The right price: on TRAI’s latest recommendations

News: The Telecom Regulatory Authority of India’s latest recommendations on the auction of airwaves identified for 5G services, particularly the pricing of spectrum, have triggered disappointment within the industry.

What are the concerns expressed by the telcos?

Telecom services providers contend that the recommendations run counter to the spirit behind the relief-cum-reforms package unveiled by the Government in September 2021.

TRAI has proposed cuts of about 35-40% on the reserve prices at which the relevant frequency bands of spectrums could be auctioned. However, it has proposed charging 1.5 times the reduced reserve price for a 30-year tenure on spectrum thereby virtually negating the proposed cut. It further undermines the Government’s aim of making spectrum affordable enough to encourage greater participation in the auctions.

What are the major challenges faced by telcos in India?

India’s telcos point to two major problems:

– High cost of spectrum relative to the global average, and

– India having one of the lowest realisations in terms of average revenue per user

Telcos state that their ability to invest in the infrastructure required to cover the length and breadth of the country and simultaneously ensure optimum reach and availability of signals in dense urban areas is constrained by these issues.

What is TRAI’s rationale for the recommendations?

TRAI’s recommendations cite a November letter from the DoT which had underscored the fact that only 37% of the spectrum on offer at the last auction had been sold.

TRAI’s reasoning for the reserve prices, seems oblivious to the challenges the industry is currently facing as well as the significant capital investments needed to modernise the country’s telecom networks.

How have other countries approached the spectrum allotment for 5G?

Japan and South Korea avoided auctions and instead adopted the discretionary approach to spectrum allotment.

– It should be noted that this approach was abandoned by India after the Supreme Court in 2012 struck down the grant of 2G licences and mandated auctions as the best method to prevent wrongdoing in the exercise of discretionary powers.

What is the way forward?

Govt needs to balance its requirement of netting optimum revenue from the auction of spectrum while ensuring that India does not end up lagging behind in the rollout of 5G telecom services.

Hence, policymakers need to insist TRAI revisit its recommendations.

The economy can ill afford any further disruptions in the linchpin sector.

Source: This post is based on the article “The right price: on TRAI’s latest recommendations” published in The Hindu on 19th Apr 22.