DoT is discussing a proposal for auctioning spectrum on a yearly basis

Move to help telcos plan their needs better

The Department of Telecommunications (DoT) is discussing a proposal for auctioning spectrum on a yearly basis and offering it at a predetermined time. The proposal, if accepted, could be implemented in the forthcoming spectrum auctions. 

The Telecom Regulatory Authority of India (Trai) has already submitted its recommendations for auctioning spectrum across various bands, including 5G. 

The move would mean a fundamental change in the current auction process, which is sometimes held after a gap of a few years, and sometimes close to each other when the regulator and the government perceive there is a requirement from the industry for more spectrum.

“We are discussing an interesting proposal by which a spectrum auction does not become a gala affair once in a while. We will instead have a clear timetable for auction of spectrum every year at a predetermined time with all the available spectrum on offer,” said a senior DoT official. 

“In many ways, this will reduce the need of telcos to spend huge amounts of money in one go, and they can plan out their spectrum requirements and finances in a stable and systematic manner over a period of time,” the official added.

Telecom operators are positive about the move. Rajan Matthew, director general of the Cellular Operators Association of India, said, “Just like in manufacturing you have just-in-time inventory, the yearly auctions would benefit telcos by helping them plan their finances and reduce cost. 

Also, the price at which spectrum is sold in one auction can be used as the basis for the next auction and simplify the process.”

The department had earlier mooted the idea of having yearly auctions, but the proposal was never referred to the regulator for its recommendation.  Experts said while the DoT could take a final call on the matter, it envisaged a structural change in the auction process, requiring to be referred to the regulator for its views.

Trai has proposed auctioning over 4,948.55 Mhz of spectrum across eight bands, which include 700, 800, 900, 1,800, 2,100, 2,300, 2,500 and 3,500. Based on the various base prices which it has fixed for spectrum, the government could get over Rs 5,056 billion if all of it is sold.

However, previous experiences suggest that telcos, especially with weak finances, are clearly uncomfortable to participate in mega auctions and pay hefty premiums to buy spectrum. For instance, in 2016, when the last spectrum auction was held with a range of bands on offer, only 40 per cent was sold; the rest, which included the lucrative 700 Mhz, was left untouched.

Telcos point out that with the regulator pricing the 5G spectrum at least seven times the rate at which it was sold in South Korea, it is highly unlikely that operators would put in money on 5G roll-outs. 

“5G, with its speed, is not for retail customers. It is for new applications like in healthcare, smart cities and agriculture. But the ecosystem for that will take at least another three to five years. So why should one buy large quantities of spectrum in the 3,500 band now, when there is no viable market for it?” said a top executive of a leading telecom company.