, the government had fixed a pan-India base price at around Rs 2,800 crore per Mhz for the 2G spectrum , both uplink and downlink, translating to Rs 1,400 crore per Mhz for unpaired spectrum.

Better still, the watchdog has suggested that the government should not set any time bound network roll-out obligation for buyers of this proposed spectrum.

"For now, we are glad that the government has decided to bring down the price of spectrum, especially for the 700 MHz band," Rajan S. Mathews, Director General of industry body COAI, said in a statement.

During the 2016 auction, the government had fixed the base price of 700 Mhz band at Rs 11,485 crore per Mhz, which was around four times the price of 1800 Mhz band. About Rs 4 lakh crore of 700 Mhz spectrum was put for auction but there were no takers due to its high price. After all, at that price, operators would have to buy radio waves worth Rs 57,425 crore to provide mobile service in this band.

But if TRAI's recommendations are approved by government, then telecom operators in the next round will have shell out a minimum of Rs 32,840 crore for providing services in the 700 Mhz band on pan India basis.

Similarly, according to Mint, TRAI has suggested lowering prices for airwaves in the 800MHz and 900MHz band by 21 per cent and 51 per cent, respectively. So it has recommended base price of Rs 4,651 crore for paired spectrum in 800 Mhz band covering 19 circles; Rs 1,622 crore per Mhz for 900 Mhz band covering seven circles; Rs 3,399 crore per Mhz of in 2100 Mhz covering 21 circles; and Rs 821 crore per Mhz in 2500 Mhz band covering 12 circles. The regulator has also recommended Rs 960 crore per Mhz for unpaired spectrum in 2300 Mhz band on a pan-India basis.

In the previous auction, nearly 60 per cent of the radio waves remained unsold due to high prices, so clearly TRAI is trying to avoid a repeat this time round.

Trai has also recommended that telecom operators buying spectrum 700 Mhz, 800 Mhz, 900 Mhz and 1800 Mhz need to roll out network across 60 per cent of district headquarters (DHQs) or towns by end of three years and 30 per cent of block headquarters by end of five years from the effective date of licence or the date of assignment of spectrum won in the auction process. Successful bidders of the 2100 Mhz band, earlier known as 3G spectrum, will similarly have to roll out network in 70 per cent of DHQ by end of 5 years.

The regulator further suggests that in case a company has closed 2G GSM or CDMA services, it cannot hold the administratively (without auction) assigned spectrum for which it has not paid the market determined price. "Any such spectrum lying with TSPs (telecom service providers) should be taken back and put to auction in the forthcoming auction," said TRAI.

Moreover, it has reiterated the need for an urgent audit of all allocated spectrum - commercial as well as the one given to various public sector units and government organizations. It added that the audits should be conducted by an independent agency on a regular basis. Based on these recommendations, the base prices and timing for the next round of auctions will be finalised by the government.

TRAI's proposals come in as the telecom sector is reeling under a debt of Rs 7.75 trillion, as on 31 March 2017. Then there's the sharp fall in revenues following the price war unleashed by Reliance Jio after it debuted in September 2016.

"Considering the current financial stress the industry is going through, lowering the spectrum prices alone doesn't fix anything. Until and unless the SUC [spectrum usage charges], licence fees and other levies are lowered as well, the industry may not be able to cope with the requirements for state-of-the-art infrastructure needed for new technologies and early roll-out of 5G," cautioned Mathews.

But no one denies that the recommended price cuts are a step in the right direction. Last month, telecom minister Manoj Sinha had said in a press conference that India may have missed the 3G and 4G busses but "we cannot afford to miss the 5G bus".

After all, if 4G unleashed a revolution in the way Indians use mobile data, all thanks to Jio, then 5G is expected to go into the history books as the start of an even bigger societal change, enabling enhanced mobile broadband services like virtual reality, augmented reality and 4k videos.  Swedish telecommunications company Ericsson has predicted that India would fully adopt the 5G services by 2022.

With PTI inputs

Edited by Sushmita Choudhury Agarwal

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