TRAI is asking whether spectrum auctions need to be held this year considering the fact that around 60% of the spectrum remained unsold last year, in a new consultation paper (pdf). Telcos had unanimously boycotted the 700 MHz and 900 MHz spectrum last year (meant for 4G LTE) stating that prices were set ‘too high’. The DoT had considered conducting a fresh auction this year, but TRAI says that the spectrum acquired by telcos in 2016 itself is yet to be deployed fully.
The regulator is also asking whether the entire spectrum needs to be put to auction in 2017 or should it be done in phased manner. “Should auction for some of the bands be held now and for other bands later based on the development of ecosystem etc.?” TRAI asked in the consultation paper.
Why TRAI is considering a phased auction process this year
TRAI is also concerned about the current industry scenario which is highly competitive with multiple consolidations taking place. “Some (telcos) have filed merger of their companies/licenses while a few licensees have traded their entire spectrum holding and closed their services,” it pointed out in the paper. The DoT is also yet to receive Rs 3.08 lakh crore in deferred payments from telcos, TRAI said. Operators were given an alternative payment structure stretching over 18 years to reduce the financial burden. The telecom industry also owes about Rs 4.60 lakh crore to various financial institutions and banks, TRAI added in its consultation paper.
Telcos, stakeholders had expressed concerns prior to 2016 auctions
The 2016 spectrum auctions concluded after 31 rounds and 5 days of bidding. The total worth of spectrum sold stood at Rs 65,789 crore. The government was initially targeting Rs 56,00,000 crore based on the reserve prices set by the TRAI in late January 2016. But only 965 MHz of the total 2,354.55 MHz of spectrum put out in 2016 was sold. Airtel, Telenor and GSMA, a worldwide body of mobile operators has red-signalled TRAI’s reserve prices which were set at Rs 11,845 crore for a single unit of the premium 700MHz band. This was four times more than that of the 1,800 MHz band’s discovered auction price in 2015.
Experts believe that the 700 MHz is crucial for the roll out of 4G LTE services because of enhanced cellular penetration capabilities.
Available spectrum bands for 2017 auctions
TRAI is considering auctioning off spectrum under 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, and the 2500 MHz, spectrum bands. This year will also see the addition of spectrum in the 3300-3400 MHz (meant for ISPs, now being opened for telcos) and 3400-3600 MHz (meant for defence and satellite use). More on this part below.
Overall availability for 2017 auctions:
3300-3400 MHz Band
Currently, in India, the 3300-3400 MHz bands are being used by multiple Internet Service Providers (ISPs) in various circles across the country. However, DoT suggested that the entire spectrum under 3300-3400 MHz band could be made available for telcos as well. But this will require “relocation/shifting of existing operations of the ISPs in 3300-3400 MHz band to other bands.”
DoT is also in the process of vacating more spectrum under this band, and plans to complete it by the end of this year. It has proposed to include a quantum of 100 MHz in all the 22 circles under the 3300-3400 MHz band for 2017 auctions.
3400-3600 MHz Band
The 3400-3600 MHz Band is generally used for research, defence and satellite communication purposes. Out of the quantum of 200 MHz spectrum available in this band, 25 MHz is being used by ISRO’s for its Indian Regional Navigation Satellite System (IRNSS). The remaining 175 MHz (3425 MHz – 3600 MHz) spectrum is available for this year’s auctions, TRAI added.
Questions for consultation
TRAI has issued a 19 point questionnaire with this consultation paper. Comments can be sent to firstname.lastname@example.org by 25th September 2017
- Q.1 (a) In your opinion when should the next access spectrum auction be held?
(b) If the spectrum auction is held now, should the entire spectrum be put to auction or should it be done in phased manner i.e. auction for some of the bands be held now and for other bands later based on development of eco system etc? Please give your response band wise and justify it.
- Q.2 Do you agree that in the upcoming auction, block sizes and minimum quantity for bidding in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands, be kept same as in the last auction? If not, what should be the band-wise block sizes? Please justify your response.
