TRAI spectrum auction consultation paper to set off another round of fighting

The TRAI’s latest consultation paper on the pricing and conduct of yet another spectrum auction has re-started the tussle between big GSM operators who hold high-propagation spectra and others who hold ‘lower quality’ spectrum.

However, according to the numbers given in the telecom regulator’s consultation paper, operators would be practically rolling in spectrum by the time the new auctions are completed.

The consultation looks primarily at two questions – how to get incumbent big operators, such as Vodafone and Airtel, to pay up, or vacate, ‘high quality’ 900 MHz spectrum, and how to arrive at a new reserve price for the auction that won’t result in huge amounts of unsold radiowaves.

A new auction has been necessitated by the government’s earlier decision to be ‘stingy’ with the quantity of spectrum it up for auction last year.

While the Supreme Court had directed that all 414 MHz of spectrum vacated by its quashing of licenses be put to auction, the government had made available just 295 MHz. Of course, it is a different matter that the high reserve price ensured that out of this, only 127.5 MHz – or less than half – was actually sold in the auction.

A large part of the reason for going ‘stingy’ with the sale was the need to migrate voice services from a lucrative, high-propagation band to this band. To ensure that this process would be carried out smoothly, it was necessary to ensure that there was surplus spectrum in the ‘low quality’ (1800 MHz) band that was put up for auction.

The TRAI wants the high-quality 900 MHz band to be used for data services such as 3G and LTE once voice services of incumbents like Airtel and Vodafone are moved out of these bands. This is expected to start from 2015 onwards as their 20-year licenses lapse. It was expected that these operators could be asked to move, or pay up very high prices to continue in the lucrative 900 MHz plan.

However, Vodafone threw a spanner in the works by challenging the government’s decision to put up only a part of the ‘low quality’ spectrum for auction.

On 15th February, 2013 Hon‟ble Supreme Court of India, issued the following direction – “The entire spectrum released as a result of quashing of the licences on 2.2.2012 should be auctioned without further delay”.

The current consultation paper is trying to walk the tightrope between meeting the long-term requirements of high-speed services and complying with the Supreme Court’s decision.

To ensure compliance with the Court’s decision, the government plans to put up 285 MHz of spectrum in the upper GSM band (1800). Most circles will have about 15 MHz of spectrum available. In other words, the new spectrum could easily accomodate 3 new operators in each circle, or allow existing operators to expand their services vastly.

“What method should be adopted for refarming of the 900 MHz band so that the TSPs whose licences are expiring in 2014 onwards get adequate spectrum in 900/1800 MHz band for continuity of services provided by them,” TRAI asked in its latest paper.

In addition, the TRAI also noted that another high quality band, 800 MHz or CDMA spectrum, was being underutilized. It noted that government operators such as BSNL and MTNL have allocated spectrum here, and some of the spectrum in the hand can be re-absorbed and re-allocated to high-speed data services as well.

“Should India adopt E-GSM band (800 MHz) in view of the diminishing interest in the CDMA services?” TRAI asked.

While opening up the discussion on setting of a new reserve price, TRAI pointed out that putting the reserve price lower than in the earlier round could be seen as unfair to those who bought spectrum in the last auction by shelling out the higher reserve price.

As such, it asked: “Should the valuation of spectrum and fixing of reserve price in the current exercise be restricted to the unsold circles in the 1800 MHz band, or should it apply to all circles?”