5G auction: Who is the winner?

V Sridhar |Shathir Hussain Sheik |Rohit Prasad | Updated on: Jul 31, 2022
Tepid action on the auction front

Tepid action on the auction front | Photo Credit: solarseven

Neither the government nor the telcos. The high reserve price has resulted in a huge amount of spectrum remaining unsold

The much expected 5G auction is expected to close soon. There has not been much action except on the first day of the auction. The total bid price increased by just about 5 per cent after the first day of the auction. As expected, none of the offerings was sold above the reserve price, except the 1800 MHz in UP (East), that witnessed about ₹29 crore/block, a 60 per cent increment over the reserve price.

All in all, out of the 72 GHz of spectrum put on the block, only 51 GHz has been sold, leaving about 30 per cent of the spectrum unsold. In the precious 700 MHz band, only 220 MHz (paired) have been sold out of a total of 550 MHz put on block, leaving 60 per cent of the spectrum unsold. The total realised value is about ₹1.5 lakh crore compared to the expected value (at reserve price) of ₹4.3 lakh crore. So, who is the winner? Is it the government — the auctioneer — or the telcos — the bidders? Unfortunately, it is neither.

As expected, there has been some action in the 5G bands, namely, 3.3 GHz and 26 GHz bands. In 3.3 GHz, a total of 5,490 MHz has been picked up by the bidders out of a total 7,260 MHz at reserve prices across various Licensed Service Areas (LSAs). Many LSAs including Kerala, Karnataka, MP, Rajasthan and UP (W) witnessed last minute action with bidders scrambling to pick up this band.

The 3.3 GHz band is excellent for enterprise broadband connectivity and is likely to be sought after by enterprises for building captive non-public networks in future allocations as well. In the 26 GHz band, out of a total of 62.7 GHz put on auction, 45.35 GHz were picked up, with last minute action in Kerala for about 2.6 GHz of this high frequency spectrum. However, the results are disappointing in all the other bands. There have been no takers for 600, 800, and 2300 MHz with very little sold in 700, 900, 2100 and 2500 MHz. In 700 MHz, it is evident that one telco bid for two blocks in each of the LSAs at reserve price and got them.

Is the sub GHz band (600,700, 800 and 900 MHz) still relevant in 5G and beyond? It has been pointed out by researchers that the carrier aggregation technique in 4G Long Term Evolution (LTE) that combines spectrum bands across various bands provides better efficiency (that is, bits/Hz) compared to even 5G networks that operate at millimetre (26 GHz and above) wave.

It would have been ideal for operators to pick up the 700 MHz for improving penetration across rural and remote areas and even inside buildings in urban areas. The single factor against this possible acquisition is the high reserve price.

The dark horses here are Madhya Pradesh (MP) that witnessed active bidding in 1800, 3300 MHz and 26 GHz. In 3300 MHz, it witnessed an aggregate demand for 28 blocks, much the same as in Karnataka and Kerala. What is unique about MP? It is in the centre of the country. When Airtel rolled out its first landline network in the mid-1990s in MP, the main objective was to have presence in the middle of the country to be able to connect with rest of the country. Can this logic still hold good for wireless broadband?

Pockets of interest

Kerala also witnessed action in 3300 MHz and 26 GHz, most probably by the Adani group that has strong presence in ports in this State. Another surprise was the intense activity for acquiring 1800 MHz in UP (East). This is due to low reserve price for 1800 MHz in UP (East) is about $0.03/MHz/Pop combined with non-availability of spectrum in the other mid bands, namely, 2100, 2300 and 2500 MHz.

In fact, both UP (East) and Odisha did not invite any bids in 1800 MHz in the first day; attracting attention of the bidders only on the second day, possibly due to lower reserve prices and availability of good quantity of spectrum.

The 900 MHz, once the coveted band, witnessed action only in Assam and J&K, even though the amount put on the block is only 4.4MHz and 6.2 MHz, respectively.

It is still not clear why the Adani group as a new entrant is acquiring spectrum through the auction route. Also, it’s not clear why the group intends to deploy public wireless broadband network using auctioned spectrum instead of laying down its own captive non-public network (CNPN) for its needs. It also depends as to how the government will set the administrative price for CNPN compared to the winning bid price in this auction.

All in all, it has been a disappointing auction, mainly due to the huge amount of spectrum going unsold. Spectrum is a precious natural resource and should be put into effective use and cannot be wasted.

The bidders, having no option but to acquire spectrum in any case, have been severely constrained by the high reserve prices, especially for the 600 and 700 MHz bands. A reduction in reserve price in these bands could have triggered more demand for this highly price-elastic band. We, as consumers, only know the poor in-building penetration of most of the other bands.

Sridhar is Professor, and Sheik is student, IIIT Bangalore. Prasad is Professor at MDI Gurgaon

Published on July 31, 2022
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