Digital Communications Commission decides to give spectrum for 20 years in upcoming auction

Digital Communications Commission decides to give spectrum for 20 years in upcoming auction

17 May    Finance News

Telecom operators will get spectrum for 20 years in the upcoming 5G auction as the Digital Communications Commission (DCC) on Tuesday approved this option on the suggestion by an internal committee appointed by it. The development assumes significance as the government had, in September last year, announced that henceforth spectrum after auctions would be given for 30-year period.

The approval from DCC came after Telecom Regulatory Authority of India (Trai) in its reference back left it to the government to decide the tenure of spectrum lease – 20 years or 30 years. A standing committee of department of telecommunications (DoT) had proposed that an option should be given to telecom firms to buy spectrum for 20 years as getting the airwaves for 30 years was turning out to be expensive. The Trai had recommended that the reserve price for a 30-year period would be 1.5 times of the 20-year period.

Apart from the tenure, DCC, at its meeting on Tuesday, also approved the reserve price as suggested by Trai. The DoT will now send the proposals to Cabinet, which is meeting on Wednesday. The Cabinet may take a call if any further reduction in reserve price is required or not.

According to sources, during the last meeting of DCC, Niti Aayog has highlighted that price for 5G spectrum should not be seen from the perspective of revenue maximisation but through the option of public good like its utility in healthcare, education etc. However, DCC felt that Trai has already reduced the 5G prices by 36% and since the spectrum will be given for 20 years, the cut was enough.

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The commission had not differed with Trai on the reserve price though operators had raised concerns regarding it being high. The telecom operators had demanded a 90-95% cut in the reserve price and feel that despite the cut, the prices remain on the higher side.

For perspective, with a 36% cut in reserve price of 5G spectrum in the 3,300-3,670 MHz band at Rs 317 per Mhz, operators can buy 100 Mhz for Rs 31,700 crore as against the 2018 price of Rs 49,200 crore for 20 years.

Once the Cabinet approves the matter, DoT will immediately get down to working on the notice inviting application (NIA) and its release by May 25. This document is crucial as it lays down all the formal guidelines relating to the auction process. Once the NIA is finalised and released, it usually takes 54 days for the auction to begin.

Communications minister Ashwini Vaishnaw said on Tuesday that the auction is on schedule and the government expects good participation from companies. The auction is expected to be over in a couple of days as there are only 2-3 operators in the fray and most of spectrum is likely to be sold at reserve price.
After the sale process ends, DoT will try to allocate frequencies to the telecom operators at the earliest, so that commercial roll out happens soon after. The DoT is aiming for the August 15 launch of commercial 5G services as desired by the Prime Minister’s Office (PMO).

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