Spectrum auction policy of India

Spectrum Auction Policy of India

Government policies and interventions is a part of UPSC Paper II and Paper III and Telecom sector is a highly important topic for UPSC Mains 2021. Hence, Spectrum Auction Policy is important to read for IAS Examination.

What is a Spectrum?

Energy travels in the form of waves known as electromagnetic waves.

These waves differ from each other in terms of frequencies. This whole range of frequencies is called the spectrum. In telecommunication like TV, radio and GPRS, radio waves of different wavelengths are used.

They are divided into bands based on frequencies (see ‘Radio spectrum’ image).

Mobile phones use two technologies based on different parts of the radio spectrum— GSM (global system for mobile communications) and CDMA (code division multiple access). Most of the radio spectrum is reserved in countries for defence. The rest is available for public use.

But following an increase in the number of phone users and new services, countries started auctioning the frequencies to telecom companies.

What is a Spectrum auction?

A spectrum auction is a process whereby a government uses an auction system to sell the rights (licences) to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources.

Spectrum auctions makes use of natural resources for revenue raising and ensuring economic development.

Why is the Spectrum auctioned?

Spectrum auctions are a step toward market-based spectrum management and privatization of public airwaves, and are a way for governments to allocate scarce resources.

How is the spectrum allocation done in India?

Every telecom operator has been assigned certain portions of spectrum to use in India, through auctions and administrative allocations. Essentially, you have spectrum "bands", and frequencies around a particular band are then auctioned off. ... The telcos have to separate the two to manage the spectrum effectively.

What is the Spectrum Allocation Policy, 2016?

The new DoT policy, which came into effect on March 31, has allocated a maximum of 15 mhz to gsm operators, such as Airtel and Hutch, and 7.5 mhz to CDMA players, such as Reliance Infocomm and Tata Teleservices. Earlier, the maximum limits were 8 mhz for GSM and 5 mhz for CDMA. Official estimates say Delhi will require an additional 28 mhz to sustain current telecom growth. Though the policy recommends a 2:1 ratio allocation to GSM and CDMA operators, it withdrew the existing condition that CDMA operators were to add more users than GSM operators if they wanted extra spectrum. The new policy mandates equal subscriber base for more bandwidth.

What is the news?

Based on the recommendation of the Telecom Regulatory Authority of India (TRAI), the government is planning to auction spectrum in the sub GHz bands of 700, 800 and 900 MHz along with mid-band frequencies in bands of 1800, 2100, 2300, and 2500 MHz across the 22 Licensed Service Areas (LSAs) of the country.

Spectrum will be offered for assignment for validity period of 20 years.

The cumulative reserve price — and hence the potential revenue accrual to the government at reserve prices — is about $50 billion.

In addition to the bid amount, successful bidders will also have to pay 3% of the Adjusted Gross Revenue (AGR) excluding wireline services as spectrum usage charges for the spectrum won through this auction.

By winning right to use spectrum through the auction, incumbent telecom service providers will be able to augment their network capacity whereas new players will be able to start their services.

Total reserve price of spectrum put on auction in 2016 was about $90 billion while the realised value was just about one-tenth of that.

Hence, the 2016 auction could be considered as a failure from the auctioneer’s point of view.