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MC Explainer | 5G spectrum auction: All you need to know about it

The bidding strategy of telcos for the C-band, the major 5G spectrum, remains a bit foggy because it is considered quite expensive.

July 27, 2022 / 01:04 PM IST

The auction of spectrum that supports 5G services in India starts on July 26, with about 72,000 MHz under nine bands up for sale with a validity period of 20 years.

The Union Cabinet approved the auction on June 15 and allowed non-telecom service providers to bid for spectrum to set up captive 5G networks.

What is spectrum and how does it work?

Airwaves are radio frequencies within the electromagnetic spectrum that can carry information wirelessly for a range of services including telecommunications. The government manages and allocates airwaves to companies or sectors for their use.

Spectrum can be divided into bands ranging from low frequency to high frequency, which determines their usage and is useful in allocation.

A low-frequency wave is one that gets repeated a fewer number of times within a second, whereas a high-frequency wave is repeated more number of times within a second. High-frequency waves carry more data and are faster than lower-frequency waves but can be blocked or obstructed easily. Lower-frequency waves can provide wider coverage.

What spectrum do telecom companies require?

For telecom purposes, spectrum in the 400 MHz to 4 GHz range is the most optimum, according to the GSM Association, an organisation that represents the interests of mobile network operators.

Operators can provide 2G, 3G, 4G, and 5G services using one frequency band if they have enough spectrum.

For mobile technology in India, 2G services use the 900 MHz and 1800 MHz bands, 3G uses 900 MHz and 2100 MHz, 4G uses 850 MHz, 1800 MHz, 2300 MHz, and 2500 MHz, and 5G uses 3.5MHz and 700 MHz bands. Operators also use other bands available with them in some capacity for the provision of these networks.

The 900 MHz band, which has been in use for mobile communications for over 20 years, has a superior commercial ecosystem with better-developed technology standards and is suitable for offering GSM-based voice calls as well as 4G broadband services. After 900 MHz, the band suitable for GSM is 1800 MHz, which is also the core band used globally for LTE (long-term evolution), a 4G mobile communications standard.

5G spectrum bands can be clubbed into low, mid and high spectrum buckets.

Low band spectrum, which is less than 1 GHz (600 MHz,700 MHz, 800 MHz, 900 MHz), offers blanket coverage suitable to serve thousands of customers over long distances with fewer towers. These bands are ideal for wide and in-building coverage and when bundled with high-spectrum bands can be used for commercial mobile and broadcasting services.

The mid-band spectrum ranges from 1 GHz to 6 GHz (1800 MHz, 2100 MHz, and 2300 MHz) and provides coverage as well as the capacity to carry more data while traveling significant distances.

The high bands range from 24 GHz to 40 GHz and are also known as the millimetre wave spectrum, which are ideal for speedy networks over short ranges. However, this range is subject to interference from dense objects.

What spectrum will operators bid for?

The government auctions a fixed amount of spectrum within specified band/s to be utilised by operators for providing communication and network services to consumers.

Operators may already have acquired some amount of spectrum in different bands from previous auctions, including those to be offered in the upcoming auction, which they might buy to consolidate their airwave holdings. Getting contiguous spectrum in minimum blocks of 5 MHz or more facilitates high-speed data processing.

What’s at stake in the July 26 auction?

There are nine bands and over 72,000 MHz of spectrum on offer in the upcoming auction. The bands on offer are in the 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 3.3 GHz, and 26 GHz range.

These bands can help operators strengthen their network coverage and can optimise their current spectrum holdings. It will be important for operators to balance their planned investments with the potential benefits of each band.

The 700 MHz band is an important low-frequency 5G band that needs fewer towers. However, as per industry experts, a minimum chunk of 15 MHz of this frequency may be needed for its best use and that would cost Rs 60,000 crore.

Two bands – 700 MHz and 600 MHz – have the same reserve price and will account for 50 percent of the value of the entire spectrum to be auctioned at the reserve price. These are new bands and telcos stand to benefit more by topping up their existing low spectrum bands of 800 MHz and 900 MHz. These will strengthen their 4G services and can eventually be re-farmed for 5G use.

What’s different this time around?

Of the nine bands on offer, the 600 MHz, 700 MHz, 3.3 GHz and 26 GHz bands have never been allocated.

This time, a couple of new caveats have been thrown into the mix – the removal of spectrum usage charges (SUC) and the unprecedented allocation of spectrum to enterprises for the deployment of private networks.

SUC is a percentage of adjusted gross revenue that operators pay the department of telecom.

According to DoT’s calculations, winning 40 MHz of spectrum in the mid-band (3300 MHz) and 400 MHz in the mm-wave band (26 GHz) will likely result in an 86 percent decrease in SUC for operators.

What can be expected from the auction?

Demand and cost will drive the bidding strategy of the telcos. However, clubbing the spectrum into 4G and 5G critical bands may help to better understand the differences.

The strategy for 4G bands seems somewhat straightforward. Operators will focus on optimising their existing holdings, with 800 MHz, 900 MHz and 1800 MHz bands likely getting the most traction.

Reliance Jio Infocomm stands to gain the most in 800 MHz because it has the highest existing spectrum in this band and it would make sense for it to focus on creating a strong position here and maintain maximum market share.

Bharti Airtel and Vi might look to the 900 MHz band for the same reason, while all three private operators may bid for some spectrum in the 1800 MHz band.

In the remaining bands majorly used for 4G, there is a possibility of bidding, particularly by Bharti and Vi, which hold a majority of the existing positions in these bands. However, since the outlay in these bands would also be significant, they might acquire more of the 3.3 GHz spectrum.

The 600 MHz and 700 MHz bands are low-frequency bands that can play a critical role in supplementing the mid-band portfolio, providing better indoor penetration and a larger footprint. However, the chances of telcos bidding for them are slim because they are priced relatively quite high, especially the 600 MHz band, which globally costs about one-third of the 700 MHz band. Operators may give both bands a miss on the expectation that they will be made available at a reduced price in a future auction.

The major 5G bands consist of the remaining two bands i.e. the 3.3 GHz, also called the C-band, and 26 GHz, also called the mm-wave. The mm-wave is the cheapest spectrum available yet, and it would make sense for telcos to acquire the maximum units possible under this in a bid to reduce their overall SUC charges.

The bidding strategy for the C-band, the major 5G band, remains a bit foggy because it is considered quite expensive, especially in light of the decision to allocate it to enterprises for private networks, which might result in subdued revenue potential for telcos.

On the other hand, there are some benefits that might offset these concerns such as zero SUC and relaxed payment terms.

There are 330 units or MHz available for allocation under this band, with a cap of 130 units per operator. Reliance and Bharti are likely to be the two main contenders for this band.

There are mixed expectations with regard to the outcome of the auction. It can be largely construed as harmonious for a majority of the airwaves, with the possibility of fierce competition for the major 5G bands.
Suchitra Mandal