The Telecom Regulatory Authority of India (TRAI) has released a consultation paper on the valuation and reserve price of spectrum for the third round of auctions.
In the consultation paper, the regulator has focused on a likely roadmap for the introduction of spectrum re-farming. TRAI has sought the views of service providers on how this can be achieved, in order that existing players can continue providing services to customers. It is also of the opinion that spectrum re-farming offers an opportunity to incumbent players, who were earlier asked to surrender spectrum in the 900 MHz band by the Department of Telecommunications (DoT). According to DoT, if the incumbent players want to continue providing services in the 900 MHz band, they would have to participate in the auction.
The consultation paper also examines the possibility of lowering the base price for spectrum. In the paper, TRAI has stated that using the 3G spectrum price as the base price to calculate the value of spectrum in another frequency band did not make for an ideal proposition. TRAI notes, ?The 3G spectrum sold in the auction of 2010 was seen as catering to the provision of data services such as video services and other data packet services. This was significantly different from the voice-dominated services provided on 900, 1800 or 800 MHz spectrum. 3G services have a different eco-system, growth profile and even subscriber base, as compared to 2G services. From this point of view, even assuming similar market environment in 2012-13 as compared to 2010, the 900 MHz, 1800 MHz or 800 MHz spectrum could not, prima facie, have had a relative value in 2012-13, similar to the 3G spectrum band.?
TRAI has also raised the issue of too many players in the market and the possibility of imposing restrictions on the eligibility of companies who can bid in the auction. ?Presently, there are 6-10 operators in each service area. However, because of a large number of operators in each license service area, there is cut-throat competition, which has adversely affected the financial health of operators and the industry,? it said.
However, the paper has not dealt with the issue of availability of contiguous spectrum in the 1800 MHz band. Discontinuous spectrum will be of less value compared to contiguous spectrum. According to DoT, spectrum in a number of areas is not continuous. TRAI has also not discussed the possibility of swapping 2100 MHz band with the defence forces for providing additional spectrum to service providers for 3G services.
However, the consultation paper has focused on two other important issues – spectrum trading and using 800 MHz band for offering GSM services.
At present, spectrum in the 800 MHz is allocated to CDMA players but TRAI states that operators are increasingly moving away from this technology and therefore the spectrum could be offered to GSM operators. TRAI has suggested that Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited should be asked to vacate spectrum in this band.
According to TRAI, the move to allow spectrum trading would pave way for optimal efficiency in the usage of spectrum. The suggestions and recommendations made in the consultation paper would be discussed with various stakeholders in the telecom industry, following which TRAI will issue its final recommendations.
To download the complete consultation paper, click here
