Group 2 - 3G & BWA Auctions_Queries and Responses

8/8/2019 Group 2 - 3G & BWA Auctions_Queries and Responses

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The effect of 3G-spectrum auction on

Indian telecommunication sector

Submitted By Abhinav Singh Kakran PGP01004

Abhishek Vaish PGP01005

Manish Verma PGP01023

Sumit Singh PGP01042

Vimal Saini PGP01047


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The effect of 3G-spectrum auction on Indian telecommunication sector 2

The effect of 3G-spectrum auction on Indian telecommunication sector ................. 1

Introduction .............................................................................................................. 3Technologies ............................................................................................................................................................... 33G ................................................................................................................................................................................. 3WiMAX....................................................................................................................................................................... 4

3G Licensing ................................................................................................................................................................ 4Beauty Contest....................................................................................................................................................... 4 Auction ...................................................................................................................................................................... 5Choice for Indian spectrum allocation ....................................................................................................... 5

Price Effect ................................................................................................................................................................... 6Investment Effect...................................................................................................................................................... 63G Licensing throughout the world ................................................................................................................ 6Indian Telecommunication sector ................................................................................................................... 8

Motivation to enter ............................................................................................................................................... 10Infotainment ............................................................................................................................................................ 11Winners Curse ....................................................................................................................................................... 122Past experiences .................................................................................................................................................. 122Game Theory .......................................................................................................................................................... 133

Are we ready? ........................................................................................................................................................ 133Challenges........................................................................................................................................................... 144Smartphones,anyone?..............................................................................................................................14

Alliance and Coverage.15

European 3G Auction-A Comparison ..15Here comes the bigspenders.16

What Happens Now?.......................................................................................................................16Double Trouble? ...............................................................................................................................17Who Wins Who Loses?187

Figure 1: The Evolution of Telecommunication ...................................................................... 4

Figure 2: Call Charges ........................................................................................................................ 10

Figure 3: Charges and Subscribers in India (sources www.cashcow.in) ................. 12


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Figure 4: 3G-auction of various countries ............................................................................... 13

Figure 5: Mobile Internet Users.................................................................................................... 14

Table 1: Licensing through auction ............................................................................................... 7

Table 2: Licensing through beauty contest ................................................................................ 8

Introduction

An initiative commenced in late 2008 finally took form in first quarter of 2010.On 9th of April 2010 3G spectrum and BWA auction commenced. The auction wasconducted over 34 days and involved 183 rounds of bidding across severalservice areas.

The unique feature of this bidding was that it was conducted online. So, everydayeach player can know what is the highest bidding amount and gave them enoughtime to think and strategize. The information was available online and media

also make sure that the auction information reaches to common man. All the 71blocks that were put up for auction across the 22 service areas in the countrywere sold.

The auction generated Rs 67,719 Cr, with service area of Delhi (including NCR)winning the highest bid of Rs 13,268 Cr. All the payments were made on 31st ofMay 2010. The auction was predicted to generate revenue of Rs 20,000 Cr.

Technologies

3G

3G refer to third generation of mobile systems. Mobile cellular becomecommercially available in early 1980s. That is technically known as firstgeneration of mobile system. Those were analog systems and had only voicetransfer capability. First generation mobile system was never deployed in India.

By 1990s digital equipments started to make their mark. Digital equipmentswere cheap and of better quality. In early 1990s there was a need for nextgeneration of mobile system. Hence second generation of mobile systems weredeployed. Second generation mobile system provided better voice transfercapability, and had some support for text transfer in form of SMS.


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By the mid 1990s it become apparent that communication of the future will bein form of data and not voice. 2.5G tried to emulate the same, that is to transfertext on voice channel, and hence the evolution of GPRS and EDGE technology. Butthey basically used the same frequency that is used for voice transfer.

The need for faster speed, a global compatibility and multimedia service has ledto the development of 3G systems. For this International MobileTelecommunications-2000 (IMT-2000) was realized. The goal of IMT-2000 wasto set the standards of third generation of telecommunications. 3G has acapability to transfer data up to 2Mbps.

