Spectrum pricing ball back in Trai's court

Telecom Commission rejects regulator's views on pricing of spectrum, auction not to be deferred

The Telecom Commission on Friday decided to ask the Telecom Regulatory Authority of India (Trai) for fresh recommendations on pricing spectrum in the 900, 1800 and 800 MHz bands for auction in February, apart from the quantum of spectrum, rejecting almost all of its earlier suggestions.

“The Telecom Commission has deliberated on the issues. Since freeing up additional spectrum from the sources that the Trai has suggested — the defence forces and Bharat Sanchar Nigam Ltd (BSNL) —will not be possible now, the quantum of spectrum to be auctioned will change. Pricing is linked to the quantum of spectrum to be auctioned. We need fresh suggestions from Trai,” said a senior official of the department of telecommunications (DoT), also a member of the Telecom Commission.

The regulator would be given 15 days to submit new recommendations on the pricing of spectrum, the official added.

The Commission’s decision is based on a report by an internal committee of DoT that had rejected nearly all the recommendations of Trai on freeing spectrum and auctioning it only when enough was available. The DoT committee also suggested the Commission refer back to the Trai on the issues.

“Discussions are on with the defence forces on vacating spectrum for commercial use, but this will take time. We can’t take back spectrum from BSNL; that is not legally tenable. We are discussing other possibilities,” the official said.

The Commission’s decision feeds the fear of mobile service providers that spectrum scarcity will inflate prices. The DoT official said the government was determined to conduct the auction in February.

Spectrum for sale would be in the 900 and 1800 MHz bands, and DoT might look putting up the 800 MHz band, too, the official added. But spectrum in the 2100-MHz band, which telecom companies are hankering for and Trai has suggested selling, will not be auctioned in February. “Trai is yet to recommend how to price the 2100-MHz band. And, auction of this band is linked with the defence forces freeing 15 MHz spectrum, which is not likely soon,” the official said.

The Telecom Commission has not indicated how much spectrum will be auctioned in February and companies fear it will be far less than what Trai had suggested. DoT had earlier indicated 184 MHz of spectrum might be offered in the 900-MHz band but this could change.

There will now be only three slots of 5 MHz available for auction, and spectrum prices are likely to hit the roof. If Trai’s proposals had been accepted, mobile operators could have bid for an average six slots of 5 MHz in the 900, 1,800 and 2,100 MHz bands.

“This is completely against the interests of the operators and consumers. What Trai had suggested made sense. We have been asking for more spectrum. If matters proceed like this, we will approach the Prime Minister’s office,” said Rajan Mathews, director-general of the Cellular Operators Association of India.

The Commission has also rejected Trai’s suggestion to reconsider the proposed extended GSM band, which would have freed another block of 5 MHz for auction. The two incumbent operators in each circle, whose licences expire in 2015-16, will want to retain this valuable spectrum to ensure services are not disrupted. However, operators that do not have data spectrum will also be bidding up the price.

Chief executives of Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications wrote to DoT last month, saying without enough spectrum, auctioning could lead to a crisis in the sector. “The inability of operators to win back the 900 MHz spectrum will lead to the market leaders in these circles being forced to curtail operations,” the telecom bosses said in a joint letter to Ravi Shankar Prasad, minister for communications.