DoT puts the upcoming auction on the fast track, releases the guidelines for the auction

The Department of Telecommunications (DoT) has put the upcoming auction on the fast track. It has published the ?Guidelines for The Auction and Allocation of Spectrum in the 1800 MHZ, 900 MHz and the 800 MHZ bands?. 

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As per the guidelines, the objectives of the auction are to obtain a market determined price of spectrum through a transparent process; ensure efficient use of spectrum and avoid hoarding; encourage competition in the sector; promote the rollout of telecom services and maximise revenue proceeds from the auction within the set parameters.

As per DoT, any licensee holding a cellular mobile technology services or a universal access service provider license or meets the criteria specified to obtain such a license is eligible to participate in the auction. Moreover, any company that applies for a unified license which adhere to DoT?s guidelines and license conditions before launching services can participate in the auction.

With regard to the spectrum cap, DoT has said that the overall spectrum cap in each circle is 25 per cent of spectrum allotted and put for auction in all the bands. Band-wise, the spectrum cap for each operator in the 1800 MHz band is 50 per cent of spectrum allotted and put for auction in this band. The spectrum cap for each operator in the 900 MHz band is 50 per cent of spectrum allotted and put for auction in the band. The spectrum won in this auction will be valid for 20 years.

With regard to the auction process, DoT has stipulated that an e-auction will be conducted simultaneously in multiple rounds. Broadly, the bidding shall be held circle-wise simultaneously for the 1800 MHz and the 900 MHz bands; the auction for 800 MHz spectrum will be conducted separately for 21 circles and the reserve price for the auction shall be set for each circle for each spectrum band.

For auctioning spectrum in the 1800 MHZ band, DoT has said that the size of the block to be auctioned is 1.25 MHZ (paired) and the auction will be carried out for the Delhi, Mumbai, Karnataka and Rajasthan circles. 15 MHz of spectrum will be auctioned in each circle and 12 spectrum blocks will be auctioned in Delhi and Mumbai, while 8 blocks will be auctioned in Karnataka and Rajasthan. The reserve price for per block of spectrum in the Delhi circle has been pegged at Rs 4.85 billion, Rs 4.74 billion in Mumbai, Rs 2.31 billion in Karnataka and Rs 469.6 million in Rajasthan.

Besides, in the Karnataka and Rajasthan circles, in addition to the 8 spectrum blocks being auctioned, a provision has been made for spectrum up to three blocks each of 1.25MHz (total 3.75 MHz) for topping up the eight blocks of spectrum put up for auction. This amounts to 11 blocks each of 1.25MHz, totaling to 13.75MHz, to meet the requirements of new entrants in case such a situation arises.

In Rajasthan, spectrum is not available in 11 districts namely Bikaner, Barmer, Bharatpur, Dausa, Ganganagar, Hanumangarh, Jodhpur, Jaipur, Jaisalmer, Jalore and Sirohi. While bids will be sought for spectrum in the entire licensed service area, the bid amount will be collected only for the spectrum available and the balance collected as and when spectrum is made available in each district, the amount being pro-rated to the population of that district(s) (as of census of 2011) and the balance period (of the 20 years).

For auctioning spectrum in the 900 MHz band, DoT has said that the spectrum block size will be 1.25 MHz (paired) and the auction will be conducted for the Delhi, Kolkata and Mumbai circles. 15 MHz of spectrum each will be auctioned in the Delhi and Mumbai circles, while 12.5 MHZ will be auctioned in Kolkata. 12 spectrum blocks are being auctioned in Delhi and Mumbai, while 10 blocks are being auctioned in Kolkata. The reserve price of spectrum in Delhi has been pegged at Rs 9.70 billion, Rs 9.49 billion in Mumbai and Rs 2.27 billion in Kolkata.

For spectrum in the 800 MHz band, the block size is 1.25 MHz (paired) and the auction will be held in 21 circles, except Rajasthan. 2.50 MHz of spectrum is being auctioned in Andhra Pradesh and Punjab (2 spectrum blocks), while 3.75 MHZ is being auctioned in the rest of the circles (3 spectrum blocks).

The reserve price differs in each circle. For example, it is Rs 1.86 billion in Andhra Pradesh, Rs 56.4 million in Assam, Rs 276.3 million in Bihar and Rs 4.50 billion in Delhi.

Also, in addition to the three blocks of 3.75MHz spectrum being auctioned, DoT has made the provision of auctioning spectrum up to one additional block of 1.25 MHz for topping up the three blocks of spectrum on auction. However, the top-up spectrum block is not available in the Delhi, Kolkata, Maharashtra and Mumbai circles.

In the Andhra Pradesh and Punjab circles, two spectrum blocks of 2.50MHz will be put up for auction and no top-up blocks are available.

The guidelines stipulate that a spectrum usage charge, in addition to the spectrum auction price as a percentage of the adjusted gross revenue (AGR) shall be payable by the successful bidder as per the rates notified by the government from time to time. Spectrum usage charges shall be payable as per the slabs or rates notified by the government from time to time.

Currently, GSM operators are charged 3 per cent of the AGR for spectrum up to 4.4 MHz, 4 per cent for spectrum up to 6.2 MHz, 5 per cent for spectrum up to 8.2 MHz, 6 per cent for up to 10.2 MHZ, 7 per cent for up to 12.2 MHZ and 8 per cent for up to 15.2 MHZ of spectrum.

For CDMA operators, 3 per cent of AGR is charged for up to 5 MHz of spectrum, 4 per cent for up to 6.25 MHz, 5 per cent for up to 7.5 MHz, 6 per cent for up to 10 MHz, 7 per cent for up to 12.5 MHZ and 8 per cent for up to 15 MHZ of spectrum.

While calculating annual spectrum charges, DoT has said that the applicable AGR ought to be calculated in accordance with the provisions of the relevant service licence; annual spectrum charges shall be applicable from the date of award of right to use allotted spectrum and there shall be a minimum AGR which shall not be less than 5 per cent of the bid amount. The calculation of spectrum usage charges shall be on the basis of minimum AGR or the actual AGR, whichever is higher. Also, the spectrum being allocated via this auction will be added for determining the slab for spectrum usage charges.

Mergers and acquisitions, with respect to intra-circle licence merger, have to be carried out as per the guidelines issued by DoT. With regard to spectrum backhaul, DoT has stated that the allotment of spectrum for individual point-to-point fixed links, i.e. microwave backhaul spectrum, would be subject to separate application and the allotment of the same is not linked to the compliance of rollout obligations. The allotment of backhaul spectrum is subject to existing processes, terms and conditions, and applicable charges. The government shall make available spectrum for these purposes under the terms and conditions specified by the WPC Wing, subject to availability. Separate charges as prescribed from time to time, are payable for backhaul spectrum.

With regard to technology, DoT has said that there will be no restrictions on the technology used for providing services within the scope of the service license using spectrum blocks allotted through this auction. Moreover, the successful bidder is to provide details of the technology proposed to be deployed for operation of its services using spectrum blocks allotted through this auction within one month of obtaining the licence, if the technology happens to be other than GSM/ CDMA/ WCDMA.

In case of change of technology, while rolling out networks for compliance with rollout obligations, the licencee is required to furnish information regarding the new technology at least one year before any new technology base station site is offered for testing.

For spectrum sharing, operators whose entire spectrum holding in a particular band is/ has been liberalised would be permitted to share spectrum without any additional one time spectrum charge.