High Five

India’s 5G spectrum is looking very expensive

The Indian government is finalizing its road map to roll out 5G services and is preparing for a spectrum auction. Like other markets, India expects 5G networks to yield changes in many industries, particularly agriculture, manufacturing, healthcare and education. The technology will support machine-to-machine communication, enabling secure connectivity between devices other than smartphones, such as sensors, vehicles, robots and drones. Spectrum bands expected to be up for grabs include 700 MHz, 800 MHz and 3.3 GHz to 3.6 GHz.

As the Indian government completes the modalities of its 5G auction, operators in many countries including the US, South Korea, Japan and the UK have already bought spectrum for 5G, and deployments are underway.

In India, prices for spectrum licences look like they could be some of the highest in the world, creating consternation among operators already suffering from brutal competition that has brought average revenue per user down to the lowest level globally. Indian wireless operators have been actively opposing the government’s plans for pricing of 5G spectrum, as suggested by the Telecom Regulatory Authority of India. Each megahertz of bandwidth is expected to cost 492 crore rupees (about $70 million), so a block of 20 MHz could sell for 9,840 crore rupees (about $1.4 billion). This would make the base price of 5G spectrum in India nearly 40% higher than the rates in markets like South Korea.

The government hopes to hold its auction before the end of 2019, but this is far from certain. The country’s largest telecom operator Vodafone Idea has suggested that 5G shouldn’t be auctioned before 2020, and Bharti Airtel, India’s second-largest player, is asserting that it won’t bid at current prices. Disruptive recent-entrant Reliance Jio, which has already gained good market share in 4G, appears the most eager for an early auction in 5G.

Last week, the Digital Communications Commission, the decision-making body for the telecom ministry, referred recommendations on the spectrum auction back to the regulator. It’s seeking revisions in the entire proposal, including the crucial reserve prices and finding ways to create more competition. It also approved the guidelines to grant trial spectrum for 5G services this month.

Such a comprehensive review is a relief for debt-ridden operators that are clamouring for lower prices. Although about 40% of the spectrum has been auctioned in the past, this time the Digital Communications Commission is taking the view that ideally all spectrum should be auctioned in one go.

The government didn’t auction any spectrum in the 2017 to 2019 fiscal years. In 2016 to 2017, it raised 65,789 crore rupees (less than $10 billion) through spectrum sale, a fraction of the amount that was expected. The total spectrum put up for sale was 2,354 MHz spanning seven bands, but the government only managed to sell 965 MHz. Operators held their ground, looking for a return on investment.

The government doesn’t want a repeat of the fiasco of the 2016 auction and is treading carefully this time. The new telecom minister, who took charge last week, has suggested that 5G trials will start in less than 100 days. However, it remains to be seen if operators, suffering from high debts, will oblige by bidding for spectrum this year. If the government decides not to hold the auction in 2019, 5G roll-out is expected to be delayed, thereby stalling India’s push for a digital future.