Govt is going to bell the cat with 5G auctions

The telecom regulator TRAI (Telecom Regulatory Authority of India) has floated a consultation paper on the next round of spectrum auction last week. The auction aims to sell spectrum in different bands, including 3300-3400 MHz and 3400-3600 MHz airwaves that are used for 5G services. It's unlikely that the department of telecom (DoT) will sell airwaves in the current financial year due to various reasons.
 
In the consultation paper, TRAI has asked for comments on a host of issues including the appropriate time for the next auction, the amount of spectrum to be auctioned, the block sizes of the spectrum to be sold, the need for changes in roll out obligations, and how the spectrum should be valued.
 
It says that as of January, there are 24 commercial networks in 15 countries that are operating on 3600-3800 MHz band, including UK, Canada, Belgium, Spain, Bahrain and Iran. "GSA also reported that the ecosystem for bands 42 continues to grow with 96 devices operate in this band," the paper says.
 
The 5G technology is expected to give boost to IoT (internet of things) and M2M (machine-to-machine) communications rather than providing higher speed data on handheld devices. Globally, the use cases of 5G are still being explored in areas like IoT and M2M communications. In addition, there's still limited deployment of 5G across the world. Major 5G trials are expected to begin in 2018 with full-scale commercial deployment expected in 2020. That's roughly three years from now.
 
Given that 4G technology was introduced in 2012, and the major push to 4G came about only last year with the launch of Reliance Jio, the domestic operators are not prepared - financially and in terms of technical knowhow - to invest aggressively in 5G at this juncture.
 
While the government may need revenues from the telecom sector in the current financial year, the industry players have so far opposed to such an idea. The operators say that the ongoing consolidation in the sector - Idea-Vodafone merger, Airtel acquiring Videocon Telecom, and others - is expected to take a long time to settle down. As per the budget documents, the finance ministry expects non-tax revenue from telecom sector to drop to Rs 44,342 crore in 2017/18 as against Rs 98,994 crore estimated in 2016-17.
 
The rationale on why the spectrum auction should not be held now are well covered in the paper itself. For instance, the paper says that telecom sector owes about Rs 4.6 lakh crore to various financial institutions and banks while some Rs 3.08 lakh crore is due to the DoT on account of deferred payment plans opted by operators for the purchase of spectrum in the recent auctions. "Due to hyper competition, concerns have been expressed about the financial health of the sector, its revenue growth and the capability of the companies to meet their contractual commitments," says the paper.
 
The financial health of the sector did affect the last auctions held in October 2016 when nearly 60 per cent of the spectrum remained unsold. The government's plan to sell 700 MHz spectrum (among other airwaves) last year turned out to be a damp squib. The telecom operators didn't bid for highly-priced spectrum, en masse. Yet another round of auction at this moment doesn't make sense.