Broad spectrum

Updated on: Aug 02, 2022
The 700 MHz spectrum is considered to be best for indoor coverage

The 700 MHz spectrum is considered to be best for indoor coverage | Photo Credit: Kesavan A N 1612@Chennai

Notwithstanding duopoly concerns, the spectrum auction marks a turning point for India's telecom market

India’s much-awaited 5G spectrum auctions concluded with 51,236 MHz of spectrum acquired by the three incumbent telecom operators Reliance Jio, Bharti and Vodafone Idea, and new entrant Adani Data Networks for a total consideration of ₹1.5 lakh crore. While the Centre has termed the auction a success, the fact of the matter is that no bidding took place in the auction. Although the reserve price was cut by 20-40 per cent across different spectrum bands, it remained very expensive. As a result, the operators acquired spectrum at reserve price in all the circles, except one. Operators will have to pay the first instalment of ₹13,400 crore in August and the remaining ₹1.36 lakh crore in similar instalments over the next 19 years. The high payout could force telecom operators to increase focus on monetisation, potentially driving further tariff hikes over the next few months. The Centre’s decision to lower the spectrum usage charge will cushion some of the financial burden. A combination of tariff hike and lower spectrum usage charge is expected to improve the operators’ margins which in turn will hopefully improve their cash flows required for investing in rolling out brand new 5G networks.

The bigger worry though is that the telecom sector has now become a duopoly. Nearly 60 per cent of the spectrum sold by value was bought by Reliance Jio for ₹88,100 crore. Jio is the only operator to acquire spectrum in the all-important 700 MHz which was priced so high that no other player could acquire it. This gives Jio a massive advantage over other players because 700 MHz is considered to be best for indoor coverage. In addition, Jio has amassed the highest amount of 5G spectrum in 3.3 GHz and 26 GHz. Its nearest rival, Bharti Airtel, bought spectrum worth ₹43,100 crore which will help it to become the only other pan-India 5G operator.

Notwithstanding duopoly concerns, the spectrum auction marks a turning point for India’s telecom market. In addition to improving mobile broadband, 5G technology will enable the delivery of critical services such as telesurgery and the Internet of Things over a mobile network with unprecedented efficiency. The Centre must do three things to make sure that the benefits of this technology reach every citizen. First, it should ensure that the recent revival package announced for BSNL is utilised efficiently. India’s telecom consumers need BSNL as an effective counter to the duopoly in the telecom sector. A strong public sector telecom company will not only prevent the private players from increasing tariffs as an easy means to wriggle out of the ongoing financial stress but also ensure that even rural consumers access digital services. Second, more should be done on reducing the cost of business along with ease of doing business. The telecom sector continues to be one of the heavily taxed sectors with licence fees and other levies adding to the cost of operations. Third, it must be ensured that operators meet quality of service parameters. Consumers are still grappling with basic network issues like voice call drops and interrupted data services. The Centre can celebrate the record revenue earned from the sale of spectrum but the real win will materialise when consumers enjoy seamless 5G services at affordable prices.

Published on August 02, 2022
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