Figure 1: The Evolution of Telecommunication

WiMAX

WiMAX (World Wide Interportablity for Microwave Access) is a protocol thatprovides mobile Internet. WiMAX also has the capability to transfer voice dataover IP network. In WiMAX data can be transferred at a rate of 40Mbps.

3G Licensing

Around the world there are primarily two ways through which licensing is donethese are beauty contest and auctioning.

Beauty Contest


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In beauty contest, a set of requirements are published in public forum and all theinterested contestants are requested to showcase their capabilities and howtheir candidature can be the best suited to the requirement. The successfulapplicants are chosen on the basis of predetermined requirements. The criteriaare different from country to country, business plan and technical expertise.

Criteria that are often used are commitments to rapid roll-out and with highlevels of land and population coverage. Other aspects such as marketconcentration and technological specifications are also taken into consideration.Normally, in beauty contest the winning contestant pays a predetermined licensefee.

Auction

In this method of license allocation all the participants try to outbid other. Thereis no criterion for suitability of the candidate and the infrastructure support thecandidate have. The participant who puts the maximum bid wins the auction.Several form of auction exists, in one form each participant is called to a commonplatform and whosoever puts highest bid wins on the spot. In other formcandidates are given enough time to strategize and put their bid. There aregenerally two methods for auction

Sealed bids

In this form of auction each participants give their bids in a sealed envelope,these days emails are also used for the same purpose, and the highest bidderwins the auction. This form of auction promotes new entrants.

Open bids

The auction is held for a period of time. Any of the participants quote its price,the rest of the participants respond to this by either quoting higher bid or byexiting from the auction. In this form the bidders desperate for winning theauction and having enough money to spend wins the auction. In this form ofauction generally the low level players lose out of the big players.

Choice for Indian spectrum allocation

Auction (open bids) was chosen for licensing in India. The major reasons for thismight be:

1. For hugely populated counties auctions generally generates morerevenues than beauty contests.

2. Auction gives equal opportunity to relatively new players.3. In beauty contest there is a need to predict the cost of licensing while in

auction the price automatically sets at market clearing rate.


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Price Effect

This is a common fact that the service providers will pass any price above theirmarginal cost of operation to the customers. So if licenses are overpriced thenits majorly the consumers who will be impacted.

Investment Effect

As firms pay large capital to pay the license fee. They might slow down thedeployment of 3G-technology, as they might feel constrained by the capital. Thisis neither beneficial for the firms as their money is blocked nor for theconsumers as they are deprived of a better technology.

3G Licensing throughout the world

Through auction

Economy Auction dateNumber ofwinners

Amount(USDmillion) Remarks

UnitedKingdom Apr-00 5 35 411

The four incumbents were awardedlicences plus a new entrant

Netherlands Jul-00 5 2515 All five incumbents won the licences

Germany Aug-00 6 46 323 Four incumbents won licences

Italy Oct-00 5 10 084Three of four incumbents wonlicences

Austria Nov-00 6 716All six bidders won licences,including the four incumbents

Switzerland Dec-00 4 121 Four bids for four licences

New

Zealand Jan-01 5 60

Four licences were awarded atauction and a fifth was set aside for

the Maori people

Canada Feb-01 5 931Five bidders won 52 regionallicences

Belgium Mar-01 3 418Three bids received for four licenceson offer

Australia Mar-01 6 578Two national and various regionallicences were awarded to six bidders

Singapore Apr-01 3 166

Auction cancelled since there wasthe same number of bids as licencesto be awarded. Each licence was


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awarded for the reserve price

Greece Jul-01 3 414

Four licences had been on offer. Thethree incumbents were awardedlicences

Hong Kong,China Sep-01 4 671

Bidders had to pre-qualify. Only fourbidders for four licences. Amountequals bid plus minimum royaltypayments for 15 years

