Trai tells department not create artificial scarcity and declines to revise reserve price for Feb auction
Prahlad Rao | January 16, 2015 | New Delhi
This fight is good and in the consumers interest. Two arms of the government are engaged in a war of words over radio waves or spectrum for your mobile services. The outcome of the fight over the reserve price and availability of more spectrum for next month’s auction would determine call rates for consumers and the cost of acquisition for the telecom firms.
The Telecom Regulatory Authority of India (Trai) on Thursday sent a well drafted letter to the telecom department, which had raised queries on the reserve price for spectrum. The Trai has said that there would be no change in its earlier base price for 2,100 Mhz spectrum in the 3G band.
The Trai had on December 31 recommended a reserve price of Rs 2,720 crore per megahertz for 2100 band of 3G airwaves.In a 37-page reply, the regulator has criticised the department of telecommunications (DoT) for being fixated on the 2010 auction determined prices and making that as a sole benchmark for fixing the current reserve price. The department had questioned the methodology for arriving at base rate of Rs.2,720 crore per megahertz for these airwaves, which is about 19% lower compared to the price paid by service providers in the 2010 auction.
According to the Trai, the 2010 auctions were conducted in a scenario where spectrum was scarce and that taking such price into consideration was not proper.
Staying on that scarce spectrum point, the Trai has exposed further streams of anti-consumer approach of the telecom department. The DoT has taken a decision to auction only 5 MHz of 2,100-MHz spectrum in February.
Trai has insisted that enough spectrum in 2,100 MHz should be made available for the February auction as otherwise it will “artificially increase” the market price in the band.
“The whole purpose of clubbing 2,100-MHz band spectrum with other bands for auction in February will be defeated if sufficient spectrum is not made available. Spreading the auction of 2,100-MHz spectrum over two rounds — first in February and the second in December, after the defence services vacate airwaves — would squeeze supply in the February auction, and artificially increase market price,” the regulator said in its clarifications/reconsideration of recommendations on ‘valuation and reserve price of spectrum: 2,100-MHz band'.
The 15 MHz of 2,100-MHz airwaves being vacated by the defence services should also be auctioned, in view of the in-principle agreement reached with the defence ministry, Trai said.
It has also recommended that no bidder should be permitted to bid for more than two blocks in 2,100-MHz band in a service area where three-four blocks were available.
The regulator said it was DoT’s responsibility to either ensure the spectrum being auctioned was interference-free, or share information upfront about the areas where interference was likely, so that telecom service providers could take informed decisions while participating in the auction.
The union cabinet had on January 5 decided to put only 5 MHz of 3G spectrum in the 2100 MHz band in 17 of the 22 telecom circles, along with 2G bands (800, 900 and 1,800 MHz) for the upcoming auctions. The 15 MHz of spectrum that the defence ministry had agreed to swap with the telecom ministry in the 2100 MHz frequency band is to be auctioned later, the cabinet had decided.
The inter-ministerial panel Telecom Commission is likely to discuss the revised recommendations in its meeting scheduled for January 19 after which the cabinet will take a final call on 3G pricing.
It remains to be seen whether the government will take the consumer interest into consideration or wants to increase its revenue by artificially hiking spectrum prices.
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