(Photo: Mint)
(Photo: Mint)

What to expect from the 5G spectrum auction this year

  • DoT has asked the Trai to consider auctioning more spectrum for 5G services than originally suggested, according to a media report
  • Mint explores DoT’s suggestions, as India prepares to join the ultra high-speed mobile broadband race

The Department of Telecommunications (DoT) has asked the Telecom Regulatory Authority of India (Trai) to consider auctioning more spectrum for 5G services than originally suggested, besides setting a higher base price for some bands, according to a media report. Mint explores DoT’s suggestions, as India prepares to join the ultra high-speed mobile broadband race.

1.Why is DoT seeking an increase in the price and quantity of spectrum?

DoT has recommended that Trai set a higher base price for the sale of spectrum in bands that can be used for 5G services, besides exploring an increase in the quantum of airwaves on offer for private firms to bid for, Business Standard reported. DoT’s request comes as M&As in the sector have freed up some spectrum. In some cases, DoT had initially given the spectrum bundled with licences, but their 20-year period has now expired. That spectrum is now up for grabs. A higher price will yield the government more revenues at a time when it is short of sources to raise money.

2.Why is the suggestion significant?

DoT’s suggestion can be a positive as well as a negative move. That there is more spectrum on offer is a welcome development as it gives room for more firms in the market. The world, led by China, is moving towards 5G and India can’t be left behind. Limited availability of spectrum can turn away potential bidders and artificially jack up prices of the coveted frequency. But so can a higher base price. Previous auctions have shown that no matter how attractive the prospects for a relatively high-margin service like 5G, firms are willing to return empty-handed if the base price is too high. Unsold spectrum helps none

3.Why does the government want a higher base price?

The government needs money to run its welfare schemes that help the poor, but has few sources to generate cash. More than a billion mobile phone users provide a large base and, thus, the sector is one of the most taxed—the services attract 18% goods and services tax. The government expects companies to submit higher bids for spectrum as it is their lifeline, but telecom operators will ultimately pass on the higher cost of spectrum to consumers. Some argue that mobile services are cheap in India and consumers can afford to pay a little more.

4.How will 5G help?

Superfast video streaming and downloads will be the starting point. 5G will enable machine-to-machine communication and Internet of Things. Power suppliers won’t have to send their executives to read your meter; they will be able to read it from a remote location. You will be able to regulate your washing machine from your mobile phone several kilometres away. This ecosystem needs 5G services.

5.Are companies ready?

The Indian market has three private firms and one state-owned company in a circle. Bharat Sanchar Nigam and Vodafone Idea are loss-making entities. Bharti Airtel made losses in four of the last five quarters. Only Jio is making consistent profits. All are sitting on large debts. Barring Jio, none wants an auction this year. Also, the government may want to consider where the equipment will come from: Huawei, the Chinese firm banned by the US, is one of the few making such equipment.

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