Explained: What is spectrum? How will it be auctioned?

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On January 6, the Department of Telecommunication (DoT) issued the Notice Inviting Applications (NIA) for auction of Spectrum across 7 frequency bands.

DoT said it would commence the bidding for the spectrum auction from March 1.

DoT has fixed January 12 for the pre-bid conference and last date for seeking clarification to the notice on January 28. Telecom operators will need to submit their application by February 5 for participation in the auction.

The Cabinet in December had approved the auction of 2251.25 MHz (Megahertz) of spectrum by the end of FY21. A total of 2251.25 MHz worth Rs 3.92 lakh crore is being offered with a total valuation of Rs 3.92 lakh crore (at reserve price), the government said in an official statement.

The upcoming round of spectrum is being offered with a validity of 20 years, the cabinet had announced.

The Department of Telecommunication (DoT) will auction the spectrum in seven frequency bands - 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz.

The final list of bidders will be declared on February 24, the government said in a statement.

A look at what is spectrum, why does the government auction it and what the auction process is like.

What is Spectrum?

Spectrum is nothing but invisible airwaves which are used for the purpose of communication. These airwaves are required for the purpose of making calls, radio, satellite television etc.

These waves differ in terms of frequency and wavelength. These airwaves are a part of a larger spectrum known as the electromagnetic spectrum.

Why does the government auction spectrum ?

Just like oil, gas and land are controlled by governments, so are the airwaves. By auctioning the airwaves of different frequencies, the government attempts to perform spectrum management. The government manages these as the airwaves are scarce. Further, the new technologies of 5G,4G, 3G and 2G have made it even more important for the government to manage it.

What is the auction process?

The upcoming auction is being conducted online. It is termed as Simultaneous Multiple Rounds Ascending (SMRA) e-auction.

The government hopes to raise Rs 3.92 lakh crore by selling airwaves in 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz.

The auction process is conducted in two stages. There are the Clock Stage and the Frequency Identification Stage. Under the Clock Stage, the bidders will bid for blocks of spectrum in given service areas/circles whereas in the Frequency Identification Stage, specific frequency bands will be determined for the winning bidders.

The winning bidders are provided with the choice to pay the entire bid amount upfront or may exercise an option to pay a certain amount upfront and remaining amount in a maximum up to 16 equated annual instalments, after a moratorium of two years.

The winners of the auction across different bands will win the exclusive right to operate the airwaves in the frequency whereas those who lost will not receive the license to operate it in a given circle.

Telecom Analysts are expecting Reliance Jio to be the biggest possible bidder in the upcoming spectrum auction.