SPECTRUM AUCTIONS

SPECTRUM AUCTIONS

Subject: Economy

Context:  Department of Telecommunications (DoT) said on Wednesday (January 6) that auctions for 4G spectrum in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz bands will begin from March 1. Licence holders have until February 5 to submit their applications.

Concept:

• The last spectrum auctions were held in 2016, when the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore(only 40% of the spectrum was sold out).
• The need for a new spectrum auction has arisen because the validity of the airwaves bought by companies is set to expire in 2021.
• The government plans to sell spectrum for 4G in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz frequency bands.
• The reserve price of all these bands together has been fixed at Rs 3.92 lakh crore for the upcoming auctions. Depending on the demand from various companies, the price of the airwaves may go higher, but cannot go below the reserve price.
• Deferred payment plan : Bidders for the sub-1 GHz bands of 700, 800 and 900 MHz can opt to pay 25 per cent of the bid amount now, and the rest later.
• In the above-1 GHz bands of 1,800, 2,100, 2,300, and 2,500 MHz frequency bands, bidders will have to pay 50 per cent upfront, and can then opt to pay the rest in equated annual instalments.
• The successful bidders will, however, have to pay 3 per cent of Adjusted Gross Revenue (AGR) as spectrum usage charges, excluding wireline services.

What is Spectrum Auction ?

• Energy travels in the form of waves known as electromagnetic waves, these waves differ from each other in terms of frequencies, and this whole range of frequencies is called the spectrum.
• In Telecom, like TV, radio and GPRS, electromagnetic waves of different wavelengths are used, they are divided into bands based on frequencies.
• In telecommunication
• A spectrum auction is a process whereby a government uses an auction system to sell the rights (licences) to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources.
• Spectrum auctions makes use of natural resources for revenue raising and ensuring economic development.

Adjusted Gross Revenue

• Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
• It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.
• As per DoT, the charges are calculated based on all revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales.