Trai bets big on 5G potential, cautious on base pricing

Telecom regulator Trai on Tuesday said it is in consultation with various agencies to work out the 5G spectrum base price in the absence of any domestic benchmark as these bands would be auctioned for the first time in the country.

“There are certain bands which will be auctioned for the first time. There are no domestic benchmarks available for this. So we are working with various agencies to come to a decision on the pricing,” RS Sharma, chairman, Telecom Regulatory Authority of India (Trai), told Financial Chronicle.

Globally, technical and regulatory standards on 5G are still evolving. Since it has a lot of data applications and business potential, the industry is eagerly waiting for the spectrum reserve price to work out their plans for it.

The Trai chairman also said the regulator is finalising the spectrum auction recommendations on the timing, reserve price and quantum of radio waves to be put on the block. 5G spectrum auction pricing would be part of this overall recommendations.

5G spectrum will be sold in bands such as 3,300 MHz and 3,400 MHz. The government will also go for a fresh auction in 700 MHz band, which drew a blank last year as companies complained of high reserve price.

The 5G auction will be conducted by selling spectrum in bands over 3,000 MHz. Also on sale will be the remaining spectrum in bands such as 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.

On the issue of 700 Mhz where the Department of Telecom (DoT) is seeking a new set of lower reserve prices than what was announced in 2016, Sharma said all aspects are being looked at. In 2016, auction per Mhz of 700 spectrum band was priced at Rs 11,484 crore and was not bought by any operator due to its high price.

“Everything is on the table. We are not saying that we will go by what was recommended earlier,” Sharma said. On the timing of the auction, if it should be held in 2018, the Trai chairman was of the view that it is for the government to decide.

Trai’s latest proposal on predatory pricing where the regulator has faced serious accusations of favouring a particular player (Jio)  by the incumbent operators’ association COAI and the operators themselves,  the Trai chairman said the overarching principle of Trai is minimal regulation and its latest proposals on predatory pricing is an example of that.
 He dismissed all the partiality and favouritism criticisms by Coai. “We believe in mi­nimal regulation. Our other overarching principles are ensuring level playing field, growth of the industry, consumer protection and deployment of best and latest technology,” he said.

Trai’s predatory pricing proposal sparked off controversy with ol­der and established telecom carriers like Airtel, Vodafone and Idea, as well as industry body Coai, hi­tting out at the new no­r­ms. The new norms chan­ged the definitions and criteria of significant market po­w­er (SMP) that excludes parameters like traffic volume and swit­ching capacity.

Trai also said a tariff will be considered predatory if in a “relevant market” a telecom operator with over 30 per cent market share offers services at a price which is below the average “variable cost”, with a view to reduce competition or eliminate the competitors in the “relevant market”. The financial disi­ncentive of up to Rs 50 lakh per circle on operators if their service rates are found to be predatory in nature.

Telecom tribunal TDSAT declined to stay on this proposal on Airtel’s petition wh­ile asking the regulator to reply in three weeks.

The new faceoff between the regulator and incumbent telcos is pitted against the latter saying these changes put them at disadvantage and stopped them from responding to “what may be actual predatory tariff plans” and have taken away flexibility from the operators to offer benefits to customers.

But Sharma said these allegations are far from facts. “Predatory pricing recomm­endations are minimal. They don’t touch the forbearance part of the tariffs. It just says play in this field within the boundaries of non-discrimin­ation, transparency, non-predatory. We believe in mi­nimal regulation,” he said.

On the allegations of cha­nging the definition and criteria of SMP, Sharma bro­ught in the context saying in SMP for predatory pricing, switching capacity is not relevant today. Data depends on the network it is operating in. So there was no standard measurement of bringing everything to a comparable level. “Thus, for the purpose of predatory pricing, determining SMP would ha­ve to be based on subscriber base and gross revenue as only these two parameters are re­levant and comparable acr­oss all technologies. It is the only relevant criteria th­at is applied. These two criteria adequately capture SMP, revenue and subscri­bers are the key in any predato­ry pa­rt,” Sharma said.

He said they are also looking at many procedural issues like how to reduce the time of mobile nu­mber po­rtability. Trai is also looking at ease of doing business and what are the cha­nges on policy or implementation wise required to promote domestic manufacturing of equipment and handsets.

Asked if India is ready to move into 5G by 2020 as sp­elt out by communication minister Manoj Sinha, he said, “From a technology pe­rspective, we are not behind to reach on the 5G front. In­dia has many cases of such technology. The business ca­se of each of the utility areas like irrigation, health, education, M2M contact under 5G will determine the scale and the speed of deployment. But as regulator, we see there are huge requirements in India which will accelerate the deployment of (5G) technology.”

The regulator was optim­i­stic on the Indian telecom industry backed by huge da­ta demand. “The telecom sector in India has a bright future. I will not comment on busin­ess related decisi­ons of telcos. From a regulator’s pe­rspective, I see that there is huge data demand in the country. Today, India is consuming one of the highest data globally – 1.5 hexabytes per year. People are consu­ming 4-5 GB data per month on an average. Today voice is incidental. I see this trend of data applications continuing.”