5G auction: Reliance Jio joins industry chorus for low spectrum pricing

With the 5G spectrum auction nearing, Reliance Jio has joined the incumbent telecom operators to demand lower reserve prices, and that more quantum of airwaves be made available to them.

Telcos feel that before fixing spectrum prices, one needs to consider its revenue potential. Customer revenues, they say, have remained stagnant despite more data being on offer at affordable prices. 

Speaking at the 5G India 2019 conference, VL Shankar, senior vice-president, Reliance Jio Infocomm, said the price points of the licensing of 5G spectrum had to be brought down. "We need large bandwidths of 5G (spectrum) and at attractive prices," he said. "The requirement is that in the sub-700 MHz band, at least 20 MHz spectrum needs to be available, around 100 MHz in the mid band of 3.3-3.6 GHz band, and around 1 GHz in the higher band of 24.25-29.5 GHz." 

In the 3.3-3.6 GHz band, the first 100 MHz (3.3-3.4 MHz) is being used by defence. If this band is made available for the industry, it would bring 100 MHz to the table, apart from the 175 MHz already available in the 3.425-3.6 GHz band. 

Shankar said India could look at the 3.6-3.7 GHz band, even though that was not in the consideration by the government as of now to make more spectrum available. 

Jio pointed out that smaller towns and cities had high data usage compared to big cities, and per capita data consumption was the highest in smaller towns. There is pent-up demand for data in rural areas. 

5G is not going to be a linear technology like 2G, but application driven and, hence, will need more spectrum, according to telcos.  Speaking on the sidelines of the event, Anshu Prakash, additional secretary to the telecom department, said industry feedback would be taken into account before conducting the auction.

"5G network will not come without investments. So, how telcos navigate is important. The government is not the repository of all wisdom and it is important for us to listen to ideas from stakeholders. If we work hard, we won't miss the 5G bus," Prakash said. 

Incumbent telcos like Bharti Airtel and Vodafone Idea, too, batted for more spectrum availability. Ravi Gandhi, chief regulatory officer at Bharti Airtel, said that in the 3.3-3.6 GHz band, at least 275-300 MHz spectrum should be made available for industry. "Gone are the days when 5-10 MHz was a big achievement in this space. The quantum of spectrum that is required would be more both in upper bands and the sub-1 GHz band. One at least needs around 100 MHz of spectrum," Gandhi said. 

Vodafone Idea, the country's largest telco by subscriber market share, said the government had to be an enabler for 5G infrastructure and subsidise it. Rajesh Singh, executive vice-president, technology, Vodafone Idea, pointed out that from the current level of 20-30 per cent fiberisation (of sites), the roll-out of 5G demanded that all sites be fiberised. 

The industry also sought changes at the policy level to reduce their financial burden. Gandhi, for example, said the spectrum usage charge (SUC) should ideally be zero or flat for all operators. The SUC has been continuing since old days when spectrum was allocated administratively. Now, in the regime when all the spectrum is sold upfront with upfront payment, the SUC has become irrelevant, Gandhi added. 

The policy on sharing of spectrum, too, can be liberalised, industry representatives said. When two operators share spectrum, the SUC rises. Sharing of network is going to be critical for the 5G roll-out, they said. 

In the 4.4 MHz band of 2G, the average revenue per user (ARPU) was higher than what it is today. "Even as operators have 30-40 MHz spectrum in each circle, ARPUs have gone down while spectrum charges have gone up," Gandhi said. 

Other industry experts felt that the telecom regulator needed to look at ground-up valuations when deciding spectrum prices. Telecom sector expert Parag Kar, who is also vice-president, government affairs, India and South Asia at Qualcomm, said, "We have seen spectrum prices rising quite consistently. Trai took the valuation of 2015 auctions as reference prices and multiplied it by 1.15 to get the current valuations. The ground-up valuation on average is much lower than the reserve price that Trai has come up with by 20-30 per cent. So the realistic valuation is quite low. Auction pricing has to be quite dynamic with different players and market scenario taken into consideration." 

Earlier this month, the telecom department asked Trai to review its recommendations on the upcoming spectrum auctions, including reserve prices. This has been done to ensure competition during the spectrum auctions as well as to avoid having unsold spectrum, as in the previous auctions when only 40 per cent of the spectrum on offer was sold. 

At Trai's recommended reserve price of Rs 490 crore/MHz, operators will have to pay around $7 billion for 100 MHz spectrum, nearly four times that of Korea, CLSA noted recently.