5G Spectrum Auction

5G Spectrum Auction

Subject : Economy

The earnest money deposited by the four bidders for 5G spectrum indicates that Reliance Jio is expected to bid the most aggressively

Details:

• Reliance has provided the DoT with an EMD between Rs 5,000 crore and Rs 7,000 crore.
• The clear aim for Reliance here is to bid aggressively in existing spectrum bands, where it is leading the market, namely 800 MHz and  1,800 MHz.
• Reliance is also likely to bid most aggressively in the new 5G band 3,500 MHz to get the cleanest possible spectrum.
• Adani has also likely put in an EMD below Rs 250 crore, with a sole focus on mm­wave for private networks.

The earnest money deposited:

• Earnest money is a deposit made to a seller that represents a buyer’s good faith to buy a home or high-value products . The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing.
• EMD is an assurance of payment in good faith made by operators to the government to assure purchase of high priced items such as 5G spectrum.
• If the EMD is higher, the operator has the flexibility to put larger bids for larger quantities of spectrum. Thus,the quantum of EMD allows the market to get a rough idea about the spectrum bidding strategy of each operator.

How does the spectrum band work?

• Energy travels in the form of waves known as electromagnetic waves. These waves differ from each other in terms of frequencies. This whole range of frequencies is called the spectrum.
• In telecommunication like TV, radio and GPRS, radio waves of different wavelengths are used.
• This radio spectrum is  divided into bands based on frequencies.
• Most of the radio spectrum is reserved in countries for defence and the rest is available for public use. 
• Following an increase in the number of phone users and new services, countries started auctioning the frequencies to telecom companies. This sale has become a major revenue earner for governments around the world.
• India was among the early adopters of spectrum auctions beginning auctions in 1994.
• Devices such as cellphones and wireline telephones require signals to connect from one end to another. These signals are carried on airwaves (medium of radio waves), which must be sent at designated frequencies to avoid any kind of interference.
• The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves. The central government through the Department of Telecom (Ministry of Communications) auctions these airwaves from time to time.
• Airwaves in the 3500 MHz band are considered ideal for the first wave of the 5G.
• Depending on the demand from various companies, the price of the airwaves may go higher, but cannot go below the reserve price.
  • A reserve price is a minimum price that a seller would be willing to accept from a buyer. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.
  • The reserve price is recommended by Telecom Regulatory Authority of India.
• The successful bidders will have to pay 3% of Adjusted Gross Revenue (AGR) as spectrum usage charges.
  • AGR is divided into spectrum usage charges and licensing fees that are fixed between 3-5% and 8% respectively.
  • It is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).

What is mm wave?

• Millimeter wave spectrum is the band of spectrum between 30 GHz and 300 GHz, wedged between microwave and infrared waves, this spectrum can be used for high-speed wireless communications.
• One of the greatest and most important uses of millimeter waves is in transmitting large amounts of data.
• mm wave frequencies are being utilized for applications such as streaming high-resolution video indoors.
• Traditionally, these higher frequencies were not strong enough for outdoor broadband applications due to high propagation loss and susceptibility to blockage from buildings as well as absorption from rain drops. These problems made mm waves difficult for mobile broadband.