Lack Of 5G Spectrum For Commercial Use May Push Up Auction Prices

India’s defence and space departments have laid claim to a large chunk of the fifth-generation (5G) airwaves, two people familiar with the matter said, casting a shadow over this year’s auctions that telcos say are too costly to bid for.

The two departments have together sought 125MHz out of the 300MHz marked for 5G services, said the people cited above on the condition of anonymity, shrinking the spectrum available for commercial use and potentially driving up auction prices.

In India, the only band identified for 5G spectrum is under the 3.3-3.6GHz band, which has 300MHz of airwaves available. Of this, the defence department has sought 100MHz to boost coastal security while the Isro wants 25MHz for satellite-based navigation services, the people cited above said. The requests, if granted by the government, leaves just 175MHz for telecom services.

The Cellular Operators Association of India (COAI), an industry body, said without adequate spectrum at reasonable prices, the auction will fail to garner industry interest.

“After Isro and defence…just 175MHz will be left for telcos…maybe out of this, the government might also want to reserve some airwaves for BSNL as it wants to keep the PSU competitive. There are clearly constraints now in this band…the government has to decide what it really wants to do. Without adequate amount of spectrum at reasonable prices, it (auction) is a non-event,” said Rajan Mathews, director general of COAI.

The department of telecommunications (DoT) did not respond to an emailed query.

COAI has earlier criticized the Telecom Regulatory Authority of India (Trai) for setting high reserve prices for the airwaves at a time when revenue streams of the debt-laden industry have thinned.

Reliance Jio Infocomm Ltd’s entry in September 2016 brought down data tariffs to rock-bottom, forcing the incumbents to match prices, which led to several companies to either shut operations or be acquired by bigger telcos. Trai had last year suggested auctioning airwaves in the 3.3-3.6GHz band at ₹492 crore per MHz, sparking an outcry from telcos who have termed it prohibitively expensive. DoT is yet to decide on these recommendations.

“Earlier, we thought only pricing was an issue, now, even the amount of spectrum is an issue,” Mathews said.

On top of this, Trai has also suggested that an operator can buy up to 100MHz of 5G airwaves. So, if the highest bidder ends up buying all that it is allowed to buy, that leaves only 75MHz for the rest. Also, this leaves the risk of not having any 5G spectrum left for the third bidder.

In India’s ultra-competitive telecom sector, it makes strategic sense for the highest bidder to purchase as much spectrum it is permitted to reduce competition. Jio is the only profitable telco in India.

“There is a huge challenge ahead for DoT and Trai as they will have to again decide on the spectrum cap per operator now that the available spectrum on offer is lower,” said a senior telco executive, requesting anonymity.

To be sure, Trai had suggested a 5G spectrum holding cap of 100MHz per operator keeping in mind the available spectrum was 275MHz, much before the defence department made its request.

“Auctioning insufficient spectrum will only further burden the already debt-laden industry with higher costs as it creates artificial scarcity, driving up prices. It’s unfair to hold an auction with less spectrum. The government must instead seize its unique opportunity to incentivize deployment of 5G by lowering the cost burden on the industry,” said Mahesh Uppal, director at communications consulting firm ComFirst India.―Livemint