Why in news?

Recently Government generated Rs.77815 crore from the auction of telecommunications. Mukesh Ambaniled Reliance Jio accounted for close to 60% of the spectrum bought, followed by Bharti Airtel and Vodafone Idea. On offer was over 2,308 megahertz (MHz) of spectrum valued for the auction by the government at ₹3.92 lakh crore, and bids were successfully received for 37% or 855.6 MHz. The auction lasted less than two days.

The 700 MHz band, as also 1,800 MHz, 2,100 MHz, and 2,300 MHz bands, are seen playing an important role in the 5G rollout (the fifth generation of mobile networks that promises to connect everybody as also everything much faster and at much lower latency). The 700 MHz band was not expected to find any takers given its prohibitive floor price. Some see this as an opening for the government to scale down the reserve price when it comes up for bidding in future. What an ICICI Securities report called the “king” in 5G, the C band, which is the band between 3,300 MHz and 4,200 MHz, was not on offer in this round of auctions.

5G Spectrum Definition

5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks. 5G mainly works in 3 bands, namely low, mid and high frequency spectrum — all of which have their own uses as well as limitations.

While the low band spectrum has shown great promise in terms of coverage and speed of internet and data exchange, the maximum speed is limited to 100 Mbps (Megabits per second). This means that while telcos can use and install it for commercial cellphone users who may not have specific demands for very high speed internet, the low band spectrum may not be optimal for specialised needs of the industry.

The mid-band spectrum, on the other hand, offers higher speeds compared to the low band, but has limitations in terms of coverage area and penetration of signals. Telcos and companies, which have taken the lead on 5G, have indicated that this band may be used by industries and specialised factory units for building captive networks that can be moulded into the needs of that particular industry.

The high-band spectrum offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength. Internet speeds in the high-band spectrum of 5G has been tested to be as high as 20 Gbps (giga bits per second), while, in most cases, the maximum internet data speed in 4G has been recorded at 1 Gbps.

When will the spectrum be allocated?

Now that the bidding process is over, an inter-ministerial committee comprising the Telecom Minister, Finance Minister, and senior officials from these Ministries will scrutinise the auction results and give their approval. This exercise will be completed by March 15, following which the three telcos will have 15 days to make upfront payments for the spectrum they have bought in various frequency bands.

The government expects that the upfront payment for this financial year could be up to Rs 20,000 crore. After the upfront payment is done, the spectrum will be allocated to the three telcos by April or May.

Global progress on 5G Spectrum

More than governments, global telecom companies have started building 5G networks and rolling it out to their customers on a trial basis. In countries like the US, companies such as AT&T, T-mobile, and Verizon have taken the lead when it comes to rolling out commercial 5G for their users.

While some such as AT&T had started testing and deploying the technology as early as 2018, other companies such as Verizon have followed suit, expanding their 5G ultra-wide broadband services to as many as 60 cities by the end of 2020. In other countries such as China, some of the telcos such as China Unicom had started 5G trials as early as 2018, and have since rolled out the commercial services for users.

South Korean company Samsung, which had started researching on 5G technology way back in 2011, has, on the other hand, taken the lead when it comes to building the hardware for 5G networks for several companies.

Where does India stand in the 5G technology race?

On par with the global players, India had, in 2018, planned to start 5G services as soon as possible, with an aim to capitalise on the better network speeds and strength that the technology promised.

All the three private telecom players, Reliance Jio Infocomm, Bharti Airtel and Vi, have been urging the DoT to lay out a clear road map of spectrum allocation and 5G frequency bands, so that they would be able to plan the roll out of their services accordingly. One big hurdle, however, is the lack of flow of cash and adequate capital with at least two of the three players, namely Bharti Airtel and Vodafone Idea.

On the other hand, Reliance Jio plans to launch an indigenously built 5G network for the country as early as the second half of this year. The company is said to have a complete end-to-end 5G solution prepared by the company itself that is ready for deployment once the networks are in place. This solution can also be deployed by other telecom operators as a complete managed service

With 5G technology, consumers will be able to download data heavy content such as 8K movies and games with better graphics in just a few seconds. But once 5G becomes commercial, users will be required to change their current devices in favour of 5G-enabled ones.

However, it is likely that the primary use of the technology will go beyond delivery of services on personal mobiles devices.

A government panel on 5G says the technology will extend the use of wireless technologies for the first time across completely new sectors of the economy from industrial to commercial, educational, health care, agricultural, financial and social sectors.

The 5G spectrum is a range of radio frequencies in the sub-6 GHz range and the millimeter-wave (mmWave) frequency range that is 24.25 GHz and above.

The 5G spectrum refers to the radio frequencies that carry data from user equipment (UE) to cellular base stations to the data’s endpoint. LTE networks use frequencies in the sub-6 GHz range and will be sharing the space with 5G traffic. The lower frequency bands will be used for less-densely populated areas because data can travel further, though slower, on these frequencies.

Who bought how much?

By selling the 855.60 MHz of spectrum in the six rounds of auctions, the government raised Rs 77,814 crore. Almost all of this amount — as much as Rs 77,146 crore — had been mopped up on Monday itself, with just about Rs 668 crore coming on Tuesday.

As had been anticipated by market analysts, all the bidding was done on the base price, thereby turning the auction into a “buyers’ market” — meaning that there would no competition among bidders.

From among the three telcos, Mukesh Ambani-owned Reliance Jio Infocomm emerged as the highest bidder in the auction, having bid for 488.35 MHz of the total 855.60 MHz spectrum that was sold over the two days. Reliance Jio spent more than Rs 57,100 crore for buying spectrum in three bands — the 800 MHz, 1,800 MHz and 2,300 MHz bands.

Its rival in the market, Sunil Bharti Mittal-led Bharti Airtel, was not far behind and bought a total of 335.45 MHz of the total available spectrum sold over the two days. It spent close to Rs 18,700 crore for buying spectrum in five frequency bands — the 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, and 2,300 MHz bands.

The least bidding was done by Vi (formerly Vodafone Idea) which bought only about 11.8 MHz spectrum over the two days, spending close to Rs 1,990 crore. No bids were received from the three players in the 700 MHz and the 2,500 MHz frequency bands over the two days.

How long will the spectrum auctions last time around?

Since there are only three big private players in the fray, most officials expect that the final results of the auction are likely to be announced within a day or two.

Apart from these private companies, new companies, including foreign companies. are also eligible to bid for these airwaves. Foreign companies, however, will have to either set up a branch in India and register as an Indian company, or tie up with an Indian company to be able to retain the airwaves after winning them.

A lot has changed in the industry since 2016, when the previous auction took place. The participants then included Tata Teleservices, Idea Cellular, Reliance Jio, Bharti Airtel, Vodafone India, Reliance Communications and Aircel.

In the last few years, there has been a consolidation in the industry, as a result of which there are only three major players now — Reliance Jio, Bharti Airtel and Vodafone Idea. An IIFL Securities report last December suggested that Jio and Bharti Airtel are, by increasing their market share, shaping the industry toward “a near two player structure”. On the other hand, Vodafone Idea, it said, is struggling financially. In recent years, while the user base has grown, the industry itself has witnessed unforeseen financial stress in the form of an important court case against it. The reference is to the Supreme Court verdict last September that ordered telecom players to share revenues coming from even non-telecom services with the government. It gave telecom companies 10 years to pay their adjusted gross revenue (AGR) dues to the government, with 10% of the dues to be paid by March 31, 2021. Vodafone Idea and Bharti Airtel were the worst hit by this order.