As telecom operators mull over strategies to procure 5G spectrum, now that the Telecom Regulatory Authority of India released pricing recommendations, the mm-wave band is likely to be an attractive property for telcos.
The general consensus in the industry remains that the price of spectrum needed for 5G continues to remain prohibitively high. While TRAI cut the price of spectrum across the board by 35-40 per cent, the industry has expressed its displeasure with TRAI’s pricing recommendations.
While the regulator was unable to reduce spectrum prices as per the operators’ demand for most spectrum bands, TRAI drove down pricing for the newly-introduced mm-wave band substantially low.
Key strategy
Sources associated with telecom operators told BusinessLine that procuring mm-wave spectrum is going to be a key strategy for operators in the upcoming auctions if the TRAI’s pricing mechanism is implemented. The reason according to experts is that mm-wave enjoys a reasonably low price allowing the purchase of large quantities of mm wave. This new spectrum is going to have a zero per cent spectrum usage charge, as per the telecom reform packages introduced last year. Thus, the purchase of large quantities of the new spectrum will drive down the reigning 3 per cent charge on yearly revenue to almost zero, for the telco.
Experts also explain that mm-wave will be extremely useful to provide fixed wireless access in urban hotspots which is likely to be one of the first 5G use cases.
The mm-wave band is a new spectrum band introduced for 5G auctions, inhabiting frequencies 24.25 to 28.5 GHz. At the highest frequency of all 5G bands introduced for the upcoming auctions, the mm-wave spectrum is typically used for meeting the very high-capacity and ultra-low latency requirements. Since it is unable to transmit data over large distances, it is best suited for high capacity, urban applications.
TRAI, in their recommendations, has set a reasonably low price for this spectrum band, at a per MHz price anywhere between ₹10 lakh and ₹89 lakh (depending on which licensed service area you purchase the spectrum in).
As per experts, the per MHz price of the mm-wave is 2.2 per cent of TRAI’s price recommendations for the 3500 MHz band, which is another core band needed to set up 5G networks. The mm-wave band also enjoys the highest amount of spectrum availability at 4250 MHz, which will allow telcos to purchase large amounts. To put this number in context, at present, telcos run their networks in around 50-100MHz of spectrum each.
All these characteristics of the mm-wave, will make it an extremely coveted spectrum in the upcoming 5G auctions as per experts. GV Giri, President & Head of Research at IIFL Securities, explains, “This band has a significant amount of spectrum available with zero spectrum usage charges, as is the case for all the spectrum that has been put for auctions. The price for mm-wave is affordable, therefore this should be a good spectrum to buy for the future of broadband in India. With mm-wave one can get a lot of bandwidth, which can become a substitute for wired broadband.”
Cost-effective way
At the moment operators give 3 per cent of their revenues every year as spectrum usage charges. With zero per cent SUC on the future spectrum, using weighted average calculations experts believe that purchasing mm-wave could be a cost-effective way to drive down future SUC to an annual charge below 0.5 per cent of the overall revenue for operators. This could result in annual savings in thousands of crores for the cash strapped operators.
However, Peeyush Vaish Partner & Telecom Sector Leader – Deloitte India, says that operators are going to be strategic regarding which LSAs they will buy mm-wave in, “mm-wave will be purchased alongside 3.5GHz in mostly urban areas, where they are likely to see high enough data traffic to need such large capacities. In rural areas, purchase of mm-wave won’t make sense, and they might rely on 3.5GHz, despite its high price.”
A key issue with purchase of mm wave spectrum are also the rollout obligations proposed by the regulator. Experts believe that 5G is unlikely to see such a high demand at early stages, to warrant the extent of rollout that regulator wishes for, if the spectrum is purchased.
Published on
April 15, 2022
