The Telecom Regulatory Authority of India (TRAI) has issued a consultation paper on the “valuation and reserve price of spectrum” in seven bands: 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz. This is being done for the next auction round, which is likely to take place in the current financial year. Through the consultation paper, TRAI has sought stakeholder comments on aspects like the quantum of spectrum to be auctioned, spectrum block sizes, spectrum caps, roll-out obligations and the methods to be used for evaluating and estimating the reserve price of spectrum.
Spectrum availability
According to the Department of Telecommunications (DoT), of the 2×45 MHz of spectrum available in the 700 MHz band, 2×35 MHz can be assigned for commercial use in each of the 22 circles. In the 800 MHz band, the government holds 76.25 MHz of spectrum, which comprises 22.5 MHz that remained unsold during the March 2015 auction, 22.5 MHz that will become available between May 2016 and March 2018 owing to the expiry of licences given to operators in 1997-98, and another 31.25 MHz that is available with DoT. However, DoT has proposed that due to the non-availability of the interoperator guard band or the government’s own requirement, 37.5 MHz of the available spectrum will be put up for sale in the upcoming auction.
To this end, TRAI has invited stakeholder opinion on:
- Whether the entire spectrum available with DoT in the 800 MHz band can be put up for auction.
- How the spectrum in the 800 MHz band, which is not proposed to be auctioned due to the non-availability of the inter-operator guard band, can be utilised.
Block sizes
It has been suggested that 700 MHz spectrum be made available in a block size of 5 MHz. In all other bands, the same block size can be maintained as in previous auctions. TRAI is now trying to determine the following:
- The block size in the 700 MHz band.
- Requirements for changing the provisions of the latest notice inviting applications (NIAs) with respect to the block size and minimum quantum of spectrum that new entrants, existing licensees and holders of expiring licences are required to bid for in the 800 MHz, 900 MHz, 1800 MHz and 2100 MHz bands.
- The block size in the 2300 MHz and 2500 MHz bands.
Spectrum caps
As per the provisions mentioned in the NIAs of recent auctions, the overall spectrum cap for each service area has been calculated to be 50 per cent of the total spectrum assigned for telecom services in a particular band, and 25 per cent of the total spectrum assigned for telecom services in the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands put together.
Since spectrum in the 700 MHz band has not been auctioned previously, the above provision regarding spectrum caps needs to be decided. One alternative is to extend previous NIA provisions to this band. As 2×35 MHz is available in all circles and spectrum is auctioned in a block size of 2×5 MHz, the 50 per cent spectrum limit in a band can allow a single bidder to acquire up to 2×15 MHz. In such a scenario, a minimum of three operators will get spectrum in this band. Meanwhile, if the cap is kept at 10 MHz, at least four operators will be able to acquire spectrum in this band. Instead of putting a separate cap on 700 MHz band spectrum, clubbing all sub-1 GHz spectrum bands – 700 MHz, 800 MHz and 900 MHz – and imposing a limit on the spectrum an operator can acquire in these bands could be an alternative approach. Keeping this in mind, TRAI has invited suggestions regarding:
- The need to modify spectrum cap provisions within a band, considering the fact that one more sub-1 GHz band (700 MHz band) is being put up for auction.
- The need to specify a separate spectrum cap exclusively for the 700 MHz band.
- Whether a cap on the spectrum holding within all bands in sub-1 GHz frequencies should be specified, and in such a case, whether the existing provision of a band-specific cap (50 per cent of the total spectrum assigned in a band) should be removed.
- Whether 2300 MHz and 2500 MHz should be treated as the same band for the purpose of imposing the intra-band spectrum cap.
Roll-out obligations
In India, the roll-out obligations of mobile operators have largely focused on urban areas. Therefore, there is an urgent need to take regulatory measures to enhance mobile network penetration in rural areas. Keeping this in mind, stakeholders have been requested to suggest:
- An appropriate coverage obligation for successful bidders in the 700 MHz band.
- Whether these obligations need to be imposed on some specific spectrum blocks (as was done in Sweden and the UK) or uniformly on all blocks.
- Whether villages/rural areas should be covered before urban areas as part of the 700 MHz band roll-out obligations.
- In the March 2015 auction, specific roll-out obligations had been imposed on successful bidders in the 800 MHz, 900 MHz, 1800 MHz and 2100 MHz bands. How can the roll-out obligations be modified to enhance mobile coverage in villages? Should there be any roll-out obligations for service providers already offering services in these bands?
- In the 2010 auction, specific roll-out obligations were mandated for successful bidders in the 2300 MHz band. They were also applicable to licensees in the 2500 MHz band. Should the 2010 roll-out obligations for broadband wireless access spectrum be retained for the upcoming auction in the 2300 MHz and 2500 MHz bands? Should these bands be treated as one for the purpose of roll-out obligations? In case service providers who are already offering services in the 2300 MHz band acquire an additional block of spectrum in the 2300 MHz or 2500 MHz band, should additional roll-out obligations be imposed on them?
Spectrum valuation
The exercise of valuing and setting the reserve price of a spectrum band depends on cost availability, revenue and other information pertaining to that band. Since no previous information, financial or non-financial, is available for the 700 MHz, 2300 MHz and 2500 MHz bands, the following issues are open for consultation:
- Can the prices discovered in the March 2015 auction for the 800 MHz, 900 MHz, 1800 MHz and 2100 MHz bands be considered the value of spectrum in the respective bands for the forthcoming auction in individual circles? If yes, would it be appropriate to index it for the time gap between the auction held in March 2015 and the upcoming auction, and what rate should be adopted for indexation? If no, should the valuation for the respective bands be estimated on the basis of various valuation approaches/ methodologies adopted by the authority in its 2013 recommendations, including those bands (in a circle) for which no bids were received or where spectrum was not offered for auction?
- Should the value of spectrum in the 700 MHz band be derived on the basis of the value of spectrum in the 1800 MHz band using the technical efficiency factor? If yes, what rate of efficiency factor should be used?
- Should the valuation of 700 MHz spectrum be done on the basis of other sub-GHz spectrum bands (800 MHz/900 MHz)? If yes, what rate of efficiency factor should be used? In the absence of financial or non-financial information on 700 MHz, no cost- or revenue-based valuation approach is possible. Therefore, another method or approach is required for valuing the 700 MHz spectrum band, along with detailed methodologies and related assumptions.
- Should the prices determined in the May 2010 auction be used as a possible valuation of 2300 MHz spectrum for the next auction round?
- Should the value of 2300 MHz spectrum be derived on the basis of the value of any other spectrum band using the technical efficiency factor?
- Should the valuation of 2500 MHz spectrum be equal to that of 2300 MHz?
- Can any other method/approach or international auction experience be utilised for the evaluation of any of these bands?