- Q.3 What should be optimal block sizes and minimum quantity for bidding in
(a) 3300-3400 MHz and
(b) 3400-3600 MHz bands, keeping in mind both the possibilities i.e. frequency arrangement could be FDD or TDD? Please justify your response.
- Q.4 Do you think that the roll-out conditions for 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz stipulated in the last auctions held in October 2016 are appropriate? If no, what changes should be made in the roll out obligations for these bands?
- Q.5 Should there be any rollout obligations in 3300-3400 MHz and 3400-3600 MHz bands? If yes, what should these be? Please justify your response.
- Q.6 Is there a need to prescribe spectrum cap in bands 3300-3400 MHz and 3400-3600 MHz? What spectrum cap provisions should be kept for 3300-3400 MHz and 3400-3600 MHz spectrum bands? Should these bands be treated as same or separate bands for the purpose of calculation of spectrum cap?
- Q.7 Whether the prices revealed of various spectrum bands in the October 2016 auction can be taken as the value of spectrum in the respective band for the forthcoming auction in the individual LSA? If yes, would it be appropriate to index it for the time gap since the auction held in October 2016. If indexation is to be done then at what rate?
- Q.8 If the answer to above question is negative then, whether as per the practice adopted by TRAI in the previous valuation exercise, the valuation for respective spectrum bands be estimated on the basis of various valuation approaches/methodologies (Referred in Annexure 3.3) including those bands (in a LSA) for which no bids were received or spectrum was not offered for auction?
- Q.9 Whether the value of 700 MHz spectrum should be derived by relating it to value of other bands by using technical efficiency factor? If yes, with which spectrum band this band be related and what efficiency factor or formula should be used? Please justify your views with supporting documents.
- Q.10 Else, what valuation approach should be adopted for the valuation of 700 MHz spectrum band? Please support your valuation approach with detailed methodology and related assumptions.
- Q.11 Whether the value of October 2016 auction determined prices be used as one possible valuation for 2300 MHz spectrum for the current valuation exercise? If yes, would it be appropriate to index it for the time gap since the auction held in October 2016? Please justify your response with supporting documents/ report(s), if any.
- Q.12 Whether the value of the 2300 MHz spectrum should be derived by relating it to the value of any other spectrum band by using technical efficiency factor? If yes, which band and what rate of efficiency factor should be used? If no, then which alternative method should be used for its valuation? Please justify your response with rationale and supporting documents.
- Q.13 Whether the valuation of the 2500 MHz spectrum should be equal to value of similarly placed spectrum band? If no, then which alternative method should be used for its valuation? Please justify your response with rationale and supporting documents /report(s)/ detailed methodology, if any.
- Q.14 Whether the valuation of the 3300-3400 MHz spectrum bands and 3400-3600 MHz spectrum bands should be derived from value of any other spectrum band by using technical efficiency factor? If yes, what rate of efficiency factor should be used? If no, then which alternative method should be used for its valuation? Please justify your response with rationale and supporting documents.
- Q.15 Is there any other valuation approach than discussed above or any international auction experience/ approach that could be used for arriving at the valuation of spectrum for 700/800/900/1800/2100/2300/2500/3300-3400/3400-3600 MHz bands? Please support your suggestions with detailed methodology and related assumptions.
- Q.16 Whether value arrived at by using any single valuation approach for particular spectrum band should be taken as the appropriate value of that band? If yes, please suggest which single approach/ method should be used. Please justify your response.
- Q.17 In case your response to Q16 is negative, will it be appropriate to take the average valuation (simple mean) of the valuations obtained through the different approaches attempted for valuation of a particular spectrum band, as adopted by the Authority since September 2013 recommendations? Please justify your response.
- Q.18 Is it appropriate to recommend Reserve price as 80% of the value? If not, then what should be the ratio adopted between the reserve price for the auction and the valuation of the spectrum in different spectrum bands and why?
- Q.19 Whether the realized / auction determined prices achieved in the October 2016 auction for various spectrum bands can be taken as the reserve price in respective spectrum bands for the forthcoming auction? If yes, would it be appropriate to index it for the time gap since the auction held in October 2016? If yes, then at which rate the indexation should be done?