Defence ministry agrees to concurrent auction of 2G & 3G bands
After informing the department of telecommunications (DoT) of its willingness to swap 15 MHz of 3G spectrum in the 2100 MHz band with an equal amount of spectrum in the 1900 MHz, the defence ministry has communicated the same to the Telecom Regulatory Authority of India (Trai). FE had reported on December 4 about the breakthrough between the two which would lead to a big-bang auction of spectrum in the 900, 1800 and 2100 MHz frequencies in February.
With the defence ministry also writing to the Trai, sources expect there would be no hiccups in holding a simultaneous auction for each of the 2G and 3G bands, which is what Trai and mobile operators also wanted.
The defence ministry’s letter to the Trai, which was reviewed by FE, has said, “Defence has agreed in principle to vacate and release 15 MHz (1939-1954 MHz of spectrum) in 2100 MHz band in lieu of swapping or the same amount of commercial EVDO spectrum, (i.e. 1900-1907.5 MHz and 1980-1987.5 MHz)”.
The letter is in response to the consultation paper floated earlier this month by the regulator to determine the reserve price for the 3G spectrum so that simultaneous auctions could take place.
The Trai had quoted DoT’s reference letter, which stated that 3G spectrum may not be released by the defence ministry. In this case, no spectrum may be available in the 2100 MHz band in the time line for the forthcoming auction, and the same will not be included in the notice-inviting applications.
Rebutting such a possibility, the defence ministry’s letter has stated that “such a scenario may not arise as it has agreed to the swap proposal of 15 MHz spectrum and has conveyed the same to the DoT on December 8”.
However, the defence ministry’s letter to the Trai has also clarified that while it has agreed to the swap proposal, the other block of 5 MHz spectrum in 2100 MHz band, which it is supposed to release in 17 licensed service areas, would only be done once the DoT completes an alternative optic fibre network for it as per the memorandum of understanding (MoU) signed between the two on May 22, 2009. “It is once again reiterated that the release of balance 5 MHz spectrum by the defence ministry is linked to the completion of triggers by the ministry of communications and IT as per the MoU signed on May 22, 2009,” the letter has stated.
With the defence ministry categorically writing to the regulator as well as the DoT on its acceptance to release 15 MHz of spectrum in 3G band and the DoT circulating a Cabinet note for a formal move, telcos can breathe easy as there would be enough spectrum preventing the bids from running very high.
For consumers the good news is that tariffs would be in check. Had the bids been high, operators would have needed to pass on costs to the subscribers.
Had the swap not been agreed to, the auction bids would have spiralled in the critical 900 MHz frequency. In this band, there is 184 MHz of spectrum up for auction across 18 circles, and the telcos need to retain this to continue their services. In this scenario, it requires just one new telecom operator to bid prices at a very high level. If, however, there is 15 MHz of pan-India 2100 MHz spectrum available · this translates to 270 MHz spectrum in the 18 circles where auctions will be held · the auction bids will not spiral out of control.
Trai, which has been asked for a recommendation on pricing of 2100 MHz, is likely to complete the exercise by the end of the month. The Cabinet’s approval could come in about two to three weeks.