DoT plans US model for 3G spectrum auction

NEW DELHI: The Department of Telecom (DoT) has decided to go for a “controlled ascending” auction rather than a direct auction for allocating 3G spectrum. This method was first developed for the US Federal Com-munications Commission’s (FCC) spectrum auctions in 1994 and has been used for all subsequent spectrum auctions by the FCC.

According to DoT, a straight auction may lead to a situation similar to that in the mid-1990s, when many players could not pay the astro-nomically high amounts they had bid. Even otherwise, the experience with straight telecom and broadcasting licence auctions — in Europe and in India — has not been fully satisfactory, says DoT in its note to the Telecom Commission.

According to sources, the 3G spectrum auction will be conducted individually for each of the 23 telecom circles in the country.

As reported earlier by ET, the DoT committee studying Trai’s recommendations had suggested that the base price for the auction of 3G spectrum be Rs 160 crore ($40 million) for Delhi, Mumbai and other Category A circles; Rs 80 crore ($20 million) for Chennai, Kolkata and Category B circles; and Rs 30 crore ($7.5 million) for Category C circles. The committee had also recommended that in the first phase, only two GSM players be granted spectrum in the 2.1 GHz space, and the third slot be re-served for state-owned BSNL/MTNL.

Here’s how the the 'controlled ascending' auction, which will be conducted online, will work: If only two operators are to be chosen for Delhi, all players will first place their bids. If more than two players place bids above the base price, the auction will continue after eliminating the lowest bidder and the second-lowest bid will be the base price for the next round. At the same time, the amount of the second-lowest bid and the highest bid will also be made public.

In the next round, bidders can increase their bids or keep them at their older value. The process will continue till two operators emerge as winners. Finally, all three players (including BSNL/MTNL) will pay the same spectrum charge as the highest bidder.

In 2001, Europe had witnessed a telecom crash after operators, in a desperate attempt to outbid each other, submitted high bids for 3G spectrum running up heavy debt. The winners cracked up soon after, as the high debts affected their credit ratings, leading to a scenario where they could not borrow to pay for the 3G equipment, nor did they have the resources to maintain and upgrade contracts within their existing 2G networks. Europe witnessed over 1,00,000 job cuts in the telecom sector within the first year of the 3G bids.

Meanwhile, DoT officials also said that they had got representations from CDMA operators to auction 2G spectrum, which is currently allocated freely (in phases) based on the subscriber base of operators. It has been a long-pending demand of CDMA players to charge for 2G spectrum, as the current policy awards GSM operators double the spectrum allocated to them, based on the criterion that CDMA was a more spectrum-efficient technology.
 

pratikbharti

MP Guru
DoT nod for CDMA players to enter GSM

The government is believed to have cleared the way for cellular mobile operators to offer services using both technologies - CDMA and GSM - a move that has irked the powerful cellular association which cried foul.

As the reports trickled that the permission for the use of twin-technology would benefit the aspiring Reliance Communication, an Anil Ambani group company, Cellular Operators Association of India (COAI) shot a letter to the government saying that such a permission was against the existing policy and is tantamount to favouring a few.

While Reliance Communication spokesman declined to comment on whether the company got a government nod on its year-long application, no official confirmation could be obtained from the Department of Telecommunication (DoT).

The news about Reliance Communication as also Shyam Telecom and Mahendra Nahata-promoted HFCL started doing the rounds this evening, coinciding with the meeting of the Telecom Commission in New Delhi.

RCom had approached DoT last year seeking spectrum to start GSM-based mobile services in all states other than the eight in the eastern region where the company is already having GSM operations.

The DoT is understood to have cleared the proposal based on the recommendations of telecom regulator TRAI in this regard.

Protesting against the move, COAI said in its letter to DOT that "Without prejudice to our submissions that such crossover/dual allocation of spectrum cannot and should not be permitted, it is submitted that even if the same were to be allowed, it can only be done through change in both policy as well as license as also after following the process of law."
 
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