Can Govt Untangle Spectrum Pricing Problem For Faster 5G Rollout In India?

India’s wait for the 5G spectrum seems to be drawing to a close with the Department of Telecommunications gearing up for spectrum auctions likely to take place by August this year. Following a long wait and several roadblocks, media reports suggest that the official launch could happen as early as next year—six years after the 5G technology came to India in 2017. 

According to a report by Qualcomm, by 2035, the 5G technology is estimated to have a market valuation of $13.1 trillion and will create jobs worth $22.8 million. Several countries like South Korea, France, Germany, the USA, and China have been exploring the space for years now, setting up the stage for early adoption of 5G. 

India seems to have fallen behind and the issues between the telecom companies and the Telecom Regulatory Authority of India (TRAI) have emerged as the main villains in the country’s 5G saga.

Telco-TRAI Tussle

Since 2018, telecom operators like Reliance Jio, Bharti Airtel, and Vodafone Idea have been at loggerheads with the TRAI over the pricing of the 5G spectrum. On their part, the telcos feel that the prices are insufficient to roll out viable 5G technology in the country. 

The TRAI has recommended auction for 526-698 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300- 3670 MHz and 24.25-28.5 GHz bands. Of this, the 700 MHz and 3300-3670 MHz 5G spectrum bands are crucial for 5G services. 

According to media reports, the prices recommended by the regulator are licensed for 20 years with a 36 per cent cut in the baseline 5G spectrum pricing for the 3300—3670 MHz band which has been the point of contention. 

Back in 2018, the regulator had allotted Rs 492 crore per MHz for 3300-3670 MHz spectrum band. However, last year, it slashed the price by 36 per cent to Rs 317 crore per MHz for 3300-3670 MHz. According to the telcos, a 36 per cent price cut is insufficient to roll out viable 5G technology in the country. The telcos are demanding that the spectrum prices be slashed by at least 90-95 per cent as compared to the 2021 prices.

Unhappy with the price cut, the Cellular Operations Association of India (COAI) had said that the 36 per cent cut in the spectrum prices announced by the TRAI is “one step backward than forward towards building a digitally connected India”.

“If one were to look at the pan-India price of 3.5 GHz spectrum, then we are back to square one with effectively no change and will nullify the relief provided by the Union cabinet in the year 2021,” the COAI had said in a statement. Last year, the government had announced a slew of reforms such as a four-year moratorium plan for the adjusted gross revenue dues repayment, removal of spectrum usage charges, and 100 per cent FDI, amongst others, in order to provide relief to the beleaguered telecom companies. The government had also announced a 5G-led manufacturing unit to be developed in the country under the production-linked incentive scheme.

The body said that the spectrum pricing recommended by the TRAI was too high and that the industry had recommended a 90 per cent lower price. “To see only about a 35-40 per cent reduction recommended at prices, therefore, is deeply disappointing,” it said, also pointing out that the methodology used by the TRAI to calculate spectrum pricing is the one that they adopted in 2018. 

The TRAI recently asked the Department of Telecommunication to intervene and decide the duration of 5G spectrum licenses as well as whether the frequency range of 27.5-28.5 GHz is to undergo 5G auction, reported a publication. 

Trial of 5G Trials

Despite the contention between telecom operators and the TRAI, several mobile companies in India have already started researching, developing as well as testing 5G technology in their smartphones. 

As per the 2021 Ericsson Mobility Report report, 5G technology will represent around 39 per cent of mobile subscriptions by the end of 2027 in India. According to another report by Mckinsey, India will increase the number of internet users by about 40 per cent to a figure between 750 million and 800 million and double the number of smartphones to between 650 million and 700 million by 2023.

Against the backdrop of such staggering numbers, telcos like Bharti Airtel, Reliance Jio and Vodafone Idea have run 5G trials after approval from the Department of Telecommunications to tap into the segment early. 

Last year, Bharti Airtel partnered with Nokia to conduct India’s first 5G trial in the 700 MHz. The company went on to conduct the country’s first rural 5G trial along with the first 5G cloud gaming experience. Mukesh Ambani’s Reliance Jio also successfully conducted a trial on connected drones on its indigenous 5G network. Vodafone and Nokia teamed up for the trials of 5G services using E-band in areas where the fiber was difficult to deploy. 

Meanwhile, smartphone companies like One Plus, OPPO and Ericsson have also conducted 5G trials in the last few months.

Bailing Out Burdened Telcos

One other hurdle in the country’s 5G path is the stress that the India telcos have been reeling under. In the last few years, the country’s telecom industry has been burdened with losses and debt with major telcos owing billions to the government. 

The telcos owed over Rs 3 lakh crore to the government in the form of AGR dues until September 2020. Of this, Bharti Airtel owes Rs 25,976 crore, Vodafone Idea owes ₹ 50,399.63 crore, BSNL owes Rs 5,835.85 crore and MTNL owes Rs 4,352.09 crore. Notably, Mukesh Ambani-led Jio Infocomm had cleared its dues last year. The AGR dues for telcos like Reliance Communications and Aircel that have shut their operations remain unchanged at Rs 25,194.58 crore and Rs 12,389 crore, respectively.

Last year, amid non-repayment of dues by major telcos, the Supreme Court of India gave a period of 10 years to Bharti Airtel and Vodafone-Idea for the repayment of their dues.

In January this year, the government announced a bailout package for Vodafone-Idea by converting its spectrum auction installments and AGR dues into equity. With this, the government becomes the largest shareholder in the company owning a stake of 35.8 per cent. Bharti Airtel, however, opted out of converting AGR dues to equity and instead chose the four-year moratorium plan in order to conserve Rs 40,000 crore.