PRELUDE TO 5G

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Last Updated18/06/2022

THE Union cabinet took the first steps towards rolling out 5G services, approving the auction of spectrum.
Government has eased terms of spectrum auction, but high reserve price and allocations for enterprises will pose problems

The auction, which will include spectrum across multiple frequency bands.
The government has eased some of the constraints that had emerged as irritants in the past-a fair amount of spectrum has been put up for auction, usage charge has been dropped, and payment terms have been eased.

The reserve price of spectrum has been retained by the govemment, despite demands from the telecom operators to review it.
Telcos have, in the past, made the case for around 90 per cent reduction in the reserve price.
However, in line with the recommendations of the Telecom Regulatory Authority of India (TRAI), which were also accepted by the Digital Communications Commission (DCC), the reduction in the reserve price has been of a much lower magnitude, around 35-40 per cent.
Thus, considering the high reserve price for the 700 MHz band, there is a possibility that this band may remain unsold this time as well.
As per some estimates, industry is likely to fork out around Rs 1.1 lakh crore in these auctions.
This will imply that the debt burden of the already over indebted telcos will increase further.
However, considering that the payment for the spectrum can be spread out over 20 equal installments, it will ease immediate cash flow concerns.
The govemment has also allowed bidders the option to give up the spectrum after 10 years, without any liability for the balance payment.

The government has made it possible for enterprises, mostly tech companies, to be directly allocated spectrum by the Department of Telecommunications to engage in the Internet of Things (IoT), machine to machine communications etc.
Telcos had earlier opposed this move on grounds of a potential loss in their revenues-according to their estimates, 40 percent of 5G revenues accrue from the enterprise services.
However, the government has leaned on the side of the tech companies. Doing so, after all, would also serve as an additional source of revenue.
Considering that 5G has more enterprise use cases, at least in the initial years, the network capital expenditure is likely to be relatively low early on.
But as retail use cases evolve, a successful rollout of 5G services across the country will lay the ground for a digital transformation, having wide ranging implications for economic activity.