Spectrum prices may spike in key circles due to high cap per operator

Prices of spectrum in the 3300-3670 band could go up substantially from the base price recommended by the Telecom Regulatory Authority of India (TRAI) in some key circles such as Delhi and Mumbai in the auction due to competition arising from the possibility that there might not be enough spectrum for the third player to get enough to run an efficient 5G network.

Some telecom operators are concerned that the regulator, by fixing a 40 per cent cap on spectrum for each operator per circle, has ensured that a single operator can now buy up to 150 MHz in the 3300-3670 band.

As the minimum required to run an efficient 5G network is 100 MHz, such a move, if two operators buy spectrum up to the cap, could deprive a third operator of sufficient spectrum to run an efficient 5G network. As a result, what they expect is tough competition among the three operators – in some key circles where the bulk of the revenues of 5G will come – to grab more spectrum, with prices shooting up much higher than the base price.  

While the Department of Telecommunications (DoT) committee is looking into various aspects of the regulator’s recommendations, telcos say that the committee’s options on this issue are limited.

“The whole idea is to conduct an auction and not give the spectrum at an administrative price. If the cap is reduced to, say, 30 per cent, there is no need for an auction at all. You can allocate spectrum to all three without any auction. And that cannot happen because of the Supreme Court order saying access spectrum has to be auctioned,” said a senior executive of a telecom company.  

Telcos concede that there will be competition in some key circles such as Delhi, Mumbai, Karnataka, and Andhra Pradesh to name only a few. Some point out that a larger spectrum availability would help an operator to provide high quality standalone 5G services, such as what Reliance Jio plans to offer, with very low latency to enterprise customers.

Also, the operator can slice the spectrum available by providing customised offerings to enterprises with assured service level agreements.        

In its response to Trai, Vodafone-Idea had pegged the cap at 100 MHz for each operator (which is the global norm currently) so that three private telcos and the one government operator could be accommodated according to their submission. In such a case, demand would have met supply.

Bharti Airtel had recommended that cap should be pegged at 35 per cent, accommodating all the three players with spectrum over 100 MHz.

Reliance Jio had demanded a 50 per cent cap saying that a 35 per cent cap would make it a ‘quasi-administrative allocation in some prized bands’.  

The DoT committee is also looking at Trai’s various recommendations. Sources in the know say it will not go for back referencing the pricing of the 3.5 GHz 5G band to the regulator because, according to the Trai Act, it can only do so once - and the DoT has indeed already done so when it asked Trai to reconsider the price of the 3.5 GHz band.

After this, the Act clearly states that the final decision has to be taken by the government. However, sources say that the DoT committee has still not taken up the issue of a change of the base price.

But there are talks on whether to back reference on the issue of mixed usage of the 27.5 -28.5. GHz millimeter band which has been allocated for auction too and can be used by telcos as well as satellite operators. The satellite operators, through the Indian Space Association, want it to be earmarked exclusively for the growth of the satellite industry.