700-MHz spectrum auction: Govt mulls swap option

The operators offering 4G services with 2,300-MHz spectrum are likely to get the option of switching to the more efficient 700-MHz band, with the Department of Telecommunications working out modalities to offer the latter in the next round of auction.

Reliance Industries, Bharti Airtel, Aircel and Tikona Digital are among the major telcos that had won 20 MHz of 2,300-MHz spectrum in each circle for 4G services.

Bharti has already launched services in a few cities, while RIL is expected to make an announcement in June.

These firms and BSNL had together paid Rs 38,543 crore (Rs 385.43 billion) for three blocks of spectrum. Of the total, RIL’s subsidiary had forked out Rs 12,847 crore (Rs 128.47 billion) for pan-Indian operations.

Under a ‘swap’ scheme, this money would be adjusted against the value of the spectrum they win in the 700-MHz band.

It is still being considered how much spectrum they would be allowed to swap.

Telcos say the 700-MHz band, one of the most efficient spectral bands, requires only half the number of towers for offering the same quality of service as 2,300-MHz spectrum.

That means a substantial cut in the capital investment required for rollout.

Also, with many countries like the US (AT&T Mobility, Verizon), Latin America and Australia setting up 700-MHz-based LTE networks globally, an ecosystem is already in place.

So, there already are 284 4G devices currently working with 700-MHz spectrum.

Just a month ago, AT&T had paid $ 1.9 billion to buy additional 700-MHz

spectrum from Verizon.

A DoT official says the department is considering the Telecom Regulatory Authority of India recommendation that spectrum in the 700-MHz band be priced at four times the 1,800-MHz base price.

Many experts say, at this high price, the swap option might not look attractive, as it would effectively mean the base price for 5 MHz of 700-MHz spectrum for pan-Indian operations would be a staggering Rs 47,508 crore (Rs 475.08 billion) -- more than 10 times the price of an equivalent amount of 2,300-MHz spectrum.

That would almost neutralise the lower investment requirement and the advantages of higher spectral efficiency.

As part of the plan being considered, about 90 MHz of spectrum would be available in this band for auction.

The government is looking at offering up to 10 MHz in each circle, in eight blocks, with no restriction on operators for the number of blocks they want to bid.

A top DoT official says: “We are looking at an auction of about 100 MHz of the 700-MHz spectrum in the first half of 2014-15.

“It’s likely 2x45 MHz would be auctioned, while 10 MHz would be kept in between as guard band.

“We might consider allowing operators to swap 2,300-MHz spectrum with the 700-MHz one.”

The limit for operators’ spectrum acquisition in this band would be 50 per cent of that assigned in their respective circles and 25 per cent of the total spectrum assigned in all bands in all service areas put together.

As part of the plan, a large part of the 700-MHz spectrum, used by analog and digital broadcasting services, will be shifted to a new band.