Thursday, August 7, 2008

DoT Guidelines for 3G and BWA Spectrum

The DoT announced its policy for allocation and pricing of 3G and BWA spectrum in August 2008. The 2.3 and 2.5 GHz bands have been earmarked for BWA with 700 MHz and 3.3-3.6 GHz to be considered later subject to availability. For 3G services, the 2.1 GHz band (1920-1980 MHz paired with 2110-2170 MHz) has been identified. In addition, CDMA operators can get spectrum for EVDO services in 450 MHz, 800 MHz and 1900 MHz bands, depending on availability. Any entity that already has a UAS license or fulfils the criteria for getting it is eligible to bid for 3G and BWA spectrum. In case of BWA, Category A and B ISPs will also be allowed to bid.

3G spectrum is to be auctioned per service area in the form of 2x5 MHz blocks, with 5 to 10 such blocks in each service area, depending on availability. Each operator can bid for only one block in a specific service area. CDMA operators can apply for 2x1.25 MHz in 800 MHz and allocations will be made (subject to availability) on the basis of subscriber base in the service area. The price will be equivalent (on a pro-rata basis) to that paid for a 2x5 MHz block by the highest bidder in 2.1 GHz band. The reserve price has been set as follows:
  • Mumbai, Delhi and Category A – Rs 160 Crore
  • Kolkata, Chennai and Category B – Rs 80 Crore
  • Category C – Rs 30 Crore
It has also been stipulated that for future auctions, the reserve price will be same as the highest bid in the upcoming auctions. A controlled, simultaneous, ascending e-auction will be used for 3G spectrum allocation. Note that BSNL and MTNL automatically qualify to get spectrum in the services where they currently operate. Nevertheless, they will have to pay the same price as the highest successful bid.

All licensees will have to pay 1% of AGR as spectrum fees annually from the second year onwards. The spectrum allocation will be for a period of 20 years and non-UASL entities that get spectrum will be granted UASL licenses (upon paying the appropriate UASL entry fees). DoT has mandated that within 5 years of getting the spectrum, 3G operators in metros must cover 90% of the respective service area and 50% of the DHQs/cities in Category A, B and C circles for which they have a license. In the latter case, 15% of the covered DHQs should be rural SDCAs.

In case of BWA, a maximum of 20 MHz can be obtained by a successful bidder across both the bands (in the form of two 5 MHz blocks in each band). The reserve price for auction has been set to one-fourth of the 3G price. The auction process will be same in for 3G spectrum. In case of a tie between two bidders who happen to be UASL operator and Category A/B ISP respectively, preference will be given to the former. If the tie is between two entities with similar license, then subscriber base will be deciding factor. As with 3G spectrum, BSNL and MTNL will automatically get 20 MHz in their respective services areas by paying a price equal to the highest bid during the auction process.

All licensees will have to pay 1% of AGR as spectrum fees annually from the second year onwards. The duration of spectrum ownership will be 15 years. Same considerations apply for new entrants (without UAS/ISP license) as with 3G. BWA service providers in metros will have to cover 90% of their respective service areas within 5 years of getting spectrum. In Category A/B/C circles, 25% rural SDCAs must be covered within 2 years and 50% within 5 years.

Note that DoT has not explicitly ruled out trading and/or sharing of spectrum. As per the guidelines, these, if allowed, will be subject to Government policy. This is in contrast to the guidelines issued earlier in February which clearly stated that “no trading/ reselling of spectrum is allowed”.