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Friday, October 17, 2014

TRAI Recommends 2015-16 Auction Prices & asks Govt for a Roadmap

With an eye on telecom licenses expiry in India in December 2015, early 2016, the Telecom Regulatory Authority of India has emphasized to the Indian government the importance of putting together a roadmap for spectrum in India. Instances of telecom licensees not winning spectrum that they current have licenses for will mean that both telecom operator and millions of consumer experiences will get disrupted. Given this context, the TRAI has asked the government to ensure that spectrum is available before conducting the auction, especially since, in 900MHz, the only spectrum available is held by telecom operators whose licenses are expiring. 
In our opinion, the last government was plagued by the myopia of looking at auctions only as a means of reducing fiscal deficit, and not as a means of ensuring that more Indians have high quality of access to phone and Internet connectivity. There were instances where licenses were given but spectrum was still not allocated in some license service areas. The TRAI has asked the NDA government to look beyond auctions, and consider taking back spectrum from BSNL, limiting the spectrum available for Defence, simultaneous auctions (possibly to prevent landgrab, though telcos might not be able to afford simultanous auctions. The recommendations:

1. Need for a spectrum roadmap, not an auction plan: The TRAI has recommended that the government first make a roadmap and determine what to do with spectrum before auctions. It has said that a dialogue needs to be held at the highest level of the Finance Minister, the Minister of Comminications and IT and the Defence Minister to ensure the availability of additional spectrum for commercial use, and:

- Make a roadmap for 700MHz, 2100 MHz and 900 MHz: The Government should announce the roadmap for the entire auction of spectrum in the 700 MHz band, before the auction of 900/1800 MHz band spectrum, and a roadmap is ready for vacating spectrum in the 2100 MHz band from Defence and in 900 MHz band from BSNL.

- Fresh look at the E-GSM band: The DoT should take a completely fresh look at the implementation of the E-GSM band
- The entire 2×60 MHz in the 2100 MHz band should be made available for commercial use
- Auctions only after issues related to supply constraints are resolved

- Simultaneous auctions: “Auctions in the 800 MHz, 900 MHz, 1800 MHz and 2100 MHz band conducted simultaneously.” Can telecom operators afford simultaneous auctions?

- Contiguous spectrum: “All efforts should be made to make available spectrum in contiguous form. In its recommendtions, the Authority demonstrated how such contiguity can be achieved in 7 LSAs in the 900 MHz band. Nevertheless, the entire available spectrum should be put to auction.”

- Liberalisation of spectrum: “The Authority reiterates that the frequency rearrangement in the same band, from within the assignments made to the licensees, should be permitted amongst all licensees irrespective of whether the spectrum is liberalised or not. However the use of spectrum shall be liberalised only if the entire spectrum holding of a licensee in a particular band is liberalised.”

2. Take back spectrum:
- Idle spectrum from Defence, and where they have more than 20MHz in 1800 MHz: “Unused spectrum in the Defence band should not be kept idle. In the LSAs, where spectrum assigned to Defence in the 1800 MHz band is more than 20 MHz, DoT should coordinate with Defence for the vacation of spectrum held by Defence in excess of 20 MHz”
- Take back 1.2 MHz spectrum in 900 MHz from BSNL, except in Punjab: “1.2 MHz spectrum in 900 MHz band should be taken back from BSNL from all LSAs where licenses expire in 2015-16, except in Punjab. In lieu, BSNL should be assigned 1.2 MHz in the 1800 MHz band only in those LSAs where its spectrum holding in that band is less than 3.8 MHz in this band i.e. in Gujarat, Rajasthan and West Bengal.”

3. Auction specific recommendations: 
- Spectrum should be put to auction in a block size of 2×200 KHz in both the 900 and 1800 MHz bands
- In the 900 MHz band, the bidders should be required to bid for a minimum of 2×3.6 MHz in those LSAs where spectrum is being put to auction is 10 MHz or more, and 2×2.4 MHz in the remaining LSAs
- Fresh valuation of 1800 MHz spectrum for all LSAs is the preferred way to determine value and reserve price of 1800 MHz spectrum (and for 900 MHz spectrum also) for the forthcoming auction.
- The average expected valuation of 1800 MHz spectrum of each LSA should not be lower than the price realized in February 2014 auction in that LSA.
- The value of of 900 MHz spectrum in each LSA is subject to condition that the average expected value in LSA should not be more than twice the value of 1800 MHz spectrum in that LSA.
- Auctions should not be held in Maharashtra and West Bengal for 1800 MHz at this stage as spectrum is available in very few districts in these LSAs.
- The reserve price for 1800 MHz spectrum in Rajasthan LSA should be fixed at a discount of 30% on the reserve price calculated due to availability of partial spectrum (this was done in the February 2014 auctions)
- To accelerate the pace of investment, and to give a fillip to the penetration of telecom services, the reserve price for North East LSA has been fixed at a discount of 50% on the reserve price calculated.

4. Reserve Price:

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