Denmark Oct-01 4 496

Sealed bid where licence pricecorresponded to the fourth highestbid in the auction

Slovenia Nov-01 1 90

Licence awarded to only bidder

(three licences had been offered)

CzechRepublic Dec-01 2 203

Two incumbents won with the thirdnot participating

Israel Dec-01 3 157 Won by the three incumbents

Taiwan,China Feb-02 5 1397

Only three of six incumbents wonlicences

Latvia Oct-02 2 19Two incumbents bid for threelicences

Table 1: Licensing through auction

Through beauty contest

CountryDate licenceawarded

Number oflicences

Amount(USDmillion) Remarks

Finland Mar-99 4

Administrative fee of EUR 1000 per

25 kHz

Spain Mar-00 4 444Amount does not include yearlyradio spectrum fees

Japan Jun-00 3 Two W-CDMA and one CDMA20001X

Norway Dec-00 3 45

In addition, each licensee isexpected to pay USD 2.2 million peryear as frequency usage charge

Portugal Dec-00 4 360 Not including annual spectrum fee


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Poland Dec-00 3 1839 Awarded to three incumbents

Sweden Dec-00 4 Spectrum use fee and 0.15 per centof turnover

France Jul-01 3 1042

Bouygues Telecom was awarded a3G licence, at a lower price, afterthe two incumbents, France Telecomand SFR

Luxembourg May-02 3

Annual spectrum usage fee of 0.2per cent of turnover or a minimumof EUR 200 000

Ireland Jun-02 3 173Two incumbents awarded licenceplus new entrant

Slovakia Jun-02 2 67Three licences had been awardedbut one was later withdrawn

Malaysia Jul-02 2 26

Additional maintenance fees basedon the number of transmitters setup in each licensees 3G network

Table 2: Licensing through beauty contest

Indian Telecommunication sector

DoT, in a first ever forecast of mobile penetration across India for the next sixyears, has projected a billion mobile phones by 2014.

It is well established that India has had one of the most remarkable growths inmobile phones since the sector was first opened to private investment in 1994.From two operators in each circle in 1995 the country now has 12 to 13

operators. Of these, about six to seven are fully functional, offering the Indianconsumer unprecedented choice and low tariffs.

India has also been breaking all types of records on new subscriber additions inthe last two years by adding up to 8 to 10 million phones a month, sometimesmore. The latest report of the DoT put together by its committee shows thatIndia will reach the half a billion mobile mark by 2010 and within four yearsreach 1 billion mobile subscribers.


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Figure 2: Service Providers share (Sources TRAI)

In 2014, India's population is expected to be 1.26 billion; with mobilepenetration of 1.01 billion the mobile teledensity would be 80% above. It wouldmean 8 out of every 10 Indians would have access to a mobile device.

This probably reflects the world's largest new growth opportunity over the nextfive years, surpassing China's potential. China is already at nearly 700 millionmobile a phone as compared to Indias 400 million. The fact that India will addmore than 600 million new subscribers must rate as the biggest subscriber addsfor any country in the world.

Figure 3: Telecom subscribers (Sources TRAI)


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The effect of 3G-spectrum auction on Indian telecommunication sector

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It is apparent that no country can have 12-13 players per circle. India will alsohave just 2-5 players competing in a particular circle. These players will survivebecause of their superior network coverage, better customer support, morevalue added services and better marketing strategies.

Motivation to enter

In the past two years there are a lot of new entrants in Indian telecommunicationmarket. The Indian telecom market is huge and is expected to grow at a rapidpace for quite some time. For example there were three major players in Delhicircle viz Airtel, Vodafone (previously Hutch and prior to that Essar), and Idea. Inthe past two years we have seen entry of Reliance, Tata, MTS, and Aircel in GSMsector.

Considering the mobile charges in India, although the mobile subscribers areincreasing in India it is quite apparent that mobile operators are not targetingrevenues from voice calls. As those subscribers are distributed among varioustelecom players. India has one of the lowest Average Revenue Per User (ARPU)in the world and that is constantly decreasing. The existing players and the newentrants are innovating new services to increase their customer base.

