Telcos demand Drastic Reduction in 5G Spectrum Prices

In the submissions to the TRAI, the telcos have demanded drastic reductions in the 5G Spectrum Prices. What's more, the telcos have warned the government of low participation in the spectrum auction coming very soon.

5G Spectrum Prices Too High: Telcos to TRAI

Notably, the telcos have asked for as much as a 90% reduction in reserve 5G spectrum prices, along with other conditions. These conditions include no payment upfront and a moratorium of at least 5 years. The telcos have also asked to pay the total liability over a period of 24 years after the moratorium ends.

These comments come in the light of the TRAI asking the industry stakeholders to submit their views on the 5G consultation paper it issued last year. Interestingly, way back in 2018, TRAI had recommended a base price for the mid-band at ₹492 crore/MHz, or ₹9,840 crores for a pan-India minimum block of 20 MHz. However, to rollout 5G effectively, the telcos need at least 100 MHz spectrum block apiece; that translates to ₹49,200 crores in spectrum liability at the minimum.

As such, Vodafone Idea has said that the government has to reduce the reserve prices for the mid-band spectrum by almost 90%. The base price for the mid-band, incidentally, remains at the 2018 value, with the last consultation paper indicating no changes. Similarly, Reliance Jio has also asked for a 95% reduction in the mid-band spectrum, which falls between 3.3 GHz and 3.67 GHz. Bharti Airtel, though, has only asked for "nominal" spectrum pricing; Airtel said that the 5G spectrum prices should not be more than 10% of what the government finalized in 2018.

In terms of mmWave spectrum, each of the three telcos has placed slight variations of a similar price point. Vi has asked for mmWave to cost about 1% of the mid-band, so has Jio; Airtel did not comment on the matter, however. Jio had also commented on the spectrum prices of V-band and E-band, two microwave bands used for wireless backhaul; it said that the price of these bands should remain around 50% that of mmWave.

A Gamble to Rollout 5G in India

The telcos have also commented on the way the sector regulator calculated the 5G spectrum prices. Airtel said, "Its previous approaches like the indexation of past prices, avoided cost method are not relevant due to the changing dynamics of the 5G era. It is no longer enough to augment additional capacity for the same traffic and avoid the cost". In general, the telcos have pointed to the fact that much has changed in the industry, and the sector remains financially strained. 5G still remains very much a gamble for telcos, as the international experiences suggest negligible incremental revenue. However, the costs remain incremental, and telcos across the world have been unable to recover their incremental costs.

Therefore, the telcos have asked for lenient pricing and payment structure. For their part, Vi and Airtel have asked for no upfront payment with a 6-year moratorium. Jio, on the other hand, has suggested a 10% upfront payment, along with a 5-year moratorium. Jio also called for 25 annual installments after the moratorium with interest at RBI repo rate; Vi, on the other hand, suggested 20 annual installments. Airtel stayed in the middle, with 24 annual installments; it did call for a total exemption from interest on the spectrum liability.

The telcos did comment finally on the spectrum caps as well. Jio submitted that the spectrum cap should be at 50% since a 35% overall cap ongoing right now remains unsuitable for a three-player market. On the other hand, Airtel has insisted on reducing the spectrum cap to match the overall cap. None of the government telecom entities have