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TRAI recommends a 50% increase in 800 MHz spectrum reserve prices

The Telecom Regulatory Authority of India has, for the third time, recommended to the government to charge a decent amount of price for the 800 MHz spectrum that it is about to sell to CDMA, or other, operators next month. It suggested a 50% increase in reserve prices for the 800 MHz spectrum compared to the base price charged in the auction conducted a year ago.trai-800-mhz-recommendations-price-spectrum

The new price of 2,685 crore per megahertz pan-India for 800 mHz is 11% costly even compared to reserve price of the costliest of all spectrum — the 900 MHz GSM band.

The authority relied on one core assumption for sticking to its guns that CDMA spectrum must be charged a premium — the possibility of launching high-speed 4G services across India at a low capital cost.

Compared to about 1 million towers required for a pan-India roll out of 4G LTE services on 2.3 GHz spectrum, the 800 MHz spectrum could give you pan-India coverage with just about 100,000 towers — or about one-tenth of the cost. Of course, in some places, like cities, the number of towers will have to be increased due to high traffic, but coverage will never be an issue with 800 MHz spectrum.

However, the government is widely expected to cut the TRAI suggested reserve price by as much as 50% in coming days. The auctions are expected to take place next month.

Reliance Communications, Tata Teleservices and Sistema Shyam Teleservices (MTS) had all urged the regulator to keep the reserve price in the 1,000-1,500 crore range, but to no avail.

TRAI dismissed their contention that the spectrum is all ‘broken up’ or discontinuous, thereby rendering it unsuitable for 4G services.

“The problem of non-availability of contiguous spectrum in 800 MHz band can easily be resolved by the Government by suitable re-assignment of frequencies among TSPs. In the light of these facts, it would be prudent to adopt the efficiency of sub-1 GHz band that is based on intrinsic technical efficiency factors without attenuating the value on the consideration of limited availability of carriers,” TRAI said, dismissing the arguments of RCom, Tata Tele and Sistema Shyam.

TRAI pointed out that except for the non-UIM (SIM) handsets and fixed wireless telephones, all other phones will automatically adapt to any frequency, making it easy to swap the frequencies of existing operators and make contiguous bits of spectrum available to them. RCom and Tata Tele had warned that it was nearly impossible to easily swap frequencies without disrupting their networks totally and inconveniencing their users.

“In most cases, it will require only retuning of the BTS RF filters, over the air reconfiguration of SIM based handsets and dongles, and manual reconfiguration of the FWT and older handsets. The dongles, which remain inactive during the over the air reconfiguration will also be required to reconfigured separately. However, the efforts and the expenditure required in the exercise is certainly not going to be significant. In contrast, the advantages accruing from such realignment will be very significant. Clearly, reconfiguration is both feasible, and relatively inexpensive. And, making available contiguous blocks in 5 MHz will unlock much greater value,” it said.

It said its prices were for continuous blocks of spectrum, and not for disjointed pieces, and suggested to the government that it should rearrange the allocations at the time of the auction to create continuous pieces.

“Only after the reconfiguration of frequencies and making available at least one chunk of contiguous 4 carriers (i.e. 5 MHz of contiguous spectrum) should the spectrum be put to auction and new entrants should be allowed to bid for at least 5 MHz of spectrum. Alternatively, the NIA for the auction may clearly stipulate that only contiguous blocks of 5 MHz will be sold,” TRAI said.

TRAI noted that Reliance Communications already has contiguous spectrum in nearly all its license areas and others too could launch advanced services like LTE with 800 MHz spectrum. 800 MHz spectrum will travel almost three times the distance of 2.3 GH spectrum — which Reliance Jio will use for its LTE services.

“This technical efficiency factor could lie anywhere between 1.5 times to 2 times. The higher intrinsic technical efficiency of the 800 MHz band is indisputable. Propagation characteristics of the 800 MHz band are far superior to those of the 1800 MHz band. The laws of physics cannot (and will not) change at will of those wishing to advance a self-serving cause,” it said.

“Since the 800 MHz band will also be a band for deployment of LTE, there is a strong case for valuation of 800 MHz spectrum on the basis of expected revenues from data services,” TRAI said, pointing out that most CDMA operators are even now using the frequency for high speed data services such as Reliance Netconnect, Tata Photon, MTS MBlaze etc..

“While CDMA accounts for only 5% share of total wireless revenue from non-data services, it accounts for almost 25% share of total wireless revenue from data services. For one of the CDMA operators in India (MTS), non-voice revenue as a percentage of total revenue has increased from 16.6% in 2010 to 36% in 2012 and data card subscribers increased by 75% between 2010 and 2012,” it said.

“A few GSM operators also commented on the issue of reconfiguration of frequencies in the 800 MHz band. According to these TSPs, this exercise would not have any impact on the continuity of services and require retuning of small number of filters, the cost of which is negligible. Moreover, such realignments of frequencies have been unilaterally undertaken by the DoT in the 1800 MHz band.

“The rather stark differences in opinion between different service providers reflect not merely a lack of interest in obtaining a fair and equitable regulatory valuation of the 800 MHz spectrum but also a deep-seated anxiety to deny any economic edge to a competitive rival,” TRAI said, commenting on the divergence of opinion between CDMA operators and GSM operators on valuation.

“The spectrum assignment should facilitate the adoption of not only EVDO, but other technologies such as HSPA, LTE, LTE-A etc. Fragmented and smaller chunks of spectrum will not only lead to reduced efficiency in the use of spectrum but also pose a hindrance to the adoption of latest technologies in line with international usage.

On availability of spectrum in the 800 MHz band, TRAI noted: “4 carriers in the 800 MHz band are likely to be available in all the LSAs except in Kolkata and Rajasthan. Out of these 22 LSAs, in 6 LSAs viz. Haryana, Himachal Pradesh, Orissa, Assam, North-East and Jammu and Kashmir, 8 or more carriers are available. However, only in 5 LSAs viz. Mumbai, Maharashtra, MP,Assam and North-East, are 4 contiguous carriers available at present. To make 4 carriers contiguous in the remaining LSAs, some realignment of the frequencies through reassignment to the existing TSPs will be required.”

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