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Auction Options: TRAI releases draft consultation paper on spectrum resale

March 30, 2012
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Based on the comments received from stakeholders on the pre-consultation paper issued by the Telecom Regulatory Authority of India (TRAI) on the auction of spectrum, TRAI has released a draft consultation paper. Apart from stakeholder views, the draft takes into account global best practices.

It notes that the recently cancelled 122 2G licences will release 60 MHz and 413.6 MHz of spectrum in the 800 MHz and 1800 MHz bands respectively. TRAI has not specified the minimum price of spectrum to initiate the auction, but has asked for a model that should be used for determining the base price.

The key issues covered in the consultation paper are the quantum of spectrum to be auctioned, liberalisation of spectrum, refarming of spectrum in the 800 MHz and 900 MHz bands, structure of the auction, spectrum block size, eligibility criteria for participating in the auction, reserve price, roll-out obligations, spectrum usage charges and spectrum trading.

TRAI has also sought inputs to arrive at the right model to be used for determining the base price. Most telecom operators whose licences have been cancelled are insisting that it should be fixed at around Rs 16.58 billion, which equals the licence fee for allocating pan-Indian licences to new telecom players after 2001.

Some of the issues raised by TRAI for consultation are:

•    What are the key objectives to be considered for the spectrum auction?

•   What is the amount of spectrum that needs to be auctioned?

•     Should spectrum be liberalised before it is auctioned?

•    Which options can be adopted for refarming spectrum in the 800 MHz and 900 MHz bands from the existing licensees?

•   For new technologies like UMTS/long term evolution, 5 MHz is the minimum amount of spectrum required. Certain licensees have only 4.4 MHz spectrum in the 900 MHz band and 2.5 MHz spectrum in the 800 MHz band. What are the possible options for such licensees?

• Some GSM spectrum allocation may be interleaved between operators. Therefore, to avoid fragmentation, a reconfiguration between operators may be required. Is frequency reconfiguration required, and what are the challenges and solutions?

•  Should spectrum refarming in the 800 MHz and 900 MHz bands be undertaken independently or a comprehensive approach be adopted, linking it with the availability and auctioning of the 700 MHz band?

•  When should 700 MHz spectrum be auctioned?

•    Should the auction in the 700 MHz band be linked with the permission for liberalised use of the 800 MHz and 900 MHz bands?

•  How much spectrum in the 700 MHz band should be auctioned initially and what amount of spectrum should a licensee be allowed to win in that auction?

•   What should be the structure of the auction process?

•   Should the auction be held in a single stage or in multiple stages?

•    Should there be simultaneous auctions for spectrum in the 800 MHz and 1800 MHz bands?

•     What should the spectrum block size be?

•     Should the block size of spectrum depend on frequency? If so, what should be the block size in each band?

•    Should there be a cap on the amount of spectrum one can bid for? If so, what should it be?

•    Should there be a separate cap on the total amount of spectrum one can hold? If so, what should it be?

•    Should there be a cap on the amount of spectrum one can hold with respect to sub-GHz spectrum?

•   Who should be eligible to participate in the auction?

•     Only licensees whose licences have been cancelled

•     Only eligible applicants as on January 10, 2008

•   Only licensees whose licences have been cancelled and all new eligible entrants at the time of auction

•     Open to all including the existing licensees

•   What should be the reserve price per MHz of spectrum in 2012 for the 1800 MHz band?

•    What should be the reserve price per MHz of spectrum in the 700, 800, 900 MHz bands?

•   Should the reserve price be uniform across India or vary across service areas?

•   What should be the roll-out obligations linked to the auctioned spectrum?

• What should be the annual spectrum usage charge for auctioned spectrum?

•   Should the spectrum usage charge be in line with the current criteria of escalating charges with the amount of spectrum holding or a fixed percentage as was done for 3G and broadband wireless access (BWA) spectrum?

•    What should be the validity period for spectrum?

•   Should the government allow a deferred payment schedule for the spectrum auction fee, or should the payment be upfront in nature?

•    Should spectrum trading be allowed in the country?

•    What should be the eligibility criteria to trade spectrum?

•   Should the spectrum assigned for 3G and BWA services be allowed for trading?

•  Can spectrum be allowed to be mortgaged for raising capital for telecom needs?

Responses to these issues are important for TRAI to give its recommendations on the 2G spectrum auction in the stipulated four months (from February 2012) as ordered by the Supreme Court. The regulator has, therefore, asked stakeholders to send their comments by March 21, 2012.

 
 
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