Spectrum auctions: Trai could consider a new pricing model to set the reserve price for 5G auctions


The Telecommunications Regulatory Authority of India (Trai) is likely to seek new models to set the reserve price for 5G auctions scheduled to take place next year. The telecommunications industry is hoping that with large swaths of spectrum unsold in the last two auctions and the government’s recent commitment to reform, reserve prices would be set at realistic levels this time around. Over 60% of the spectrum auctioned in 2016 and March 2021 remained unsold.

The need for a realistic reserve price, in line with industry sentiment, is seen as essential because in a three-player market, spectrum is typically sold at base price. If the price does not meet industry expectations, the spectrum could remain unsold.

In addition, there is hope to deviate from the current reserve pricing methodology where the last auction price becomes the base price. This stems from the fact that Trai plans to meet with all telecom operators, as well as equipment suppliers, to get the industry perspective before launching a formal consultation process.

Bharti Airtel Chairman Sunil Mittal recently spoke about the need to explore other spectrum pricing models. “Spectrum should be priced appropriately for India. If you go back to the 2010 3G and BWA auctions, that was the starting point of the problem. The price went from 5 to 6 to 7 times compared to the reserve price which became the bane of this industry because there were 6 to 7 players for three slot machines. Now, whatever reserve price you put in, the spectrum will mostly go to that price because there aren’t a lot of competitors, ”Mittal said.

The telecommunications department has already sent a reference to the regulator asking for a new reserve price for 5G spectrum in the 3300-3600 MHz band, as well as the premium 700 MHz 4G band (which supports 5G services). In addition, the DoT has added around 70 MHz of spectrum in the middle band, such as 24.25 GHz to 28.5 GHz, which also supports 5G services.

Trai was also asked to suggest the new base price for unsold spectrum in previous auctions, held earlier this year, in bands such as 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz. Although Trai submitted the reserve price for 5G spectrum in the 3300-3600 MHz band in 2018, the auction for this band did not take place in March. The DoT estimates that by the time the next auctions take place, four years have passed, a price revision is therefore necessary.

As for the 700 MHz band, there was no taker in the last two auctions due to the high base price. This time, neither the regulator nor the government want to be hampered by the spectrum remaining unsold.

“Pricing needs to be rethought for 5G, as previous price recommendations were made in 2018 and the auction will take place in 2022. There have already been many developments in recent years regarding 5G,” said said a ministry official. The government has also included more bands for 5G, for which price recommendations are required, the person added.

In 2018, Trai recommended a reserve price of Rs 492 crore per MHz for the 3300-3600 MHz band. The price meant that for a pan-Indian minimum block of 20 MHz, operators would have to shell out Rs 9,840 crore, which was considered steep. As telecom operators need around 100 MHz to offer pan-Indian 5G services, this price means they would have to shell out Rs 49,200 crore.

Likewise for the 700 MHz band, although Trai reduced the reserve price by 43% in auctions that took place earlier this year than he recommended for the 2016 auctions, still at 6,568 crore per MHz, for a pan-India 5 MHz block, operators would have had to shell out Rs 32,840 crore. Consequently, everything remained unsold.


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