DoT committee to determine ‘economic value’ of spectrum

DoT committee to determine ‘economic value’ of spectrum

India’s department of telecommunications, or DoT, has constituted a new committee to ascertain economic value of radio spectrum for offering current and new generation of mobile services, as the government prepares to auction around 30MHz early next year for so-called third generation or 3G services and allocate about 20MHz to providers offering mobile phone services today after the country’s defence forces vacate frequency bands they are using.

The committee, which is expected to submit its report by this week, is headed by Manju Madhavan, member finance at DoT, and includes several other representatives from the wireless planning committee or WPC of the department. “The committee is looking at (the) mode for auctioning the 3G spectrum, minimum bid price, and lease period for the 2.1 GHz 3G spectrum apart from other related issues," said an individual associated with the telecom industry and familiar with the development, who did not wish to be identified. Calls to Madhavan’s office for comment were not returned on Tuesday.

On 12 November, the government said only three telecom operators will initially be allowed to offer 3G services, which enable fast transfer of data and applications that require such data speeds such as Internet surfing on the move. “The country may eventually permit five," D.S. Mathur, secretary at DoT, had then added. Apart from their bids, firms that win 3G licences will have to pay “additional spectrum charge of 0.5% of revenues to be shared as the recurring annual spectrum charge starting three years from the date of spectrum assignment," DoT had then said in a statement.

“We are looking at how 3G auctions happened in Hong Kong and the UK very closely," a senior DoT official who did not wish to be identified said. “We could lease spectrum anywhere from 10 to 15 or even 20 years, depending upon the final analysis (done by the committee)."

The committee is also looking at reserve prices or minimum bid price for the 3G auction. In its recommendations, the Telecom Regulatory Authority of India, or Trai, had said Rs80 crore each could be set as reserve price for those bidding to offer 3G services in Delhi and Mumbai, and Rs40 crore each for Kolkata and Chennai. In 2000, the UK earned around £22.5 billion by auctioning five 3G licences for 20 years.

While regulatory experts such as Mahesh Uppal say auctions are the best way to determine true economic value of spectrum, Trai views so-called ‘administrative incentive pricing’ or AIP as a credible proxy. “In AIP, we look at the capital expenditure required to set up telecom towers and additional infrastructure to support subscribers if additional spectrum is not allocated," said a senior Trai official who did not wish to be identified.

Experts also want DoT to delink telecom licence from radio spectrum. “A pure telecom licence without spectrum could be priced around Rs200-300 crore instead of almost Rs1,650 crore being paid currently," the Trai official added.