Why in news?
The Cabinet has cleared the proposal for auctioning the Radio Spectrum for commercial mobile services.
How will the auction take place?
- TRAI has recommended auctioning the spectrum of sub GHz bands of 700, 800 and 900 MHz.
- The total spectrum to be auctioned is about 2,251 MHz when compared to 2,355 MHz in 2016.
- The cumulative reserve price will be about $50 billion.
- Reserve price is the potential revenue accrual to the government.
- The auction will use the well-proven methodology of Simultaneous Multiple Round Ascending (SMRA).
What are the factors that determine the success of an auction?
- The success of spectrum auction depends on the following factors.
- First is the Reserve price which is positively related to the winning bid price.
- Higher reserve prices inhibit the bidders from bidding more spectrum blocks leading to lower amounts of spectrum sold.
- This was witnessed in the 2016 auction.
- Second is the willingness the telecommunication companies (telcos) to pay which is directly dependent on the number of VoIP subscribers.
- Now the Over the Top (OTT) providers provide more substitute goods than the VoIP subscribers.
- This has eroded the position of telcos resulting in a lower willingness to pay.
- Third is the allocation of unlicensed spectrum for Wi-Fi.
- Use of Wi-Fi by off-loading mobile data will reduce the demand for mobile network capacity.
- Hence, high allocation of unlicensed spectrum will lower the demand for licensed spectrum.
- Fourth, is the amount of spectrum that will be opened up for the auction.
- This data is not very clear leaving bidders in dilemma whether to acquire the spectrum now or wait for subsequent auctions.
What can be done to make the auction successful?
- Spectrum is a perishable scarce resource and its value will be lost if not used properly.
- Due to COVID-19 crisis, with the new form of work from home, the government has to ensure that the spectrum is successfully auctioned.
- Hence the following recommendations can be followed:
- Reserve prices have to be kept lower-especially for 700 MHz –since it covers the hinterlands of the country.
- Higher unlicensed spectrum has to be released for proliferating the use of Wi-Fi.
- It can seen as a complement to carrier network & will augment the deployment of the Public Wi-Fi project.
- Data should be clear on the quantum of spectrum to be put for the auction.
- Government should release guidelines on how OTT will be regulated.
- This can help telcos and OTTs to provide superior services for the benefit of the consumers.
Source: The Hindu
