Spectrum prices soaring in India

Published: April 20th, 2010

Wireless carriers around the world are probably choking at the news that the bidding for a national 3G license in India topped 60 billion Indian rupees (US$1.3 billion) on only eighth day of the spectrum auction of 3G. Or they may be thanking their local gods that they aren’t one of the bidders.

The soaring prices are a reflection of how hot wireless is in India.

According to John Ribeiro of IDG News in Bangalore, an industry analyst said paying at least that much will put tremendous pressure on bidders to come up with a pricing model that lets operators pay for the costs but attracts customers.”It may be a difficult model to sustain given the cost-conscious nature of the Indian consumer, and the lack of an immediate business case for 3G beyond just data access,” Kamlesh Bhatia, a principal research analyst at Gartner, told Ribeiro.

3G in India is not for the masses right now, Bhatia said, and will initially start of as a niche, premium market. The 3G business in India is for operators with deep pockets and the staying power to wait for the market for 3G services in the country to take off, Bhatia said.India started an online auction of 3G spectrum on April 9. Two days after it ends an auction for broadband wireless access (BWA) spectrum, which in recent years has been occupied by WiMax technology.

The auction for 3G spectrum has nine bidders, all of whom are existing mobile operators in the country, including the largest player, Bharti Airtel. For the large Indian operators like Bharti Airtel and Vodafone Essar, the Indian joint venture of Vodafone, the 3G auction provides an opportunity to get more spectrum, at a time when they are running out of 2G (second-generation) spectrum, Bhatia said. They will probably migrate some of their current customers to 3G services, freeing up 2G spectrum, he added.

For 3G services, the government has decided to auction three blocks of 5MHz of paired spectrum in the 2.1GHz band in 17 of the country's 22 service areas, with four blocks up up for bidding in the remaining five service areas.

Which reminds me, Ottawa has to be thinking about the upcoming 700 Mhz auction …

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