Trai Stands by Proposal to Auction All 700MHz Band Spectrum

Sectoral regulator Trai on Monday reiterated that the entire spectrum available in 700MHz band should be auctioned in the upcoming sale as non-utilisation would result into irreversible loss to the government.

Trai also reiterated its stand on the methodology used for the pricing of 700MHz band, for which it had proposed a base price that is four times of 1800MHz band.

Trai had recommended a record high base price of Rs. 11,485 crores per megahertz for the 700MHz band, which will be auctioned for the first time. Spectrum in the band is considered more economical for providing telephony services compared with other bands like 900MHz or 1800MHz.

The Department of Telecom (DoT) had asked Trai if auction be split in two phases as there may not be enough demand due to higher quantity of airwaves and also telcos rolling out networks using spectrum bought in 2014 and 2015.

Leading operators have also requested the regulator and the government to defer sale of 700MHz spectrum, saying that the ecosystem for providing services in this band was not developed and sale would lead to underutilisation of the spectrum for several years and block industry's crucial funds.

However, Telecom Regulatory Authority of India (Trai) said DoT's presumption that the demand for the spectrum may be less in the forthcoming auction may not be entirely correct as subscriber base has widened and traffic has increased manifold particularly data traffic.

Trai said it is of the view that "holding back some of the spectrum in 700MHz from this auction and selling it after a gap of certain period of time from now, would lead to non-utilisation of this scarce natural resource for that period and it would turn into irreversible loss to the government." It further said even if it is assumed that greater revenue can be generated by auctioning a part of spectrum in 700MHz band in future, "deferring the revenue receipts now may not be of economic prudence keeping in view the impact of telecom services on the other sectors and overall GDP growth."

"The authority reiterates its earlier recommendation that entire available spectrum (2x35MHz) in the 700MHz band should be put to auction in the upcoming auction," Trai said.

The regulator had submitted recommendations for base price for spectrum in seven bands, including 700MHz band and DoT is looking to commence the sale around mid-July, which may fetch the government a whopping Rs. 5,36,000 crores.

Of the Rs. 5,36,000 crores windfall, 700MHz spectrum could alone contribute over Rs. 4,00,000 crores if all frequencies are sold at pan-India base price.

Regarding the methodology used by it to arrive at the base price for 700MHz band, Trai said as the band is auctioned for the first time and there is no historical data, it has priced it four times that of 1800MHz band as both are primarily used for LTE services.

The DoT has found out that in UP (East), UP (West) and Bihar, price of 700MHz is less than 900MHz band whereas in MP, the price is lower than 800MHz.

"As it has not benchmarked reserve price of 700MHz band with reference to either 800 or 900MHz, therefore the contention of DoT that in some licence service areas the recommended reserve price is lower than the reserve price of either 800 or 900MHz band is not relevant," Trai said.

The cost of delivering mobile services in 700MHz band is approximately 70 percent lower than 2100MHz band, which is widely used for 3G services.

Trai also said harmonisation exercise should be expedited and additional spectrum that comes out of it should be put to auction.

On the issue of spectrum usage charge (SUC) also, Trai said it has no further comments to offer as DoT has already conveyed its decision on the subject. DoT has said SUC of 3 percent would be charged for spectrum acquired in upcoming sale whereas weighted average will apply in case of combination of spectrum already held by the operators.

Trai also reiterated its proposals related to block size, roll-out obligations, and liberalisation of spectrum.