The Editorial Analysis- Analysing Spectrum Auction

Analysing Spectrum Auction- Relevance for UPSC Exam

Auction of IMT/5G Spectrum: Cabinet approved Auction of IMT/5G Spectrum. 5G auction policy is important as it comes under Governance, Administration and Challenges- Government policies and interventions for development in various sectors and issues arising out of their design and implementation of UPSC Mains GS Paper 2.

Analysing Spectrum Auction in News

• Recently, the Union Cabinet has cleared a mega auction of radio spectrum in various bands for commercial mobile services.
• The auction of radio spectrum in various bands is based on the recommendation of the Telecom Regulatory Authority of India (TRAI).

About Radio Spectrum Auction

• Spectrum band to be Auctioned: The government is planning to auction spectrum-
  • In the sub-GHz bands of 600, 700, 800 and 900 MHz;
  • In the mid-bands of 1,800, 2,100, 2,300, 2,500 and 3,300 MHz, and
  • In the high-frequency band of 26 GHz.
• Spectrum Value: The total spectrum to be auctioned is about 72 GHz, compared to about 2.2 GHz put on the block last year.
• Expected Revenue Realization: The cumulative reserve price- and hence the potential revenue accrual to the government at reserve prices- is about ₹4,31,605 crore compared to about ₹3,90,000 crore last year.
  • However, the realised value in last year’s auction was just about 20% of the reserve price at ₹74,000 crore, with the 700 MHz and 2,500 MHz band not being sold.

India’s First 5G Testbed

Factors affecting the Success of Spectrum Auction

• Reserve Price: It significantly and positively correlates with the winning bid price, according to a study.
  • A higher reserve price inhibits bidders from bidding for more spectrum blocks, resulting in lower amounts of spectrum sold.
  • If the quantity effect is more than the price effect, it results in reduced revenues for the government exchequer, as it happened in 2021.
  • Though some of the bands are high-priced compared to other countries, the average price of the new bands such as 3.3 GHz and 26 GHz, at $0.02 and $0.0004, are in line with international prices on per MHz per pop basis.
  • However, the evolving heterogeneity within each of the 22 LSAs (licensed share access) makes it difficult for the bidders to ascertain the true value of the spectrum given the reserve prices.
• Willingness to Pay by the Telcos: It depends on their position vis-à-vis-
  • Over The Top providers who are providing substitute services such as Voice Over Internet Protocol; and
  • Capturing a greater mind share of customers while remaining relatively invisible to government regulators.
  • However, the erosion of the position of telcos vis-à-vis OTTs in the context of their relationship in the overall digital value network of devices, connectivity and apps could result in a lower willingness to pay.

What is 5G technology?

• About: 5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks.
  • It works in 3 bands, namely low, mid and high frequency spectrum — all of which have their own uses as well as limitations.
• Different 5G Bands and their Usage:
  • The maximum speed in the low band spectrum is 100mbps. So, while it can be used and installed for cell phone users who may not have specific demands for very high-speed internet, the low band spectrum may not be optimal for specialised needs of the industry.
  • The mid-band spectrum offers higher speeds compared to the low band. It, however, has limitations in terms of coverage area and penetration of signals.
  • The high-band spectrum offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength.

Conclusion

• The present spectrum auction is about 35 times more than last year, including the new bands in 600 MHz, 3.3 GHz and 26 GHz. It is expected that it will have substantial negative effects on spectrum prices.
• On the other hand, abolition of annual spectrum usage charges for all spectrum procured in this auction and the deferred payment option incentivises bidders to be active in the auction.

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