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TRAI Recommendations

October 15, 2006
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While drafting its recommendations on allocation and pricing of spectrum for 3G and broadband wireless access (BWA) services, the Telecom Regulatory Authority of India's (TRAI) mandate essentially was to maximise consumer interest including affordability; ensure responsible and efficient use of spectrum in order to aid growth, particularly in the rural areas; and ensure a level playing field.

At the outset, TRAI has declared that "the allocation of 3G must be treated as a standalone exercise and not an extension of the 2G spectrum". This is in contrast to countries such as the UK, which allowed new operators to enter the market to offer 3G services in addition to the existing operators.

The recommendations outline that 32.5 MHz of spectrum should be made available in the 2.1 GHz band, 450 MHz band and 800 MHz band immediately for 3G services through a system of auctioning. This is in line with the frequency bands outlined by the International Telecommunication Union for IMT 2000 services.

TRAI has asked the Department of Telecommunications (DoT) to take immediate steps for allocating five blocks in 2x5 MHz in the 2.1 GHz band. Apart from that, one block of 2x5 MHz in the 450 MHz band and two of 2x1.25 MHz in the 800 MHz band will be accessible.

On grounds of non-availability in a short-term time-frame and also on account of technical issues, particularly in the mixed-band plan, the regulator has not immediately taken into account the PCS 1900 MHz, 2.3 GHz, 2.5 GHz and 700 MHz for 3G and BWA services. However, it has asked DoT to verify the technical feasibility of coexistence of mixed-band allocation. If found feasible, DoT should work towards refarming of the PCS 1900 bands, specifically 2x10 MHz, in the medium-term scenario for allocation to CDMA operators.

Despite constraints, TRAI chairman Nripendra Misra estimates that "the 2x32.5 MHz spectrum will be available within six to nine months, and 3G services to be offered by June 2007".

While five operators are to be given spectrum in the 2.1 GHz band, the remaining would receive spectrum as and when available. However, since the quantity of spectrum in the 800 MHz band is limited, the regulator has set it aside exclusively for unified access service licence (UASL) CDMA operators.

TRAI has also asserted that "2x5 MHz in the 450 MHz band should be allocated to an existing UASL CDMA operator with a rural rollout commitment as the 450 MHz band has excellent propagation characteristics, and will be well suited for coverage in the rural areas."

The TRAI statement reads: "UASL CDMA operators are to be given an option of one carrier for EV-DO services in the 800 MHz band and one block of 2x5 MHz in the 450 MHz band, subject to specified conditions. If there are more UASL CDMA operators claiming the available spectrum in the 450 MHz or 800 MHz bands, then a one-stage bid process will be organised."

Meanwhile, TRAI recommends that DoT should take steps for vacating the 2x5 MHz spectrum in the 900 MHz band in order to refarm GSM operations within the band, and then allocate an additional 2x5 MHz for CDMA operations in the 800 MHz band.

Spectrum pricing
Under the existing licensing framework, a licensee is required to pay a one-time entry fee, which includes fees for spectrum usage. The structure also includes annual spectrum charges. These charges are on a revenue-sharing basis as a percentage of the adjusted gross revenue of the operator.

For 3G services, TRAI has formulated a somewhat different scheme. It is following the view that there should be a pricing policy for sale of spectrum, especially in light of its revenue-generating potential. For allocating spectrum blocks in the 2.1 GHz band, the government may utilise a simultaneous ascending auction system. In this respect, TRAI recommends the following base prices:

  • Rs 800 million for Category A circles, Delhi and Mumbai
  • Rs 400 million for Category B circles, Chennai and Kolkata
  • Rs 150 million for Category C circles
  • Rs 14 billion for pan-India rollout.

    Operators wanting to provide services using the 800 MHz band and/or 450 MHz band will have to pay a spectrum acquisition fee unless there are more interested operators than the blocks available. In that case, a one-stage bidding process should be organised to decide the winners. Otherwise, the second highest winning bid in the 2.1 GHz auction should be used to price the 2x1.25 MHz in the 800 MHz band.

    TRAI has also advised that operators pay an additional annual spectrum charge of 1 per cent of the operators' total annual gross revenue, following a one-year moratorium.

    The regulator has outlined stringent rollout obligations for operators in the 2.1 GHz band. These state that the operator must cover 90 per cent of the area in the metros. In the case of A, B and C circles, 50 per cent of the district headquarters or cities should be covered, 15 per cent of which should be rural. All this must be completed by the end of five years. TRAI states: "Operators should be given one year within which to fulfil their rollout obligations. After this, they should be fined a spectrum hoarding cess of 2.5 per cent of their winning auction bid per quarter in the next year. If they do not complete their rollout obligations within this one year, their spectrum assignments should be cancelled and the spectrum should be reallocated to a new operator."

    Spectrum for BWA
    TRAI has also released recommendations for BWA, and stated that operators may choose between this and 3G. In order to promote growth and development of broadband services, it has assigned at least 200 MHz of spectrum to operators until 2007, and has recommended that an additional 100 MHz be earmarked for allocation by 2010. BWA is considered a part of 3G services and is being given high priority in view of the shortage of spectrum for 3G.

    The authority has assigned 12 blocks of spectrum for BWA in the 3.3-3.4 GHz and 3.4-3.6 GHz bands to about 13 operators in contiguous blocks of 15 MHz each. DoT should organise a one-stage sealed bid auction for each circle to allocate BWA for circlewide licensees to UASLs, CMSPs, or Category A and B internet service providers. Reserve prices have been estimated at Rs 100 million for the metros and Category A circles, Rs 50 million for Category B circles and Rs 20 million for Category C circles.

    Taking all this into account, the revenue estimated by TRAI from the base price, not accounting for the final auction bid, has been pegged at about Rs 15 billion for 3G and BWA services.

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