Explained | Why are telecom companies upset with TRAI despite its proposal to cut spectrum prices by 40%?

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The story so far: The Telecommunications Regulatory Authority of India (TRAI) this week issued recommendations on the auctioning of spectrum, including that which could be used to offer 5G services. The telecommunications regulator has suggested reducing airwave prices on different bands by 35-40% from its previously proposed base price. However, the Cellular Operators Association of India, whose members include the three private telecom operators, Bharti Airtel, Reliance Jio and Vodafone Idea, expressed disappointment, given the industry’s demand for a 90% reduction in price.

What are the main recommendations?

The telecommunications regulator has recommended that all available spectrum in existing bands – 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz, 2500MHz – be auctioned, along with airwaves in new bands such as 600 MHz, 3300-3670 MHz and 24.25-28.5 GHz. In total, over 100,000 MHz of airwaves have been recommended for auction. The total spectrum offered at the reserve price is valued at around ₹5 lakh crore for 20 years.

For the 3300-3670 MHz band, which has become the main spectrum for 5G and is likely to be used to deploy 5G in India, the reserve price for all of India has been lowered by around 35.5% at ₹317 crore/MHz, from ₹492 crore/MHz recommended earlier. Similarly, the reserve price of the premium 700 MHz band, which saw no takers in the previous auction, was reduced by 40% to ₹3,927 crore/MHz from around ₹6,568 crore/MHz .

The TRAI determined the reserve price for the spectrum bands based on a spectrum holding period of 20 years. The reserve price for increasing the spectrum holding period to 30 years would be 1.5 times the recommended reserve price for 20 years.

He also recommended several options for the adoption of Captive Wireless Private Networks (CWPNs), including private networks through telcos, an independent isolated network at a company’s premises using the telcos’ spectrum, allowing the company to lease spectrum from telecommunications operators or directly from the Department of Telecom (DoT) to establish their own isolated captive private networks. TRAI also suggested that companies could obtain spectrum directly from the government and establish their own isolated CWPN.

Why has the price been reduced?

Given the financial strains in the sector, the government wrote to the regulator in November stressing the need to strike a balance between revenue generation and the sustainability of the telecommunications sector so that telecommunications service providers are in good health. health with sufficient capacity to make regular and substantial investments to switch to 5G technology. He had also pointed out that unused spectrum was a waste for the economy.

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Furthermore, in the last spectrum auction, held in March 2021, only 37.1% of the auctioned spectrum was acquired by telecom service providers, largely due to high prices.

“Inputs received by the Authority during the consultation process also point to the need to further streamline the reserve price,” the regulator said in the more than 400-page recommendation.

In its recommendations, the regulator affirmed that “the valuation exercise (and the setting of the reserve prices) is based on a proven technical and economic methodology. The valuation aims to obtain spectrum prices that encourage buyers to procure radio frequencies in different bands, while ensuring that bidders are discouraged from collusive behavior.

Why are telecom operators unhappy?

Telecom service providers have, through industry body COAI, expressed disappointment with TRAI’s recommendations to auction 5G spectrum bands.

Explained | How much did the government make from the 2021 spectrum auction?

In a strongly worded reaction, COAI called the recommendation a “step backwards” rather than forward towards building a digitally connected India.

The COAI argued that the spectrum pricing recommended by the TRAI was too high and noted that throughout the consultation process the industry had made numerous arguments based on global research and benchmarks, in favor of a significant reduction in spectrum prices. “The industry has recommended a 90% lower price, and to see only about a 35-40% recommended reduction in prices is therefore deeply disappointing,” he said.

He added that charging a 1.5x price for spectrum for a 30-year period will negate the relief provided by the Union cabinet in 2021. The industry body pointed out that in introducing mandatory deployment obligations for 5G networks without considering the huge cost of such deployment, TRAI has “disconnected from reality and runs counter to government efforts to improve the ease of doing business” .

By allowing private captive networks for businesses, the COAI argued that the TRAI significantly changed the dynamics of the industry and harmed the financial health of the industry instead of improving it. Private networks discourage the telecommunications industry from investing in networks and continuing to pay high levies and taxes, he argued.

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