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Inconsistent principles result in high spectrum price recommendations by TRAI, says ICRIER BIF joint study

May 27, 2019
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The spectrum price recommended by the Telecom Regulatory Authority of India (TRAI) is high due to inconsistency in the principle applied for calculating base rates, claims a joint study by ICRIER and Broadband India Forum (BIF).

As per the study, TRAI has been placing immense value on the bid price of previous auctions, which does not always consider changing market conditions or operator situation even if the gap between two successive auctions is insignificant. It has also been using index pricing formula to decide the spectrum price based on bank interest rates. Further, the indexed value does not consider the supply of spectrum in previous auctions, the number and status of bidders and fragmentation of spectrum accessible, the study claimed.

The over-reliance on reserve prices may not necessarily yield successful market outcomes. Therefore, the government should instead hold combinatorial clock auctions in which spectrum is packed along with supplementary rules that may suit the industry based on their business scenario, the study said.

In conclusion, the study suggests that spectrum auctions in India should aim to strike a balance between transparency in distribution and revenue potential for the government also noting that high reserve prices could result in counterproductive results thereby reducing government revenue and affecting sector growth.

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