COAI voices its concern about spectrum crunch in the upcoming auction

COAI New LogoThe Cellular Operators’ Association of India (COAI) has written a letter to Nripendra Misra, Principal Secretary (PS to the prime minister Narendra Modi over spectrum crunch and has asked for more spectrum for fair auctions due February 2015 in India.

The industry requires the government’s enabling support for crafting a viable and sustainable industry structure, the letter said.

“For this, a predictable and stable regulatory and policy environment that ensures an investor-friendly climate, protection of existing investments, service continuity, availability of adequate, appropriate and contiguous spectrum would be a prerequisite,” it said.

As per the letter, the government’s digital agenda will require huge investments, and regulatory certainty and protection of existing investments are essential for attracting future investments.

“These investments will not be made, if existing investments (to the extent of thousands of crores) are put at risk and the return on investment is put in jeopardy,” it said.

It further added, if the proposed spectrum auction (to be held in February 2015) is conducted with completely inadequate spectrum, it will put investments of thousands of crores and continuity of services to millions of customers at huge risk.”

Also Read : Will customers end up paying for the spectrum auction in terms of higher tariffs?

The COAI letter said an unprecedented auction design, where the spectrum being put to auction is almost entirely held by existing licensees (with hardly any fallback spectrum in other bands), is a fundamentally flawed mechanism and is most likely to lead to irrational and totally unrealistic pricing or a significant write off of existing investments by incumbents.

“In the auction that is going to start in February, in 1,800 MHz band, 20 circles are going for auction, while in the 900 MHz band 18 circles will be up for sale. The recommendations said spectrum should be put to auction in a block size of 2×200 KHz in both the 900 and 1,800 MHz bands,” according to the letter.

“It is requested that the auction should not be conducted till the adequate spectrum, as recommended by TRAI (Telecom Regulatory Authority of India), is made available,” it said.

“We, therefore, suggest that as a first priority, additional spectrum should be made available on an urgent basis in 800 MHz, 900 MHz, 1800 MHz and 2100MHz bands as these bands are the most harmonized spectrum bands internationally,” the letter suggests.

Our Take : 

As voiced by COAI and various other telecom players, if the spectrum auction proceeds in its current form, some of the implications it could lead to would be:

1) Increased price of the spectrum which is auctioned thus leading to tariff hikes by the operators in an effort to pass on the price hike burden onto the subscribers

2) Disruption of services in different circles as is the case currently in Delhi where Idea has won spectrum which is currently been held by Airtel and Vodafone

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