The Telecom Regulatory Authority of India-TRAI, has released recommendations (pdf) on the auction price of 2G spectrum in 22 circles, following the Supreme Court’s verdict in the 2G spectrum allocation scam case, where it cancelled 122 licenses.

The TRAI has recommended that auction of spectrum should be conducted in multiple rounds. It has also said that auctions shall be open to all incumbents holding CMTS/UAS licenses, however not to those that hold spectrum above the prescribed cap. The authority has recommended a reserve price of Rs 3,622.18 crore per MHz in 1800 MHz band, Rs 7244 crore in 800 and 900 MHz band, and Rs 14,000 crore in 700 MHz band for spectrum auctions. It has also recommended refarming of spectrum in the 900 MHz band, which is more cost effective for telcos. This translates into a reserve price of over Rs 18,100 crore for a block of 5 Mhz in the 1800 Mhz band for 2G spectrum, since the authority has proposed a limit of 5MHz in each of the 22 circle.

The TRAI has also proposed re-farming of the 900 MHz band when licences of incumbent operators like Airtel, Vodafone and Idea come-up for renewal, asking them to surrender existing spectrum in the band and paying more for it. Interestingly, the TRAI has also asked the government to take back about 2 x 2.4MHz of spectrum from MTNL, since it doesn’t have enough subscribers.

In a rare show of unity, the COAI(Cellular Operators Association of India) and AUSPI(Association of Unified Telecom Service Providers of India) issued a statement expressing their concern and disapproval of these recommendations, and termed them as being arbitrary, regressive and inconsistent. The industry bodies also said that the industry was also hoping that TRAI would limit its recommendations narrowly to the 2G case verdict, and that the expansion of the recommendations to cover 700 MHz auction, and refarming have caused concerns to the industry relating to existing rights to spectrum conferred by extended licenses with operators.

Here’s the statement:

“The Indian Telecom Industry has expressed deep dismay on the TRAI’s latest recommendations on the auction of 2G spectrum. TRAI in its latest recommendations has proposed reserve pricing/ per MHz for 700 MHz at Rs.14000 crores, for 800/900 MHz band at Rs.7244 crores and for 1800 MHz at Rs 3622 crores, which translates into a reserve price of over Rs 18,100 crores for a block of 5 Mhz in 1800 Mhz band.

The Cellular Operators Association of India (COAI) and the Association of Unified Telecom Service Providers of India (AUSPI) have vehemently expressed their concern and disapproval of these recommendations and termed them as being arbitrary, regressive and inconsistent. The industry was looking forward to reasonable spectrum reserve price recommendations from TRAI in the light of the government’s own articulated policy directions on affordability, rural penetration, etc.

The Ministry and the DoT has clearly stated that the primary objective of the NTP 2012 is proliferation of “affordable, reliable and secure telecom and broadband services in furthering the national development agenda while enhancing equity and inclusiveness”, and stated – “revenue maximisation as a secondary objective”. The draft NTP 2012 also “recognises the predominant role of the private sector and the consequent policy imperative of ensuring continued viability of service providers in a competitive environment”.

However, industry has repeatedly been facing contradictory and regressive approach from the Regulator which is detrimental to the future of the sector that is often touted as the poster boy of India’s economic reforms. From deciding to link the price of 2G spectrum to 3G spectrum auctions, to its own expert committee’s inputs without the application of any logic; and unilaterally trying to interpret DoT’s own licence terms like ‘extension’ as ‘renewal’, the Regulator’s actions appear to be unfair and biased against all operators for reasons best known to it.

The TRAI’s actions seem to be directed towards creating unnecessary constraints for the sector, overlooking the universal rules of sustainability and growth for this sector. Under such inconsistent, regressive and uncertain regulatory environment, it is inconceivable that the telecom industry, which is already in a state of doldrums, will be able to deliver on the Government’s vision of affordable communications, rural penetration and rollout of data services.

It will further hurt the ability of the country to be at par with other developing and developed nations where access to communication and information via the Mobile broadband route has been regarded as the foremost parameter for the socio-economic growth an index of national competitive advantage. Moreover, it will also affect the investors’ already shaken sentiments as it will prove to be an impediment for operators to invest and expand services.

We hope that the Government will look into this aspect and revisit the entire process. In their current state the guidelines have the potential to derail a sector that is a significant contributor to the National Economy. The industry was also hoping that TRAI would limit its recommendations narrowly to the matter referred to it by the Supreme Court, i.e auction of canceled 2G licenses. However, the expansion of the recommendations to cover such matters as 700 MHz auction, refarming, etc. have caused concerns to the industry relating to existing rights to spectrum conferred by extended licenses with operators.”