Figure 4: Call Charges


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Figure 5: Charges and Subscribers in India (sources www.cashcow.in)

Winners Curse

Any player major or minor didnt want to lose out of this 3G-auction battle. Thismight give us insight to an important analysis of winners curse. Did the telecom

players really overpaid for 3G spectrum? It is likely that these players put alltheir thought process to win 3G spectrum. They had enough time to strategizetheir bids for each circles. On the contrary it is apparent that even the big playerslike Bharti and Vodafone had to dig deep in their pockets to pay the government.The real effect for this would be seen in future, may be 10 years down the line.The effect of past 3G spectrum sales may be seen to analyze whether the winnersof the auction really overpaid or is it a pre-calculated and safe bet.

Past experiences

A decade ago most of the western European and US auctioned their 3G-spectrum.One of the most notable auctions was that of United Kingdom. It generated a

whooping $107.2 million. But it turned out to be a bad decision taken by thefirms. They auction was far above the market clearing price and hence it took along time for the major players to recover the huge capital they put in.


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Figure 6: 3G-auction of various countries

There should always be more licenses than the major players. Netherland didthis mistake in their license auction. Most of the major players partnered theminor players like Deutsche Telecom partnered the weakest Ben; Docomo andHutchison partnered with KPN and NTN with Dutchtone. This lead to just six

bidders bidding for five licenses: five strong and one weak player. This ensuredthat there is less competition and the major competition exists only between themajor players.

Game Theory

If all the players get the same resources then there wont be any problem. Noplayer has any bandwidth to alter the equilibrium. The government of Indiaknew this phenomenon, and hence helped them to raise revenues from a varietyof auction type situations. TRAI devised such a structure of auction so that theIndian government can generate most revenue.

All the major players auctioned and tried to win 3G-spectrum. This has createdhavoc; each player kept on raising the bar and become desperate to win thespectrum. No player really wanted to lose the market by not having 3G-capablities. Market equilibrium will again be achieved as most of the players nowhave 3G-spectrum.

Are we ready?

Are we really ready for 3G-spectrum? Most of the Indians still use voice as theirprimary way of transferring information. GPRS and EDGE have been big flops inIndia. Only a handful of people of India know how to use mobile phone for datatransfer and even lower actually use it for data transfer.


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Figure 7: Mobile Internet Users

Challenges

The major challenges faced are:

1. The mobile handset (equipment) that is capable of providing mobileInternet is way too costly as compared to the ones that dont have suchfeature.

2. The Internet usage rates on mobile phone are still very high as comparedto voice transfer.

3. People are not ready to accept data transfer as a mean of data transfer.

Smartphones , Anyone?

It doesnt help that very few cellular subscribers in India already possess 3Gphones. A recent report by Evalueserve says there are over 20 million Indiansusing 3G-enabled handsets right nowthats less than 3% of the currentsubscriber universe of 605 millionand this number is likely to increase to 395million by 2012. Handset manufacturers are already pulling out the stops topromote 3G handsets, perhaps aware that expecting financial support fromservice providers may be a little unrealistic in the present situation. Instead,theyre offering a range of phones across all price pointsfrom entry and mid-level to high-end consumers. We believe 3G in India will be driven by contentrather than voice, says V Ramnath, Nokia Director, Operator Channels. AddsSamsung India director, mobile and IT, Ranjit Yadav, Our portfolio of 3G


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handsets contributed around 5% to our total sales volume. Once 3G services arerolled out, we see this contribution doubling very soon.

Alliances And Coverage

Another likely hurdle is the lack of a pan-India presence. No player bagged a pan-India licenceat Rs 16,750 crore, it was beyond the pockets of everybody. Thismeans no single player can offer customers 3G services all over the country.Roaming agreementsand consequently higher charges for consumersseeminevitable, therefore.

