Think Out-of-the-Box On Telecom Spectrum

After four years, the government is venturing into spectrum auctions once again, offering around 2,250 MHz of spectrum across seven bands. It has refused to learn from the previous auction in 2016, when high reserve prices curtailed offtake.

The reserve price is very high, telco finances are a mess and, but for the dire necessity of renewing their lease on spectrum as it expires later this year, they would not bid at all. Perhaps it is time the government thought up some out-of-the-box alternatives to flogging spectrum to emaciated telcos.

Suppose at least two special purpose vehicles come up to buy up the spectrum on offer. Three would be better. This will give the government some money upfront. Suppose these vehicles act as suppliers of spectrum on a spectrum exchange, to offer week-ahead, dayahead or even hour-ahead contracts, and telcos are able to buy the spectrum they need as and when they need it.

In the ongoing auctions of 5G spectrum in the US, cable companies and DTH operators too are competing with telcos to bid up prices. Such would-be users of spectrum could be allowed to place their demand on the spectrum exchange, and the competition would bid up prices. Would this mean that telco tariffs would turn dynamic, with calls or data traffic during peak hours costing more than at other times? Probably. Why not?

Telcos would not need to spend money on hoarding spectrum and would have to buy only what they need. This would lower costs. Who would set up the spectrum-owning entities? There are multiple options. Private equity firms could. A finance firm can be induced to set up a spectrum investment trust, on the lines of a real estate investment trust. An intermediary holder of spectrum is an idea whose time has come.

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