An embarrassing 9 months after the originally proposed dates of spectrum auction, the Indian government announced at the end of August that the auctions would be held within 90 days (which means before November 27th, 2009). There are some major changes from the earlier major announcement in January 2009: one regarding spectrum pricing and the second pertaining to license validity.

The government announced a price higher for 3G and BWA spectrum. The auction to operate 3G mobile-phone services and fixed wireless broadband (WiMAX) services is expected to bring the government about 25,000 crore Indian Rupees (US$5.1 billion). The starting price for each slot of 3G spectrum is 3500 crore Indian Rupees (US$716 million), lower than the earlier US$827 million price but much higher than the original (US$413 million) price suggested. For BWA, the base price has been fixed at 1750 crore Indian Rupees (US$ 356 million) for nationwide spectrum.

According to Department of Telecommunications, the government announced the intention to allocate 4 blocks of unpaired 20 MHz spectrum in each of the 22 service areas, with 2 blocks in the 2.3 GHz band and 2 blocks in the 2.5 GHz band. One block in the 2.5 GHz band will be reserved for MTNL (in Delhi and Mumbai) and BSNL (in all other service areas), and the remaining 3 blocks will be put up for auction.

The following table indicates partial details of BWA spectrum to be auctioned in some metros/circles in India:

The Ministry of Telecom has restricted the sale of radio bandwidth to five slots, one of which has already been allotted to incumbents BSNL and MTNL a full year before the auctions, thus leaving 4 slots available for bidding. While BSNL operates in 20 of 22 telecom service areas in the nation, MTNL covers the two large metros of Mumbai and Delhi. These two operators are required to pay the equivalent of the highest bid amount paid by winning participants to the government. The government also announced that blocks in the 700 MHz and 3.3-3.6 GHz bands will be auctioned as they become available to offer fixed WiMAX and rural wireless broadband segments to consumers. There is also a discussion to extend the validity of the BWA license from current 15 years to 20 years and thus bring it on par with the GSM licenses.

Summary of BWA Spectrum Auction Guidelines

Eligibility:

1. Any service provider who holds a UASL/CMTS cellular mobile telephony service or fulfills UASL criteria and will acquire one before commencing operations.
2. Alternatively any ISP Internet Service Provider who holds a Category A and Category B license.
3. BSNL/MTNL as incumbents will be given one (the fourth) 20 MHz slot in 2.5 GHz without having to bid but will have to pay spectrum charge of the highest bidder.

Frequency Bands:

1. 4 Blocks of 20MHz of spectrum (TDD mode) in the 2.3 GHz and 2.5 GHz bands.

Rollout Obligation:

1. At the end of five years from date of spectrum allocation, the service provider needs to cover 90% of metro areas and 50% of rural SDCAs (Short Distance Charging Area).
2. The awarded bands are for a license period of 15 years. This is under discussion for revision upwards to 20 years.

M&A Guidelines:

1. M&A between UASL holders in the same service area is allowed only after 3 years from the date of grant of license.

Spectrum Usage Charges:

1. BWA spectrum is not to be counted to arrive at the relevant slab of spectrum.
2. Standalone BWA operators or ISP license holders will be charged 3% of AGR (annual gross revenue) after the first year of spectrum allocation. 

The government is keen to release the spectrum and allow inbound capital to help partially plug a yawning financial deficit. Still, it is suspected that some of the BWA spectrum may not be available immediately as promised for want of freeing it from current usage in certain government departments and agencies. It is believed that 3G and BWA spectrum auctions could happen within a matter of 15 days of each other, with 3G occurring first. Operators and equipment vendors are meanwhile planning their own strategies as to how best to move in this complex maze and maximize their chances of winning this lifetime opportunity of broadband-enabling India.

More details about opportunities and challenges for broadband wireless in India can be found in Maravedis and Tonse’s landmark report: “India Wireless Broadband and WiMAX Market Analysis and Forecasts, 2009-2013 - 3rd Edition” (April 2009). 

Sridhar T. Pai runs Tonse Telecom, a research, analysis and consulting firm based out of Bangalore, India. Tonse covers the Indian telecom sector extensively and is the in-country partner for Maravedis Inc. For more info, visit www.tonsetelecom.com

For more information you can contact the author at info@maravedis-bwa.com

Copyright © 2009 by Maravedis Inc. All Rights Reserved.
No reproduction without consent.



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