Of course, its much too soon for the seven players to sign up partnersthegovernment will release 3G spectrum only by September and services wontbegin until the end of the year or early 2011. But a study of the allocated circlesthrows up some interesting insights. Between them, Vodafone (nine circles) and

Aircel (13) cover all the 22 telecom areas on offer; Tata has six circles that RComdoesnt, while Idea has seven circles not on Vodafones list. Aircels 13 winsinclude five that Bharti didnt bag.

Not that a presence in all 22 circles is any guarantee of success in the 3G arena.Between them, MTNL and BSNL cover the country. But despite their headstart inoffering 3G services, the two public sector companies have received only a tepidresponse. While MTNL has 120,330 subscribers across Delhi and Mumbai, BSNLhas 1.25 million in 434 cities. Tariffs have been reduced twice already in the pastone year and BSNL Chairman and Managing Director Kuldeep Goyal accepts thatthe initial growth of 3G connections was slow. This is in line with the global

trend where the initial uptake has been rather slow but later on the growth picksup, he adds.

Whether that trend plays out across 3G services all over India in the near futureremains to be seen.

European 3G Auction : A Comparison

For most people tracking the telecom industry, the current scenario isuncomfortably reminiscent of the 3G auctions in Europe, especially the UK andGermany, in 2000-01. Disaster and debacle are commonly used to describethe fallout of that exercise.

In April 2000, after seven weeks and 150 rounds of bidding, the Britishgovernment raised nearly $35 billion from just five licences. In Germany, thestate was richer by $67 billion after two weeks and 173 rounds. Within a year,though, the telecom sector across Europe cut about 100,000 jobs, of whichroughly a third were in the UK. Telcos in Europe struggled financially for years,

hovering on the brink of bankruptcy.


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Not many expect India to fare much better. We have seen bankruptcies in othercountries. I believe operators would have bid smartly to ensure it does not hurtthem, hopes Kunal Bajaj, Director at telecom consultancy Analysys Mason.Operators in India will definitely bleed post-3G. We will see some players fallingby the wayside in the next few years, declares Romal Shetty, Telecom Director,

KPMG.

Adds Sandeep Ladda, Executive Director, PricewaterhouseCoopers, Bids havegone way beyond expectations; it will be difficult for operators to recover theircosts. I think the business case is under challenge now.

Here Come The Big Spenders

Are the bids really that excessive? Its unfair to compare the collections this timeto what the 2G licence round in 2008 garnered: based on 2001 valuations, eight

operators paid up just Rs 1,651 crore. Instead, compare the 3G winning bids withthe base prices set by the government at the start of the auction (see table):Vodafone Essar, Bharti Airtel and Reliance Communications (RCom) baggedDelhi for Rs 3,316.83 crore and Mumbai for Rs 3,247.07 crore, more than 10times the reserve price of Rs 320 crore for Delhi, Mumbai and circle A zones.Bihar, which falls in the lowest C category was tagged at a minimum Rs 30crore, but Bharti, RCom, Aircel and STel shelled out a staggering Rs 203.46 crorefor the licence to operate there. Oh, and did we mention that the entire amounthas to be paid within 10 days of winning the bid?

Even the companies involved admit that the 3G auction prices were

unwarranted. This is extortion. The government has sucked out Rs 68,000 crorefrom the telecom sector at a time when providing connectivity is of utmostimportance, declares the head of a mobile services provider. Bharti Airtel issueda statement that the auction format and severe spectrum shortage, along withensuing policy uncertainty drove the prices beyond reasonable levels, which iswhy the company could not achieve its objective of a pan-India 3G footprint.

Vodafone Essars Director of Strategy Samaresh Parida seconds the spectrumshortage charge. If the price was determined by market supply and demand, itwould have been a fair determination. But if the supply has been artificiallyconstrained by releasing just three slots, it is not fair pricing, he says.

