Do you know that the 5G auction price will not get reduced in the next round of auction even if the operators choose to skip these bands (600, 700 & 3500 MHz) in the current round? But why? The issue is the TRAI’s current “Pricing Models” which have been used to value 5G bands. Normally, the perception is that when a spectrum band sees no bids then its price gets reduced substantially in the next round. But strangely this is not true for many bands, especially 3500, 700 & 600 MHz. Let me explain.
TRAI’s Pricing Principle
In order to value 5G bands, the TRAI uses the prices of the other 4G bands as references. In other words, the prices of 5G bands are not derived independently — ground up. This is also true for all existing 4G bands as well, except for the 1800 MHz band, whose pricing is done ground up using various valuation models. The prices of other bands get extracted from the value of the 1800 MHz and other bands with similar propagation characteristics. Hence, the prices of these bands (3500 & 700) will only drop significantly if the 1800 MHz & 800 MHz bands see no bids. To understand these further let’s dive straight into the pricing models that TRAI used to value 3500 MHz & 700 MHz bands.
