TRAI Sticks to High Reserve Price for Spectrum Auction

New Delhi: The Telecom Regulatory Authority of India (TRAI) retained its recommendations on high reserve price for spectrum auction despite staunch criticism by the industry.

"The reserve price for spectrum has been estimated on the basis of the perceived value of spectrum to the user," TRAI said in a late night statement.

"The last price of spectrum discovered through auction was that of the 3G spectrum in the 2100 MHz band in May 2010. After adjustment for price escalation for 1 year as well as for relative efficiency, 80 percent of the resultant value was recommended as the reserve prices for spectrum in the 1800 MHz band," it added.

TRAI was responding to the Department of Telecom (DoT's) reference back on TRAI's recommendations on "Auction of Spectrum" dated April 23, 2012.

The regulator also said that the reserve prices have been finalized in the context of the recommendation to liberalise the spectrum which means essentially to remove technology restrictions to use of new access technologies within the same band or bands.

This will enable the operators to choose any technology in the spectrum bands held by them. Eliminating constraints associated with spectrum usage is expected to greatly enhance the value of the spectrum to the operators.

On possible implications of the proposals on tariff, TRAI said they would not have any adverse impact on the profitability of the wireless industry or the entry of new operators nor would do they adversely affect the affordability of the consumer.

"The results indicate that mostly, the impact on tariff is less than 4 paise per minute and often much lower. This can be either absorbed by the service providers from the additional minutes that are generated or recovered through charges for different retail and wholesale services," it added.

The operators have warned of a 100 percent hike in tariffs if the proposals are accepted.

The regulator has recommended, among other proposals, a reserve price of 3,622 crore for 1 MHz pan-India spectrum, which is around 10 times higher than the price at which 2G licences were allocated in 2008 under then Telecom Minister A. Raja.