After the Department of Telecommunication questioned The Telecom Regulatory Authority of India (TRAI) regarding its high reserve prices, the TRAI recently issued some recommendations (pdf) on spectrum pricing, allocation, and charges. Accordingly, the TRAI has offered an alternative payment structure to reduce any financial burden for 700 Mhz.
Experts believe that the 700 Mhz is crucial for the roll out of 4G services by telecom operators.
For the upcoming auctions, telcos could first pay 10% of the bid amount; the balance 90% could be paid over 18 years with 18 equal annual installments, along with interest. The telecom regulator has upheld the it’s pricing of Rs 11,845 crore for a single unit of the 700MHz band
While questioning the TRAI, DoT said that it considers a set of parameters before approving a reserve price for any spectrum band. However, in case of the 700 MHz band, the reserve price was set at four times more than that of the 1,800 MHz band’s discovered auction price, and that no clarifications were given regarding the high pricing,
The auction of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz has been planned to be held in July.
Spectrum too expensive
It’s worth noting that Gopal Vittal, Airtel India CEO had said that the pricing for 700 Mhz was too expensive. “We believe that the price that has been set or proposed for 700 MHz just makes it very, very expensive for us to buy any of that spectrum, so we believe we cannot afford to buy that spectrum at that price,” he said.
700 MHz Allocation: The TRAI has informed DoT that the entire 700 MHz band available in 2 blocks of 35Mhz spectrum, should be auctioned off as a whole, and not in two phases i.e. 20+20 MHz in first phase and 15+15 Mhz in second phase, as suggested by DoT earlier. TRAI also added that auctioning off the entire block is vital as subscriber base, and wireless broadband subscriber has ‘tripled’ in the past two years.
“The Authority is of the view that holding back some of the spectrum in 700 MHz (i.e. 15+15 MHz) from this auction and selling it after a gap of certain period of time from now, would lead to non-utilization of this scarce natural resource for that period, though it has the potential to be reused and reallocated,” added TRAI
Conditions: Additionally, the regulator added that telcos acquiring the 700MHz band in the upcoming auctions must utilize the band across all towns/villages having population of 15,000 or more (but less than 50,000) within 5 years from the date of allocation. All villages having population of 10,000 or more (but less than 15,000) should be allotted with the 700MHz spectrum within 7 years from the date of allocation.
1800Mhz and 800MHz band harmonization
The regulator has also recommended DoT to carry out reassignment of the 800 MHz band before the upcoming auctions, so that the entire spectrum is available for commercial use. This would help the government to cut revenue losses arising due to unutilized spectrum. “It should also be ensured that the spectrum, which is getting released due to re-assignment of carriers, is in contigious blocks,” added TRAI.
The TRAI also mentioned that the DoT, in coordination with Defence and ISPs, should complete the harmonization process—uniform allocation of radio frequency bands across an entire region—in the 1800 MHz band before the upcoming auctions, in blocks of 5MHz.
Withdraw Aircel’s and Tata Communcation’s spectrum: The TRAI has further asked DoT to take back 1800MHz band won by Aircel in Haryana, Madhya Pradesh; the 800 MHz band won by Tata Communications in West Bengal and Punjab. TRAI added that the two telcos—Aircel and Tata—have not utilized the spectrum without any justification; therefore the spectrum could be taken back from them.
Spectrum Usage Charges
This month, the DoT had decided to reduce Spectrum Usage Charges for telcos to 3% from the previous 5% of the adjusted gross revenue made by telcos. The proposal was then sent to the Union Cabinet to approval. The TRAI has upheld these recommendations.
However, it is also worthy to note that telcos holding Broadband Wireless Access (BWA) spectrum will have to put in place “a system for independently monitoring and verifying the revenue earned from BWA spectrum to prevent revenue misrepresentation”. This mandated by the DoT during the 201 BWA spectrum auction.
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