The Telecom Regulatory Authority of India (Trai) has stuck to its stand on pricing for the next spectrum auctions, the first for 5G airwaves in the current year, as it believes that an auction is an open process and players other than existing licensees could also participate.

This is expected to be a setback for debt-laden telcos, which have been clamouring for lower spectrum prices.

The regulator made public its response to the government late on Monday evening after the Digital Communications Commission, the highest decision making body at the department of telecommunications, last month sought a comprehensive review of the regulator’s recommendations on upcoming spectrum auctions, including reserve prices.

The government’s call for Trai to review its suggestions came as it was worried that the demand for spectrum is likely to be subdued because of consolidation in the market as a result of which there are effectively three private telecom service providers.

The sector saw intense disruption after Jio’s entry in September 2016 which brought down data prices to rock bottom and made voice calls free. This forced other operators to match tariffs and many shut shop or were acquired by bigger players. Now, only Bharti Airtel and Vodafone Idea are left to compete with Jio.

The government had also urged the telecom regulator to review its suggestions so that entire spectrum put for auction is sold rather than having a large quantum of spectrum unsold.

Trai said that for the sale of spectrum in an auction, the bidders take into consideration various factors such as the company’s vision, network need, price, number of competing participants in the auction, foreign direct investment policy, and development of device ecosystem.

“The government’s own marketing efforts will also have an impact on participation in the auction. Therefore, no guarantee can be given about sale of all the spectrum put to auction," it said.

The government is also keen that social sectors get the benefit of 5G.

The regulator, however, said that it may not be correct to assume that only existing licensees will participate in the auction.

“The auction is an open process and there is always a possibility of additional players participating in the process," Trai told the government. Its suggestions include putting all the available spectrum on auction, the regulator said.

Given that the 700MHz band remained unsold in the last auction in 2016, Trai had in its recommendations in August last year already proposed fixing the base price for the 700MHz band at 6,568 crore per megahertz—43% below the 11,485 crore set in the 2016-17 auction. The high-value 700MHz spectrum is considered efficient for deploying 4G LTE networks and has greater structural penetration.

For airwaves in the 800MHz and 900MHz band, Trai suggested lowering prices by 21% and 51%, respectively.

The Cellular Operators Association of India (COAI) has said that it is disappointed that Trai has chosen not to reduce its recommended reserve prices.

“This puts in serious jeopardy the 5G aspirations of the government and the potential benefits to citizens. We hope the Digital Commission and Cabinet will review this Trai recommendation and make the right decision in the interest of the country," said Rajan Mathews, director general, COAI, said.

The government did not auction any spectrum in fiscals 2017-18 and 2018-19. In 2016-17, it had raised 65,789 crore through spectrum sale, a fraction of the 5.63 trillion worth of spectrum, at base price, it had put up for sale. While the total spectrum put up for sale was 2,354.44MHz across seven bands, the government managed to auction just 965MHz.

In August, Trai had said the 3,300-3,600MHz band, expected to be the primary band for 5G services, should be auctioned as a single band and in blocks of 20MHz each at 492 crore per megahertz. Bharti Airtel Ltd has said these prices are exorbitant and it would not participate in an auction held at these prices, while Vodafone Idea Ltd has suggested that the 5G auction take place in 2020. In South Korea, the same band was priced at roughly 131 crore per megahertz in auctions held in June last year.

The government is finalizing a road map to roll out 5G services, the next-generation technology for wireless communications expected to improve data speed and propel Internet of Things. It is expected to yield industry-altering changes.

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