The Telecom Regulatory Authority of India (Trai) on Tuesday hinted that the methodology of valuation of spectrum and thereafter fixing the reserve price for auctions may be revised from what has been followed so far.
Further, components like upfront payment to be made by the operators for spectrum acquired in auctions, the moratorium period, the number of installments for deferred payment, and spectrum cap may also be reviewed. Areas like block size, spectrum surrender and spectrum assignment for private networks may also be analysed in a fresh perspective.
Trai has flagged all these issues on Tuesday in its consultation paper, which is aimed at fixing the reserve price of spectrum spread across 10 bands, including 600 MHz and the millimetre band for 5G services. In the process, the quantum of spectrum which may be put up for auctions next year would be the largest so far and if the reserve price is not fixed realistically, the government runs the risk of once again finding no takers for a large amount of airwaves, which was the case in the auctions held in March this year and earlier in 2016.
Stakeholders are required to submit their responses on various issues by December 28 and the deadline for counter-comments is January 11.
On valuation and pricing, Trai has quoted DoT’s communication, which reads, “There is a need to strike balance between revenue generation from the auction on one hand, long-term growth/sustainability of the telecom sector, introduction of new services/technologies, on the other. In the recently-concluded spectrum auction 2021, only 37.1% of spectrum put up for auction was acquired by the telecom service providers.”
The communication further states, “The government has recently approved for an option of four-year moratorium on spectrum auction instalments as well as AGR instalments for TSPs, to ensure healthy cash flow situation in the sector. Further, spectrum lying idle is a waste for the economy.”
The regulator has sought the views of the stakeholders on why large quantum of spectrum remained unsold in the previous auctions. It has also asked whether the reserve price should continue to be at 80% of the valuation or should be changed. Though finally reducing the reserve price would be a challenge for the Trai as well as the government, but the industry feels that by raising such questions and trying to analyse them with stakeholders’ inputs means that the exercise would be meaningful and yield desired results.
Mentioning the recent government’s revival package for the telecom sector which included rationalisation of bank guarantees, increase in duration of spectrum allocation to 30 years from the current 20, provision for surrender of spectrum, no spectrum usage charges for spectrum acquired in future auctions, and removal of additional spectrum usage charge of 0.5% for spectrum sharing, Trai has sought to know from the stakeholders how would these measures impact the pricing of spectrum.
Trai has asked what percentage of bid amount should be fixed as upfront payment in each spectrum band, what should be the applicable period of moratorium for deferred payment option, and how many instalments should be fixed to recover the deferred payment. In the March 2021 auction, telecom operators had to make an upfront payment amounting to 25% of the bid amount for sub-1GHz bands and 50% for above 1GHz bands. The deferred payments have to be made over a period of 18 years (2 year moratorium plus 16 annual installments) with interest rate of 7.3%.
Since 5G would herald the era of private networks, the Trai has asked whether the licensing framework needs to be changed when bandwidth is used for purposes other than providing direct services to consumers. “They can be used by industries to automate manufacturing lines, to reduce security risks, to protect employees from dangerous environments, monitoring and control of assets etc,” Trai has said. Some of the questions which have been raised include whether operators should be allowed to lease spectrum for such purposes and what should be the caps, blocks of airwaves leased, SUC and other regulatory obligations.
The regulator has also asked whether the current spectrum caps should be changed. For instance, no operator can currently hold more than 50% of sub-1 GHz spectrum in a circle. It has also asked how should surrender of spectrum by operators be given shape.