Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc

What are Spectrum Auctions?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Telecom Spectrum

Mains level : Read the attached story

In the spectrum auctions scheduled to begin on March 1this year, the government plans to sell spectrum for 4G in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz frequency bands.

Q.What are the various challenges faced by India’s telecom before the upgradation to 5G technology?

What is Spectrum?

  • Devices such as cellphones and wireline telephones require signals to connect from one end to another.
  • These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
  • The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves.
  • With the expansion in the number of cellphones, wireline telephone and internet users, the need to provide more space for the signals arise from time to time.

Spectrum allocations

  • Spectrum refers to the invisible radio frequencies that wireless signals travel over. The frequencies we use for wireless are only a portion of what is called the electromagnetic spectrum.
  • To sell these assets to companies willing to set up the required infrastructure to transport these waves from one end to another, the central government through the DoT auctions these airwaves from time to time.
  • These airwaves called spectrum is subdivided into bands which have varying frequencies.
  • All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.

Why is spectrum being auctioned now?

  • The last spectrum auctions were held in 2016 when the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore.
  • Although the government managed to sell only 965 MHz – or about 40 per cent of the spectrum that was put up for sale.
  • The need for a new spectrum auction has arisen because the validity of the airwaves bought by companies is set to expire in 2021.

How is the spectrum priced?

  • The reserve price of all these bands together has been fixed at Rs 3.92 lakh crore.
  • Depending on the demand from various companies, the price of the airwaves may go higher, but cannot go below the reserve price.

How will the payment plan work?

  • As part of the deferred payment plan, bidders for the sub-1 GHz bands of 700, 800 and 900 MHz can opt to pay 25 per cent of the bid amount now, and the rest later.
  • In the above-1 GHz bands of 1,800, 2,100, 2,300, and 2,500 MHz frequency bands, bidders will have to pay 50 per cent upfront, and can then opt to pay the rest in equated annual instalments.
  • The successful bidders will, however, have to pay 3 per cent of Adjusted Gross Revenue (AGR) as spectrum usage charges, excluding wireline services.

Who is likely to bid for the spectrum?

  • All major private telecom players in India are eligible contenders to buy additional spectrum to support the number of users on their network.
  • Apart from these three, new companies, including foreign companies, are also eligible to bid for the airwaves.
  • Foreign companies, however, will have to either set up a branch in India and register as an Indian company or tie-up with an Indian company to be able to retain the airwaves after winning them.
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