DoT's stubborn stance on 1800 mhz spectrum could hurt auctions

New Delhi: The auction of 1800 mhz spectrum band is tying the Department of Telecom (DoT) in knots. Several issues have surfaced with the auction of this band, including how much spectrum to auction and what to do about non-contiguous spectrum in this band.

Put simply, non-contiguous spectrum means it is split into several chunks and is not a continuous block of 5 mhz. Non-contiguous spectrum is of no use to telecom service providers who might want to offer data services on 1800 mhz spectrum band, though it works just fine for voice services.

 DoTs stubborn stance on 1800 mhz spectrum could hurt auctions

Representational Image. Reuters

Senior DoT officials said today they are convinced that contiguous spectrum be allotted only to those bidders in the January auctions who have bid aggressively. They also made it clear that there won't be any option of withdrawing a bid once it becomes clear that the spectrum on offer is non-contiguous.

In simple terms, this could mean that bidders who participate and place bids for 1800 mhz spectrum in January auctions will not get any incentive for finally getting non-contiguous spectrum. A senior telecom industry official pointed out that this decision, if finalised, will "kill the auctions. Almost 50% of spectrum which is available with the Government right now is not contiguous. Why should bidders make aggressive bids when they know that they will pay the same price for non-contiguous spectrum which is being asked of those who are getting contiguous spectrum".

A senior DoT official said if non-contiguous spectrum can become a reason for a telco to withdraw its bid, then a large amount of spectrum could technically remain unsold. He also said that the upcoming auctions will be a "single step" and those bidders who participate aggressively will be prioritized for allocation of contiguous spectrum.

A recent story in the Hindu Business Line had said that DoT is considering options such as charging a premium from operators that win in the next round of auction if they are given contiguous spectrum. Another option this story mentioned was to allow winning operators to withdraw their bids, after the auction ends, if they are not given contiguous spectrum.

The contiguous spectrum puzzle will now get solved only when the DoT issues guidelines for upcoming auctions. It had better give an incentive for telcos who bid for non-contiguous, fragmented spectrum in this band or the response to auctions in January could well be tepid. Anyway, despite spectrum being liberalised, why would telcos rush to buy 1800 mhz spectrum which is most suitable for voice services when the market is moving rapidly towards data?

On the issue of how much 1800 mhz spectrum is being put up for auctions, the official said the quantum is yet to be decided. He said earlier, it had been decided that some spectrum would be reserved for refarming in some circles where incumbent operators would have come for license renewal in the next 18 months. But now that no spectrum has to be kept reserved for these operators, the total quantum of spectrum which will be available for auctions this time will increase.

The DoT official quoted earlier said the quantum of 1800 mhz spectrum available will be submitted before the Empowered Group of Ministers on and this group will take a final call.

On the issue of 800 mhz auctions, this official said a letter will be sent from DoT to TRAI seeking its pricing recommendations within a week.

Updated Date: Dec 21, 2014 00:26:26 IST