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India regulator retains proposed 2G spectrum price

Despite criticism from operators, Telecom Regulatory Authority of India justifies proposed hike in reserve price for country's upcoming 2G spectrum auction by saying it won't adversely impact industry.
Written by Jamie Yap, Contributor

The Telecom Regulatory Authority of India (TRAI) has decided to retain its recommended reserve price for the upcoming 2G spectrum auction, despite criticism from industry players.

In a statement late-Sunday, TRAI, said it determined the figure based on perceived value of the spectrum to users. "The last price of spectrum discovered through auction was that of the 3G spectrum in May 2010. After adjustment for price escalation for one year as well as for relative efficiency, 80 percent of the resultant value was recommended as the reserve prices for spectrum in the 1800 MHz band," the regulator explained.

TRAI in April proposed, among other recommendations, increasing the base price to 36.2 billion rupees (US$678 million) per megahertz (MHz) in the 1800MHz band for the upcoming spectrum auctions--about 10 times the price at which 2G licenses were allocated in 2008. Its current remarks were part of a whitepaper that addressed various references by the Indian Department of Telecom (DoT) on the recommendations.

India called for a re-auction of the country's 2G spectrum following errors the government made in issuing licenses on a first-come-first-served basis. All 122 license agreements previously issued were revoked.   

TRAI said in its statement the reserve prices were finalized on a proposal to liberalize the spectrum, which was essentially to remove technology restrictions to use of new access technologies within the same band or bands as existing and legacy technologies. This would enable operators to choose any technology in the spectrum bands held by them.

"Eliminating constraints associated with spectrum usage is expected to greatly enhance the value of the spectrum to the operators," it said. The Indian regulator also pointed out that its analysis revealed the recommendations "do not adversely impact the profitability of the wireless industry or the entry of new operators, nor do they adversely affect the affordability of the consumer".

The impact on tariff is low as it can be either absorbed by service providers in terms of additional minutes generated, or recovered through charges for different retail and wholesale services, it added.

TRAI's recommendations on the spectrum auction had met with public criticism from both telco operators in India and international industry bodies. Local operators recently warned of a death knell to the industry should the government accept its proposal, noting that mobile call tariffs on customers could spike by as much as 100 percent.

International telecommunications industry group GSMA also argued TRAI's spectrum proposals went against international best practice and would only retard India's growth.

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