All you wanted to know about spectrum

Hear ‘spectrum’ and the word ‘scam’ immediately pops into your mind. It was in 2008 when spectrum was allocated to telecom companies at throwaway prices. Since then, auctions have become the norm for the sale of spectrum. Last week, the government approved the largest ever auction of spectrum to be conducted this September. So, what is being auctioned and why does it matter to companies?

The telecom spectrum is a part of the much larger electromagnetic (EM) spectrum, which includes the entire range of variable frequency electromagnetic waves such as radio waves, x-rays and ultra-violet rays. Only a segment of the EM spectrum, made up of radio waves, can be used for transmission of communication signals. Since radio spectrum is a limited resource with multiple competing uses, the government apportions specific frequency bands for different purposes such as phone services, radio and television broadcasting and global positioning systems. Having sufficient spectrum is critical for providing mobile voice and data services to an increasing number of customers across the country.

In September, the government will auction frequency bands suitable for mobile (voice and data) services. These will include the existing frequencies of 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz and two new ones, 700 MHz and 2500 MHz. Expiration of existing spectrum licenses, unsold spectrum from earlier auctions and spectrum vacated by the defence forces is being auctioned off now.

While mobile voice service can be offered using all the above frequencies, data services, depending on whether it uses 3G or 4G technology, can be provided only using specific frequency bands. Today, all the leading telecom companies have sufficient cross-country spectrum for providing phone (voice) services. They are also quite comfortably placed in terms of the requisite frequency bands for 3G data services. But, they still need additional spectrum — one, for providing a robust 4G data network to their customers and, two, for bolstering their existing mobile data services.

Companies may like to hoard this spectrum, but it’s not going to be all that easy. With spectrum not coming cheap and with the winning bidders having to make substantial upfront payments, the highly leveraged telecom companies are not very well placed to buy all the spectrum being offered. The fact that a new entrant is throwing its hat into the ring — Reliance Jio Infocomm — also does not help matters.

For the government, revenues from spectrum auctions offer nice windfall gains to add to its tax and disinvestment kitty and inch closer to the deficit target. This year, for instance, the Centre hopes to garner over ₹5 lakh crore from the auctions.

Do you have the latest smart phone in town but still grapple with patchy 4G data connectivity and now-on-now-off 3G internet services? Well, the upcoming auctions provide hope of better mobile internet services for you. The more the spectrum your service provider can acquire and put to use, the less will be the congestion on existing networks. Also, additional spectrum in newer areas can help your telecom company expand its coverage and provide you with connectivity in un-served regions.

If telcos and the Centre want to keep cash registers ringing, spectrum auctions need to take off.

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