TRAI sticks to 700 MHz spectrum price for July auction

Indian telecom regulator TRAI has maintained its recommendations on 700 MHz spectrum pricing for the upcoming auction as well as on the quantum that will be put on sale.

Telecom Regulatory Authority of India’s response came following the Telecom Commission’s query on the pricing and quantum of 700 MHz airwaves to be put for auction in July this year. It had recommended a reserve price of Rs 1,595 crore for 700 MHz in Delhi circle.

Telecoms operators such as Bharti Airtel, Idea Cellular, and others consider the price of the 700 Mhz band as too high.

The Department of Telecommunications (DoT) had raised doubts over the computation of the reserve price for 700 Mhz band, noting that in a few circles, it is priced lower than 900 MHz.

The regulator however noted that “the ‘bottom-up’ approach was used in 800 MHz, 900 MHz, 1800 MHz and 2100 MHz in view of availability of historical information or data and other spectrum bands (700/2300/2500 MHz) where historical information or data are not available, valuation and reserve price has been worked out on the basis of other spectrum bands’ reserve prices and outcome of the auctions held in the past”.

“However, in the case of 700 MHz band which is being auctioned for the first time, the authority did not have any historical data – financial as well as non-financial relating to this band. There is no denying the fact that technical propagation characteristic-wise 700 MHz is nearer to 800 and 900 MHz band than 1800 MHz band,” it added.

“Moreover, it is also a fact that as per international trends 700 MHz band will be primarily used for LTE technology and presently 1800 MHz is the most deployed band for LTE technology. Therefore, the authority has decided to benchmark the reserve price of 700 MHz with reference to 1800 MHz band and not 800 or 900 MHz band.”

“The authority (TRAI) therefore reiterates its recommendation on reserve price for 700 MHz band.”

It noted that even if it is assumed that greater revenue can be generated by auctioning a part of spectrum in 700 MHz band in future, “deferring the revenue receipts now may not be of economic prudence keeping in view the impact of telecom services on the other sectors and overall GDP growth”.

Spectrum being a scarce resource, auction of spectrum is primarily to solve the allocative problem in an open, transparent manner and “revenue maximization cannot be (and should not be) the only objective of auction where the government is an auctioneer”, it said, adding that the government has to a strike a balance between its fiscal targets and its responsibility to promote and encourage growth of the telecom sector.