Trai floats paper on 5G spectrum base price amid industry push for lower rates

The telecom regulator kicked off the critical process of setting starting prices of 10 spectrum bands earmarked by the government for offering 5G services, including for 600 Mhz and the millimeter wave frequencies, to be auctioned in April-May 2022.

On a reference from the Department of Telecommunications (DoT), the regulator sought views on issues such as applicable reserve price, band plan, block size, quantum of spectrum to be auctioned and associated conditions for auction of spectrum in new bands such as 526-698 MHz and the millimetre wave band of 24.25-28.5 GHz, besides those in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz and 3300-3670 MHz bands.

Amid a clamour by the industry for low base prices of 5G spectrum, the Telecom Regulatory Authority of India (Trai) said that spectrum unsold amounted to spectrum wasted. And thus, in order to fix a saleable price of airwaves, the regulator sought stakeholder views n whether any other methodology not currently followed by it but followed elsewhere globally should be used to value the precious airwaves.

The government had so far earmarked the 3300 MHz – 3609 MHz band for 5G, the price of which has been fixed at Rs492 per unit. Telcos have repeatedly said they would not bid at this price which amounts to Rs 50,000 crore for 100 Mhz of bandwidth that a carrier is allowed to buy. Even the coveted 700 MHz band went unsold in the March 2022 sale, despite a 43% price cut, with telcos asking for a further cut in base price.

Trai has sought comments from stakeholders by December 28, 2021, and counter-comments by January 11, 2022. It will then hold open house discussions and then recommend its starting prices to the telecom department. The Cabinet will then take a final call on the prices for the auction which is expected in April-May of 2022.

The regulator has also asked whether a certain portion of spectrum should be earmarked for private networks (such as automotive and other industrial uses), and on how to price those airwaves.

Quoting that the government’s objectives were centred around maintaining liquidity in the sector to encourage investment and to reduce unnecessary regulation, the regulator has said, “DoT informed that there is a need to strike a balance between revenue generation from the auction on one hand, long term growth/ sustainability of the telecom sector, introduction of new services/ technologies, on the other.”

The DoT in its letter had highlighted how only 37.1% of airwaves had been sold at the last auctions which concluded in March, thus nudging the regulator to take a hard look at its pricing methodology and alter it to increase the uptake of airwaves. “ Further, spectrum lying idle is a waste for the economy,” the DoT’s letter has stated.

The regulator has also asked why large quantities of airwaves were left unsold in the previous auctions. It has also asked whether the reserve price or the price at which the auction begins should continue to be at 80% of the valuation or if it should be lowered.

Citing from the reforms initiated by the government which resulted in rationalization of bank guarantees, increase in duration of spectrum allocation to 30 years, provision for surrender of spectrum, no spectrum usage charges for bandwidth acquired in future auctions and removal of additional SUC of 0.5% for spectrum sharing, the regulator has asked how would these impact the pricing of airwaves.

In the recently announced reform package for the telecom sector, Trai has said, the validity period of the right to use spectrum acquired in the future auctions has been extended from the existing 20 years to 30 years. “This will enable the TSPs to reap benefits from the spectrum usage over an increased time horizon, thereby increasing the value of spectrum from the perspective of spectrum user,” thus the regulator has asked what percentage of bid should be upfront payment and what should be the applicable period of moratorium. Until now the moratorium of two years from the payment of upfront amount is allowed by the government.

The Trai has also asked what should be the applicable period of moratorium for deferred payment option and how many instalments should be fixed to recover the deferred payment.

On the issue of private networks, the regulator has sought answers on whether the licensing framework needs to be changed when bandwidth is used for purposes other than providing direct services to consumers. “They can be used by industries to automate manufacturing lines, to reduce security risks, to protect employees from dangerous environments, monitoring and control of assets etc,” the regulator has said. Some of the questions raised include whether telcos should be allowed to lease airwaves for such purposes and what should be the caps, blocks of airwaves leased, SUC and other regulatory obligations.

Among the other questions asked are whether the current spectrum caps should be changed. For instance no telco can currently hold more than 50% of sub-1 GHz bandwidth in a service area. Also, the regulator has asked for answers on the contours of surrendering spectrum, a provision recently made possible by the telecom relief package.


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