How does the spectrum auction work?

The auction process

There are 2 stages in the spectrum auction process, here it is:

•                    First is the Clock stage and

•                    Frequency Identification Stage.

The clock stage will set up the competitors and number of blocks to be awarded in each service area while the second stage will recognize particular frequency blocks for the winning aspirants. Auctions on both the spectrum bands are being directed at the same time.

In the clock stage, bidding begins in rounds where offers can be placed for some or all service areas. Competitors will be informed about the Clock Round Price per block for each of the service areas in both the bands where spectrum is put to auction. In each round, the bidder’s option will be a ‘Yes/No’ if he agrees to bid at the Clock Round Price. If the answer is yes, he then has to choose the number of blocks in the area. In 1,800 MHz blocks of 200 kHz are on sale while in 900 MHz, each block size is 1MHz.

In the first Clock round, the cost per block will be the reserve price. In the following rounds, the Clock Round price will be fixed on by the excess demand in the prior Clock Round. The Clock Rounds will continue until demand can be pleased within each and every service area in each of the bands. Price increases won't be more than 10 percent of the prior Clock Round.

Why are the bids so competitive?

For the significant players, it makes sense to have a pan India existence, which is why we see aggressive competitors in the present auction rounds as Vodafone and Bharti’s licenses are expiring in some of the metros.

The interesting thing behind this auction is that a new player Reliance Jio, the telecom arm of Reliance Industries is applying for the license and would like to get the maximum possible licenses across the country. The number of the spectrum he wins will affect his pan India rollout plan.

What does it mean for the winners and losers?

While the winners get the full right to use the spectrum, those who have lost the offer in that region won't be able to operate Spectrum outage map in it. They won't be able to get subscribers in the area where they don't have a license and can’t make any Spectrum pay bill online & Spectrum bill payment.