Spectrum Auction

Why in news?

• The Department of Telecommunications (DoT) in India is planning to carry out a new spectrum auction of 5G frequencies in January-February

About Spectrum Auction:

• Devices such as cellphones, radio, wifi, etc. require signals to connect with one another.
• These signals are carried on airwaves. These airwaves must be sent at designated frequencies to avoid any kind of interference. Such airwaves are called the spectrum. The various frequencies are subdivided into bands.
• Frequency is the number of repetitions of the wave that one can see in a period.
• If a wave repeats slowly, it is low frequency. If the wave repeats more, then it is called high frequency.
• Hertz (Hz) is the unit of Frequency.
• Range of various devices:
  • Radio: 100-200 Megahertz (Mhz)
  • Telecom: 800 Mhz – 2300 Mhz
  • Wifi:  Earlier it was 2.4 Ghz and now enhanced to 5 Ghz.

What is a spectrum auction?

• The Union government owns all the publicly available assets within the geographical boundaries of the country. This includes the airwaves also. So the government has the right to sell the airwaves.
• The selling of airwaves as a band for a certain period is known as Spectrum Auctions.
• The central government through the Department of Telecom (Ministry of Communications) auctions these airwaves from time to time.
• The government performs spectrum auctions after dividing the entire country into telecom circles. Presently India is divided into 22 telecom circles.
• All these spectrums are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.
• With the expansion in the number of cellphones, wire line telephone and internet users, the need to provide more space for the signals arise from time to time.
• Telecom companies are willing to set up the required infrastructure to use the waves once they auctioned the particular spectrum.

How is the spectrum priced?

• Depending on the demand from various companies, the price of the airwaves may go higher, but cannot go below the reserve price.
  • A reserve price is a minimum price that a seller would be willing to accept from a buyer. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.
• The reserve price is recommended by Telecom Regulatory Authority of India.
• The successful bidders will have to pay 3% of Adjusted Gross Revenue (AGR) as spectrum usage charges.

Add ons:

• All major private telecom players in India are eligible contenders to buy additional spectrum to support the number of users on their network.
• Foreign companies are also eligible to bid for the airwaves.
• Foreign companies, however, will have to either set up a branch in India and register as an Indian company or tie-up with an Indian company to be able to retain the airwaves after winning them.

PRACTICE QUESTION:

Which of the following statements regarding spectrum auction in India?

1. Foreign telecom companies are not eligible to bid in the auction

2. The reserve price for the auction is recommended by Telecom Regulatory Authority of India.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer