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Ensure adequate spectrum before auctions: Trai to govt

Also suggests 10% higher price for auction in 1800 MHz band.

By: ENS Economic Bureau | New Delhi | Updated: October 16, 2014 8:39:07 am
No auctions should be held unless sufficient spectrum is made available, says TRAI No auctions should be held unless sufficient spectrum is made available, says TRAI

The Telecom Regulatory Authority of India on Wednesday virtually stymied the government’s plan to hold auctions of 900 and 1800 MHz band spectrum in February, stating that no auctions should be held unless sufficient spectrum is made available.

While submitting the reserve price for auction of spectrum in the two bands in response to a reference from the Department of Telecommunications (DoT), the regulator said auctions should be held simultaneously for spectrum in the 800, 900, 1800 and 2100 MHz bands and a clear timeline for auctioning the 700 MHz should be specified.

Trai has warned in its over 100-page recommendations that if the government does not heed the regulator’s counsel, there would be a serious crisis in the country where mobile services in 18 of the 22 telecom circles (broadly contiguous with the states) could get disrupted.

For the government the choice seems to be simple — act fast or postpone auctions, in which case its budgeted Rs 27,000 crore from auctions in the current fiscal goes haywire.

The problem, as brought out by Trai, is that in the upcoming auction in the 900 MHz band, only the spectrum held by the operators whose licences are expiring is available.

These licensees will have to win back this spectrum to ensure business continuity or else their investment could be impacted. This is because unlike the February 2014 auctions there is not enough spectrum in the alternative 1800 MHz band as a backup. A total of 184 MHz spectrum in the 900 MHz band and 34.2 MHz in the 1800 MHz band, from 29 licences in 18 circles expiring in 2015-16, will be put up for bidding. Additionally, 69.8 MHz of free spectrum in the 1800 MHz band, which remained unsold from the last auctions, will also be up for grabs.

“This auction is unusual because all the prospective bidders are well aware of the shortage in the supply of spectrum and the fact that licences are expiring across 18 circles. This will give rise to strategic and aggressive bidding leading to escalation of prices, similar to what happened back in May 2010 when 3G spectrum was auctioned. We recommend that more spectrum be made available for bidding to ease the demand for the 900 frequency band,” said Rahul Khullar, chairman, Trai.

However, Trai has offered a solution to the government, which is to create a supply of more spectrum in the 900 MHz band by taking back a portion of it from BSNL in all its 18 circles. Creation of an e-GSM band by utilising the 800 MHz band is also an option. More spectrum in the 1800 MHz band can be made available by asking the defence forces to vacate it wherever they are holding more than 20 MHz. Similarly, the entire 60 MHz of spectrum in the 2100 MHz (3G) band should be released for commercial services against 25 MHz currently, it said.

Trai also suggested an average 10 per cent hike in the reserve price at Rs 2,138 crore per MHz for the auctions in 1800 MHz band, compared to reserve prices in the February 2014 auction. In the 900 MHz band, the reserve price for the 18 circle adds up to Rs 3,004 crore, roughly 1.5 times the price of 1800 MHz.

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