Editorial: Getting real on spectrum

Though there is considerable excitement in the telecom circles as India kicks off its first-ever auction of 5G spectrum, an unreasonably high reserve price set by the government could be a dampening factor. It seems that the Centre is driven more by the impulse of revenue maximisation in the 5G airwaves auction. Striking a balance between revenue generation and the long-term sustainability of the telecom sector is crucial. A total of 72 GHz (Gigahertz) of airwaves across 10 bands, worth Rs 4.30 lakh crore based on the base price, will be up for grabs, with participation from four entities — Reliance Jio, Bharti Airtel, Vodafone Idea and Adani Data Networks. While the government stands to rake in Rs 4.3 lakh crore if all spectrum is sold at reserve prices with a validity of 20 years, the reality, however, is that it can expect the proceeds in the range of Rs 1.50 lakh crore, given that there are only two major bidders — Jio and Airtel — and ample spectrum available. It is expected that the Mid and High band spectrum will be utilised by telecom service providers to roll out 5G technology-based services capable of providing speed and capacities which would be about 10 times higher than the current 4G services. Assuming both Jio and Bharti Airtel bid to the maximum extent allowed, there would still be enough spectrum left for other players to bid. The telecom industry has been pushing for over 90% reduction in the base price as spectrum prices in India are very high compared with global benchmarks.

Despite pleas from the telecom players for slashing the reserve price, the Centre is going ahead with the price levels set in 2018. On the other hand, technology companies have opposed the government’s decision to prohibit the direct allocation of spectrum to enterprises for private 5G networks. While India’s telecom industry has grown significantly over the last few years, supported by the pandemic-induced demand and digitalisation, there are still some market dynamics that can hamper the advent of new technologies and services. Considering the financial stress of the operators and their inability to raise tariffs to more profitable levels due to fierce competition, keeping a high base price will adversely impact participation. It must be pointed out that Vodafone Idea is yet to attract noteworthy funding and is continuously losing subscribers to Airtel and Jio. This may result in muted bidding intensity and the auction process may become a battleground for only two operators. An underdeveloped domestic hardware manufacturing also adds to the challenges for a smooth 5G launch. Though the government is aggressively rolling out policies in favour of local manufacturing, it will take a few more years to show an impact on the ecosystem. Additionally, developing India-centric use cases is important as 5G technology is not limited to catering to consumer-specific needs.