Broadband India Forum (BIF) has urged the government to look for a different methodology for the spectrum pricing and auction.
The development assumes significance because India government could not sell 60 percent of the spectrum during the spectrum auction in October 2016 due to poor demand from mobile operators.
Indian mobile operators have an average spectrum holding of 31 MHz in 2017 as compared to the global average of 50 MHz. This indicates that telecoms such as Bharti Airtel, BSNL, Vodafone Idea and Reliance Jio are keen to enhance their spectrum – if available at the right price.
India could not conduct 5G spectrum auction in 2018 because most of the telecom operators were not keen to participate during the spectrum auction due to high prices for the new frequencies.
“A combination of over-pricing and delays in releasing spectrum led to inflated valuations which have a long-term impact on investments in the sector,” TV Ramachandran, president of Broadband India Forum, said.
Broadband India Forum said – quoting a report prepared by ICRIER — the reported reserve prices in the 1800 MHz band finds that the estimates using the multiple-regression method is significantly higher than the other methods for many service areas.
TRAI Methodology of calculating reserve price does not rely much on fresh valuation of spectrum. In 18 out of 22 circles, the reserve price of spectrum is based on last auction price duly indexed.
As per the DoT norms, the price can be based on last auction if it has happened within a frame of 1 year. Hence, the price should not be referenced to the last auction. The reserve prices are way higher than international norms, Broadband India Forum said.
The ICRIER report said that Marginal Cost of Funds based Lending Rate (MCLR) is not ideal for the purpose of indexing. While a telecom price index is not available for India, the consumer price index (CPI) could be used as proxy.
Alternatively, TRAI could consider studying price effects in the telecom sector. Ofcom, UK extensively researches on pricing trends for communication services using data on consumer preferences, usage levels, contract lengths, promotional prices, etc.
Since 2010, the Department of Telecommunication has almost uniquely applied the auction-based method for spectrum allocation. Over the six auctions held during the period 2010 to 2016, the government has auctioned only sub-sets of the total frequencies and the average reserve price in every subsequent auction has witnessed an upward revision.
The auction design is crucial. India follows a Simultaneous Multi-Round Ascending Auction (SMRA) which, while providing the option of price discovery, also poses an aggregation risk. Combinatorial Clock Auctions (CCA), are a popular alternative as they avoid aggregation risks and are more efficient.
New trends are emerging in the allocation of 5G spectrum. FCC (Federal Communication Commission) conducted an incentive auction in order to free up more spectrum for 5G in the US.
Under this format existing rights holders in those bands can choose either to relinquish their rights in exchange for a share of the auction revenue or alternatively receive modified licences after the auction.