Thesis: Many believe that with the just concluded 5G spectrum auction 5G spectrum auction The Ken India’s mega spectrum auction is a sale, not really an auction Read more —spectrum will be allocated this week—India has finally joined the 5G rank. The auction has been successful in some measures, not terribly so in others. No less significantly, 5G spectrum is yet to be given out for private networks. Large enterprises like the Tatas and big tech companies like Google, Meta, Amazon, and others are waiting to acquire spectrum to roll out their private networks.
But do we need non-telcos to build private networks? Former bureaucrat, Secretary-Department of Telecom (DoT), the architect of the 2010 spectrum auction design, and former ambassador to the World Trade Organization (WTO), JS Deepak, has a Counterthesis.
“The 5G spectrum allocation exercise was not an auction in the true sense.”
Except for one non-5G band, 1800 MHz in one of 22 service areas, all spectrum was sold at the reserve price. That said, the auction was a success and a good public policy measure for the following reasons:
One, the spectrum was made available for the rollout of 5G services in all possible bands—sub- GHz, 3.5GHz and Millimetre Wave band, 26GHz.
Two, the spectrum was allocated in a transparent manner.
Three, the government reduced the price of spectrum. It even made the additional revenue sacrifice of about Rs 75,000 crore ($9.5 billion) over 20 years by having a 0% incremental spectrum user charge (SUC) for spectrum sold in the auction to revive the sector and promote investments. This means the amount telcos like Airtel and Jio would pay this year will be less than what they’d have paid annually without taking any new spectrum. So, the telcos are the net gainers.
That’s also the need of the hour. The success of the telecom sector is the result of private sector enterprise, investments, and efforts. If you go back to the first telecom spectrum auction of 2010, the auction was designed with this objective in mind.
Coming in the wake of the 2G telecom scam, the 2010 auction sought to provide spectrum in a transparent manner to telcos at a market-determined price while assuring reasonable revenue for the government. The auction was a success as all these objectives were met with all players participating and buying all the spectrum put up for sale. They bid up to 4-5X the reserve price and provided the government with $24.5 billion in revenue upfront, which was about 12X the price charged for 2G spectrum. If anybody thinks the telcos overbid at that time, let me say there was no overbidding. The industry continued to flourish with the telcos’ EBIDTA EBIDTA EBITDA Earnings before interest, depreciation, taxes, and amortisation.