Last week, the Telecom Regulatory Authority of India gave its go-ahead to the auction of new 5G spectrum in the 37-40 GHz band. Once the telcos get this spectrum, better high-speed connectivity in densely populated urban areas can be expected, explains Jatin Grover
What has the Trai proposed?
The Telecom Regulatory Authority of India (Trai) has cleared the way for the auction of Rs 17,940-crore worth 5G spectrum in the 37-40 GHz band in all the 22 telecom circles. The band, which is in millimeter wave, is crucial for capacity additions by telecom operators and is ideal for high-density areas where high-speed connectivity is required.
A total of 3,000 MHz spectrum per circle is available in the 37-40 GHz band. Trai has recommended that the department of telecommunications (DoT) put up the spectrum for forthcoming auctions and provide it to the telecom operators for a validity of 20 years. It has proposed that, along with mobile operators, category ‘A’ and ‘B’ internet service providers (ISPs) and machine-to-machine (M2M) service providers under the unified licence participate in the auction. The 37-37.5 GHz band is designated for broadband mobile use, while the 37.5-40 GHz and 40-42.5 GHz bands support mobile and satellite gateway link applications. The spectrum cap for the band has been recommended at 40% of the total spectrum put to auction. The band should be auctioned with a block size of 100 MHz, Trai said.
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What the Trai recommendations mean
As Trai is the sectoral regulator, the department of telecommunications (DoT) has to consult the former before any regulatory changes and auctioning of spectrum. Once Trai recommends reserve price and other modalities, DoT can move a step closer to the auction. The recommendations on the reserve price for the 37-40 GHz band came after the DoT in August 2023 had asked the former to carry out an analysis of different spectrum bands and their base price. Trai, however, at that time skipped the bands in 37-40 GHz and 42.5-43.5 GHz bands. In April 2024, Trai issued a consultation paper on auction of frequency spectrum in 37-37.5 GHz, 37.5-40 GHz, and 42.5-43.5 GHz bands for telecom operators. Basis the comments from stakeholders including telecom operators and own analysis, it came out with the reserve price of the spectrum. The regulator said the band can be auctioned as the device support is available in the band.
Is there a discount on the reserve price?
At the reserve price of Rs 5.98 crore per MHz, the spectrum in the 37-40 GHz is about 14.4% cheaper than the reserve price of Rs 6.99 crore per MHz for the 26 GHz spectrum, which came in auction for the first time in 2022. In the 2024 auction, 26 GHz band went unsold due to lack of device ecosystem. A comparison is being done with 26GHz because of its millimetre wave nature.
The regulator said the reserve price should be set at an optimal level to ensure efficiency of the auction process. In order to ensure competitive bidding and price discovery, the reserve price should be set at 70% of average valuation, the regulator added. While arriving at the reserve price, Trai took into consideration the 26 GHz band pricing and international spectrum pricing for the band. Owing to the non-availability of the device ecosystem in 42.5-43.5 GHz frequency range, Trai didn’t recommend pricing for the same.
Did Trai consider telcos’ request?
While any new spectrum put up for auction is good for telecom operators and end-customers as these help improve connectivity, the regulator did not accept certain requests of telecom operators in the recommendations.
Telecom operators had requested for a 5-6 year interest-free payment gap or moratorium on the spectrum to be bought in the upcoming auctions. Trai, however, kept the status quo on the existing payment terms, continuing with the upfront payment option and 20 equal annual instalments.The telcos wanted a moratorium since, according to them, any new network takes 4-5 years to monetise. Recovering the payment for spectrum in 14 installments spread over the period of spectrum can meet the objective of securing revenue for the exchequer while also alleviating the financial burden on telecom service providers, Airtel had said during the consultation process. Jio had said the upfront payment should be kept only at 10% of the bid amount and thereafter, a minimum 5-year moratorium without any interest cost should be provided.
While high bands like the 37.5 GHz band have certain targeted use cases for 5G, especially in densely populated urban areas, telcos had also wanted access to the 6GHz band for large-scale 5G coverage.
When will the next auction happen?
The government has not yet decided on the next spectrum auction date. Currently, it is assessing the demand for spectrum from telecom operators and whether the next auction is needed anytime soon. In September 2021, the Cabinet had decided that spectrum auctions should be held annually. However, post the 5G spectrum auction in 2022 when the telcos bought spectrum worth Rs 1.5 lakh crore, the demand for the spectrum is not expected to go up very quickly. For example, in the 2024 auctions, telcos bought 141.4 MHz of spectrum for a total of Rs 11,340 crore. Only 1.3% of the total radio frequencies on offer was sold in 2024, which was the lowest since 2010.