India’s biggest ever sale of mobile airwaves saw a tepid end
with 60% of the airwaves left unsold and govt earning Rs 65,789. The govt had for the first time included the premium LTE band 700MHz in the auction. The premium 700MHz LTE band was left untouched and unsold. The main reason for the premium band being left unsold is the premium pricing it came at. The telecom regulator TRAI
calling it an “uncut diamond” priced the 700MHz band at a whopping R11,485 crore per MHz for pan India. Telecom operator's cry and telecom department’s plea to the TRAI for a rethink on the pricing went unheard. Which meant the 700 MHz band even if sold at minimum price would fetch govt over Rs. 400,000 crore which meant the premium band was responsible for almost 70% of govt’s earnings from the current auction.
The ecosystem for 700MHz is still non-existent but the band is extremely promising to provide super fast data services in the future but telcos stayed away from the premium band due to high reserve price, India’s largest telecom operator Airtel
said, “Three to four national operators with robust 700 Mhz based broadband networks have the potential to accelerate India's progress to the top league of digitally enabled nations. Therefore, the pricing of the 700 Mhz band spectrum needs to be addressed on priority for the nation to benefit from the digital dividend arising out of this high quality spectrum band”, the company said in a statement.
It certainly is a dent in terms of govt’s inflows from spectrum auction
but it also means customers will have to wait a little longer for world class internet service. In 2010 when ‘4G spectrum’ (2300MHz) was being auctioned for the first time the reserve price was kept low as the govt did not see interest for the band and the 4G ecosystem, much like the 700MHz ecosystem now, was yet to take form. That’s also the time when Reliance Jio
won 4G spectrum across the country at throw away price and only recently launched its 4G services in the country. Telecom Analyst Mahesh Uppal says, “Reserve price was too high govt made a serious miscalculation to derive market value of 700MHz band. They made a strategic error in their understanding of reserve price (RP) itself. Sole Purpose of the RP is to discourage non serious players but by making it too high it ended up discouraging the serious players too”. The goal of the reserve price should be to rely on market to discover the market value. In this case the govt pre-empted the market value and it backfired. In the 3G auction in 2010 the operators paid three times the reserve price because they found value in the spectrum.
The telecom regulator may have considered the ever growing data market and strong propagation of the 700MHz band as it can reduce the cost of setting up a network by a massive 70% but telcos decided to skip the high power data band, Rajan Mathews, Director General, COAI
said, “When the upfront price becomes so steep the potential from saving on capital gets eroded and value proposition gets diminished when there is no ecosystem in place.” We saw similar situation wt jio that has similar challenges; it took them six years to set up their network.” When the govt put the 800MHz band under the hammer in 2012 telcos stayed away quoting ‘too high pricing’ for the spectrum band and the reserve price for 800MHz band was eventually cut by half.
We’ll have to see what really happens with the premium 700MHz band in the next round of auction, if the 700MHz band will see a similar fate like the 800MHz band but if the band remains unsold for long the progress on the growth of ecosystem will hit a roadblock and even with the promise of a Digital India
the consumers will have to wait much longer for world class internet service.