In 2013, the Australian Communications and Media Authority (the ACMA) conducted auction of spectrum in the 700 MHz band (and the 2.5 GHz band. The 700 MHz band became available as a result of Australia switching from analog to digital television services. The 2.5 GHz band is currently used for electronic news gathering (ENG) services, which are being migrated to other parts of the spectrum. The licences issued in both bands will be of 15 years duration.
The auction used a combinational clock auction (CCA), similar to that used most recently in the UK 800 MHz and 2600 MHz band auction. This is a price clock-based auction method used to sell multiple items in a single process and designed to create incentives for bidders to bid their full value for the spectrum. However, it makes it difficult (if not impossible) to assign a value to each band separately. CCA consisted of two major stages:
an allocation stage, which determines the spectrum that each bidder secures
an assignment stage, which determines the specific frequency ranges awarded to each successful bidder from the allocation stage.
ACMA imposed ‘competition limits’, which limited the total amount of spectrum that a single bidder can acquire in each band in the auction.
25 MHz paired (50 MHz in total) in the 700 MHz band
40 MHz paired (80 MHz in total) in the 2.5 GHz band.
Reserve price was set at AU$1.36/MHz-PoP for the 700 MHz band and AU$0.03/MHz-PoP for the 2.5 GHz band. Based on this, the auction was expected to generate AU$2.89 billion, but with the unsold allocation in 700 MHz only AU$1.96 was raised: AU$ 929 million less than expected. Setting a high reserve price has evidently backfired resulting in lower total proceeds. Three operators have won spectrum in Australia's digital dividend auction, in the 700MHz band, but a 2x15MHz chunk - one-third of the total - has gone unsold because of the high reserve prices set by regulator ACMA.
CASE STUDY OF LAST THREE SPECTRUM AUCTIONS (NOV 2012, MARCH 2013 AND FEB 2014) IN INDIA
Consider the Spectrum auctions of India held in the month of November 2012. These auctions were held after the cancellation of 122 licences of TSPs by the Hon’ble Supreme Court of India. The licensees, whose licences were cancelled, were allowed to continue providing the services till the auctions are over. TRAI was asked to make recommendations for these auctions. After considering the recommendations of TRAI1, the Government made the following provisions in the auction:
There are no restrictions on the technology to be adopted for providing services within the scope of the service license using spectrum blocks allotted through this auction. The technology should be based on standards approved by ITU/TEC or any other International Standards Organization/ bodies/ Industry.
Existing Licensees will be allowed to convert their entire existing spectrum holding in 1800MHz band into liberalised spectrum after payment of auction determined price.
Following were the limits imposed on the quantum of spectrum that a bidder could procure through these auctions:
800 MHz Band: Rs. 18200 crore (US$ 3033 mn) for 2x5 MHz (i.e. 1.3 times that of spectrum in 1800 MHz band).
Apart from the spectrum acquisition fee, TSPs shall be liable to pay Spectrum Usage Charges (SUC) as a percentage of the Adjusted Gross Revenue (AGR) as per the following slab rates. For the purpose of calculation of spectrum usage charge, minimum AGR shall be not less than 5% of the bid amount.
Table
Spectrum slab
Annual spectrum charges (as a percentage of AGR)
GSM
CDMA
Up to 4.4 MHz
Up to 5 MHz
3
Up to 6.2 MHz
Up to 6.25 MHz
4
Up to 8.2 MHz
Up to 7.5 MHz
5
Up to 10.2 MHz
Up to 10 MHz
6
Up to 12.2 MHz
Up to 12.5 MHz
7
Up to 15.2 MHz
Up to 15 MHz
8
Duration: The validity period shall be 20 years from the date of issue of Letter of Intent (LoI) (the ‘Effective Date’).
Deferred Payment Option: (i) An upfront payment of 33% in the case of 1800MHz Auction and 25% in the case of 800MHz Auction of the final bid amount; (ii) Moratorium of 2 years for payment of balance amount, which shall be recovered in 10 equal annual instalments.
Spectrum Sharing: Operators whose entire spectrum holding in a particular band (900MHz/ 1800MHz and 800MHz) is/ has been liberalized would be permitted to share spectrum without any additional one time spectrum charge.
Spectrum trading will not be allowed in India.
There was no bidder for the 800 MHz band. For 1800 MHz spectrum, there were five bidders. Spectrum in LSAs of Delhi, Mumbai, Karnataka and Rajasthan in 1800 MHz remained unsold. Except in Bihar, spectrum in all other LSAs was sold at the reserve price. LSA wise details of reserve price and auction discovered price are given below.
