The highly anticipated sixth round of spectrum auction for radio waves, estimated at Rs. 3.92 lakh crore, is scheduled to commence from 1st March 2021. This event, organized by the Telecom Regulatory Authority of India (TRAI), marks the first spectrum auction in four years and arrives more than two years after TRAI decided on the base/reserve price for radio waves.
The Essentials of Spectrum Auctions
Spectrum auctions are crucial for facilitating communication between devices such as cellphones and wireline telephones. These gadgets depend on signals transmitted via airwaves or radio waves, which have to be sent at specific frequencies to prevent interference. Interference can range from temporary signal loss to serious disruption to the quality of sound or picture output.
Airwaves, a publicly available asset within the country’s geographical boundaries, are owned by the Union government. With the rise in the number of cellphone, wireline telephone, and internet users, an increasing demand for signal space arises periodically. To fulfill this need, the government auctions these airwaves, referred to as spectrum, through the Department of Telecom (Ministry of Communications). The spectrum, subdivided into different frequency bands, is sold for a specific duration, typically 20 years.
Overview of the Upcoming Auction
The impending auction has been prompted by the soon-to-expire validity of airwaves bought by various companies during the last round in 2016. In December 2020, the Union Cabinet approved the sale of 2251.25 MHz of spectrum across seven frequency bands at a reserve price of Rs. 3.92 lakh crore. While potentially bolstering government revenue collections during a time of economic downturn due to Covid-19 restrictions, the latest spectrum auction does not include 5G airwaves.
Reserve Price and Spectrum Usages Charges
The reserve price— the minimum amount a seller is prepared to accept from a buyer—is set by the Telecom Regulatory Authority of India. The bid for airwaves can surpass this threshold, but cannot go lower. Successful bidders are obligated to pay 3% of Adjusted Gross Revenue (AGR) towards spectrum usage charges. The Department of Telecommunications (DoT) levies this charge alongside licensing fees that range between 3-5% and 8%.
Potential Bidders and Requirements
Existing telecom players, as well as new and foreign companies, can participate in the bidding for airwaves. However, foreign entities must either establish an Indian branch and register as an Indian company or form a partnership with an Indian company to retain the airwaves post-auction.