In fact, there is a strong sense of the speculative bubble about the 3G licence fees.Scarcity and uncertainty combined to drive bids through the stratosphere: notonly is spectrum a limited resource, in the past two years, there has been noallocation at all. Even now, the government has released only 20 MHz in eachcircle with no indication of when the next round will be, or at what price. Threeslots of 5MHz each were auctioned in 17 circles and four slots each in anotherfive circles. Which means only three operators can offer 3G services in mostcircles, with BSNL and MTNL being the other players. This is what happenswhen you try to sell a scarce commodity. There is always a fear of overpayment,

points out former Trai chairman Pradip Baijal.


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But for the operators, the value of 3G spectrum is two-fold. Not only can itbolster their overburdened bread-and-butter 2G services, it is also a potentialgame-changer (value-added data services can be the differentiator in a market

condemned to sameness).

Theres also a high opportunity cost attached to forgoing the 3G licence.Typically, the early adopters of new technology are also the high spenders; 3G isexpected to be no different, with the top 10% of customers bringing in anaverage revenue per user (ARPU) that will be three or four times that of the rest.Unfortunately, these customers are also notoriously fickle: if the incumbentservice provider doesnt offer them something new that a competitor does, theywont hesitate to switch. The best way to realise the value of spectrum is todesign smart, go-to-market strategies that allow users to adopt 3G services fasterthan they would have otherwise, says Aircel Chief Operating Officer GurdeepSingh.

What Happens Now?

Telcos in India wont find the numbers ringing right for a while yet. They mayhave forked out close to Rs 68,000 crore in the first 10 days after the auction, butit wont be long before they realiseif they havent done so alreadythattheyve barely scratched the surface when it comes to 3G costs. Before they canroll out 3G services by the end of the year as planned, they will need to spendastronomical sums of money on getting their networks 3G-ready, creating or

buying applications and content, and in creating a buzz around the newtechnology. Significant investments in 3G spectrum and infrastructure, highmarketing costs (including handset subsidies) and sluggish subscriber growth inthe early years of launch of 3G services are expected to keep the returnindicators low for telecom operators in the initial years, says a December 2009report by Icra on the implications of 3G telephony on Indian operators. ReubenChaudhury, the Asia Pacific head of the telecom and technology practice at ATKearney, estimates that deploying 3G on a pan-India basis will require anadditional investment of $5 billion (Rs 22,500 crore) over five years.

It doesnt help that the telecom sector is still reeling from a savage tariff warthat began last year. Tariffs for voice calls are down to absurdly low levelsonepaisa for four seconds, anyone?And, not surprisingly, thats taken a toll on ARPUs and profit margins. ARPUs for Indias 605 million subscribers haveplummeted. On average, each of market leader Airtels 130.6 million users bringsin just Rs 220 a month, compared to Rs 440 five years ago, while the figures forVodafone are Rs 197 now against Rs 469 five years ago (when it was Hutch).

Meanwhile, according to some estimates, the EBITDA margins of mobilecompanies have dropped over 60% in 2009-10 compared to the previous year.Bharti Airtel posted an 8% drop in net profit during the January-April 2010

quarter compared to the same time last year, while RComs net profit drop for


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the same period was 16%. Vodafone Essars British parent, too, has just writtenoff Rs 15,157 crore from its value.

Double Trouble

The implications are obvious. Huge payouts and insufficient income mean thatthe payback period for operators will increase. If the bids had been at a morerational level, a large part of the investments could have been recovered in aboutthree years. Now, a five to seven year payback window appears more likely.

Ideally, in a price-sensitive market like India, a new service should be introducedat rock-bottom prices. Given the financial compulsions mobile firms are likely toface, that option wont fly. Instead, 3G services are quite likely to command near-premium prices as companies scramble to get their books back in shape.

Thats a double whammy price-sensitive Indian consumers wont accept easily.The entry costs of 3G may be too expensive for a large group of consumers: notonly will they have to bear higher charges, in many cases they will also need toinvest in new equipment3G-enabled handsets. Again, it now seems unlikelythat mobile operators will subsidise smartphones through bundled offers, amove many analysts believed was indispensable to hurry up the adoption of 3Gservices.

