Decks cleared for 5G auction; India may see services showcased on 15 August

Trai leaves it to DoT to decide on the validity of spectrum assignment, deferment of auction in 27.5 GHz - 28.5 GHz band and quantum of spectrum to be reserved for BSNL/MTNL

Don’t expect any cut throat competition and prices going through the roof for 5G spectrum. Prices are expected to settle near the base in most circles, though there could be more competition in Delhi and Mumbai.

On Monday night, the decks were cleared for the Department of Telecommunications (DoT) to auction the long-awaited 5G spectrum.

The Telecom Regulatory Authority of India’s (Trai’s) response to ‘back references’ made by the DoT on Monday gave the latter a free hand to decide on three crucial issues: The validity period of spectrum assignment, the deferment of auction in the 27.5 GHz -28.5 GHz band, and the quantum of spectrum to be reserved for BSNL/MTNL.

Sources say the DCC might meet on Thursday to endorse the 5G spectrum auction or refer it directly to the Cabinet for a go-ahead possibly by next week.

The DoT can begin the auction process in June and telcos say some limited roll out might be seen at the end of the year. Prime Minister Narendra Modi could well showcase 5G services on August 15. 

    

There is enough spectrum for everyone. Despite some of it being reserved for BSNL and MTNL. Operators are also constrained by the 40 per cent cap on the spectrum they can buy in the two 5G bands.  

Consider this: In the crucial band between 3,300-3,670 Mhz, the DoT has decided to reserve 40 Mhz for the state-owned companies. As a result, each operator can buy up to 130 Mhz, so even if Airtel and Reliance Jio hit that number, Vodafone Idea (Vi) will be left with 70 Mhz — enough to launch 5G services.

Globally, telcos have launched 5G services mostly with 100 Mhz of spectrum. And in Vi’s letter to the regulator, it requested that there should be an allocation of 80 Mhz of contiguous spectrum in this band.

In the millimetre band between 24.25 Ghz to 28.5 Ghz, the amount available for auction will shrink by 1.4 Ghz. That is because the DoT does not want to auction the 27.5-28.5 Ghz band in the coming round, a position endorsed by Trai. The DoT has also reserved 400 Mhz of spectrum in the millimetre band for state-owned telcos.

But even with the reduction, there is 2,850 Mhz of spectrum. With a 40 per cent cap, (even if Airtel and Reliance Jio want to buy up to their respective cap of 1,140 Mhz each), the third player will have 570 Mhz of spectrum.

But telcos say the top two operators will probably not go for more than 1,000 Mhz.

The key question is whether Vi will have enough financial heft to go for pan-India 5G spectrum.

The telcos might not have got the 90 per cent reduction in 3.5 GHz spectrum that they demanded, but the base price has been reduced by 36 per cent for a validity of 20 years, at Rs 317 crore for a pan-India 1 Mhz of spectrum.

According to estimates, the three telcos will also save Rs 4,200 crore from spectrum user charges annually that can be used for spectrum acquisition.

The DoT did an about-turn in its back reference, suggesting 20 years because the base price for 30 years would be 1.5 times higher. As a result, the base price for nationwide spectrum in the 3.5 Ghz band would become Rs 476 crore — hardly any reduction from the Rs 492 crore recommended by Trai in 2019.

Telcos said if the price were to be pegged so high again, it would discourage them from participating.

The DoT could recommend a base price reduction for back reference, but it was clear that Trai was not changing its method for fixing the base price.         

The DoT has also taken cognizance of the satellite industry demanding that the entire spectrum between 27.5 GHZ to 28.5 GHz be reserved for its broadband foray and preferably offered at an administrative price. The DoT has urged the auction to be put on hold.

On private captive networks, both the DoT and Trai have rejected the option of enterprises getting spectrum directly from the DoT to run their own networks in remote locations.  

   

Trai has suggested a demand assessment. But it has disagreed with the DoT’s back reference that enterprises should not been even allowed to lease spectrum for telcos and establish their own independent networks.

The reason is that telcos have told the government that the bulk of the business in 5G will come from enterprises, as it has globally. By allowing enterprises to run their own networks, this would seriously impact the viability of their 5G business.