Explained | Why are telcos upset with TRAI despite proposing to cut spectrum prices by 40%?


The story so far: The telecoms regulator of India (TRAI) this week published recommendations on the auctioning of spectrum, including those likely to be used to offer 5G services. The telecom regulator has proposed reducing the price of radio waves in different bands by 35-40% from the previously proposed base price. However, the Cellular Operators Association of India, whose membership includes three private telecoms companies Bharti Airtel, Reliance Jio and Vodafone Idea, expressed disappointment at the industry’s call for a 90% price cut.

What are the main recommendations?

The telecoms regulator has recommended that all available spectrum in the existing bands – 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz, 2500MHz – should be put up for auction, along with radio waves in new bands such as 600 MHz, 3300-3670MHz and 24.25-28.5GHz. In total, more than 1,00,000 MHz ether was recommended for auction. The full range offered at the minimum price is worth around ₹5 lakh crore for 20 years.

For the 3300-3670MHz band, which has emerged as the main spectrum for 5G and is likely to be used to deploy 5G in India, the all-India reserve price has increased by about 35.5% to £3.17bn/ MHz lowered ₹492 crore/MHz earlier recommended. Similarly, the reserve price for the 700MHz premium band, which had no bidders at the previous auction, was reduced by 40% from around £6,568bn/MHz to £3,927bn/MHz.

TRAI has set the reserve price for frequency bands based on a 20-year frequency holding period. The reserve price for extending the spectrum holding period to 30 years would be 1.5 times the recommended reserve price for 20 years.

It has also recommended several options for the deployment of Captive Wireless Private Networks (CWPNs), including private networks owned by telcos, independent isolated networks on a company’s premises that use telco spectrum, allowing companies to purchase spectrum from telcos or directly from the Department of Telecom (DoT) to build their own isolated private networks. TRAI also suggested companies could get the spectrum directly from the government and set up their own isolated CWPN.

Why was the price lowered?

Given the financial strains in the sector, the government wrote a letter to the regulator in November emphasizing the need to strike a balance between revenue generation and the sustainability of the telecoms sector so that telecoms providers are healthy and have sufficient capacity make regular and significant investments for the transition to 5G technology. It had also stressed that unused spectrum was a waste for the economy.

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Furthermore, at the last spectrum auction in March 2021, only 37.1% of the auctioned spectrum was purchased by the telecom operators, mainly due to the high prices.

“The input received from the agency during the consultation process also points to the need for further rationalization of the reserve price,” the regulator said in the more than 400-page recommendation.

In its recommendations, the regulator has claimed that “the assessment (and the fixing of minimum prices) is based on a proven techno-economic method. The assessment aims to identify spectrum prices that encourage buyers to acquire radio spectrum in different bands while ensuring that bidders are discouraged from collusive behavior.”

Why are Telekoms dissatisfied?

Telcos, through industry association COAI, have expressed disappointment with TRAI’s recommendations to auction 5G spectrum bands.

Explained | How Much Did the Government Earn in the 2021 Spectrum Auction?

In a sharply worded response, COAI called the recommendation a “step backwards” rather than a step towards building a digitally connected India.

COAI claimed that TRAI’s recommended spectrum pricing was too high, noting that throughout the consultation process, the industry had made extensive arguments for significant spectrum price reductions based on global research and benchmarks. “The industry has recommended a 90% lower price and it is therefore deeply disappointing to only see around 35 to 40% of the recommended price reduction,” it said.

It added that charging a 1.5x price for spectrum over 30 years would nullify the relief granted by the Union Cabinet in 2021. The rollout, TRAI has “detached itself from reality and runs counter to the government’s efforts to simplify doing business”.

Regarding allowing private corporate captive networks, COAI argued that TRAI is dramatically changing the dynamics of the industry and is hurting rather than improving the financial health of the industry. Private networks discouraged the telecom industry from investing in networks and continuing to pay high levies and taxes, she claimed.

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