Telecom analysts estimate that for 3G to succeed in India, the share of dataservices in total revenue needs to increase significantlyfrom the present 6-7%to a figure closer to the 25-30% share found in developed markets. If mobile

firms arent able to bring their prices and offerings more in line with whatcustomers expect, data ARPUs may continue to inch along the single digits.

Who Wins Who Loses

Government: One of the clear winners of 3G-spectrum auction is government ofIndia. Indian GDP for the year 2009-10 was 61,64,178 while that is expected togrow at about 69,34,700. This auction has provided a much-needed liquidity thatwas required post recession to maintain the GDP growth.

Customers: Consumers win on one front and lose on another. The consumers ofIndia will enjoy the advantages of 3G-spectrum. This will also delight thecustomers of other countries, as there was very limited support to make a videocall in India. The consumers should also be delighted by the fact that thespectrum in the major circles is won by some of the biggest players of India. Sothey are expected to provide equivalent service as they were providing with 2G-network. This may also lead to monopoly market where a few firms control themarket. But in the past TRAI has make sure that there should be easy entry inthis market and hence monopoly can be dissolved anytime.

The customers will lose because the spectrum is sold at a very high price and still

most of the Indians dont really use data as their primary means ofcommunication. So its quite possible that a lot of people will not use 3G-


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technology. Also the equipment required for 3G is far costly than the similar onewithout 3G-capability. The price offered by BSNL and MTNL for 3G-network wasvery low. In fact BSNL was offering video call rate of 50-paisa per minute that isequivalent to voice call in India and which is of course the lowest prices offeredin the world. The strategy of BSNL and MTNL was to acquire as much consumers

as possible before actually the auction happens. But now as BSNL and MTNL willhave to pay Rs 10,187 Cr and Rs 6564 Cr respectively, 50-paisa per minute callwont be feasible option for them as well.

BWA (WiMAX) spectrum auction also happened just after 3G-spectrum auction. As stated earlier that WiMAX can provide better data transfer speeds ascompared to 3G. Most of the big players in India like Vodafone, Idea, and Reliancedidnt participated in BWA auction. The only major player in BWA auction wasBharti Airtel. Now as we know that WiMAX has all the capabilities to be thesuccessor of 3G technology before 4G-technology really hits the ground. But nothaving major players in WiMAX field might impact the customer satisfaction that

they could have got with major players. Although the positive point to bementioned here is that BWA spectrum is sold at market clearing price and henceit is not as overpriced as 3G-spectrum price.

Service Providers: Only time can tell whether service providers really win orlose. Around 8years ago 3G-spectrum was auctioned in most parts of WesternEurope. The carriers overpaid for the spectrum and then they spent years ofscrabbling for the return of their huge investment.3G auctions in India created alot of buzz globally followed by a phase of silent calm. But this silence is theprecursor to the storm which can be expected with the launch of 3G services inIndia shortly!


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Annexure 1:

TRAIs Recommendations on Permitting New Entity for Allocation of 3G-Spectrum

TRAIsRecommendations

Can also be downloaded from:-

http://www.trai.gov.in/WriteReadData/trai/upload/Recommendations/104/recom10dec08.pdf

Annexure 2:

Auction queries and responses by GOI

3G & BWAAuctions_Queries an

Can also be downloaded from:-

http://www.dot.gov.in/as/Auction%20of%20Spectrum%20for3G%20&%20BWA/3G%20&%20BWA%20Auctions_Queries%20and%20responses.pdf


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References:

Cramton, P. (2001). Lessons learned from the UK 3G Spectrum Auction.

http://www.trai.gov.in/

Department of Telecommunications (2000), Guidelines for Issue of Licence forCellular Mobile Telephone Service

Jain, R. (1999a). Changing role of regulation: Lessons from US spectrum auctions.

Group 2 - 3G & BWA Auctions_Queries and Responses

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