The spectrum auction rules can appear quite overwhelming, especially for those who have no past experience of running through an auction. Hence, for the benefit of all, I am taking this opportunity to explain how to read the Daily Public Report published by the DoT every day.
The Report Structure
The report looks something like this and runs into multiple pages.
The top section of the report is self-explanatory. It consists of the date, the number of rounds completed on that date, and the cumulative number of rounds completed till that date.
The rest of the report consists of seven columns. Column number, 1 & 2 (from left) is easy to understand, they represent the service area mapped to the respective bands.
Column number 3 is the clock-round price of the last completed round. This is the price advertised by the auctioneer for this round after applying the rules for incrementing prices (clause 9.8.7, page 76 of NIA). As per the auction rules, the bidder just has to agree or disagree with this price. He has no other options. If he agrees to this price, then it is considered a bid, and if he disagrees then as a “No-Bid”. This price remains static (i.e doesn’t increment) if demand is less than supply (for the specific band/circle). If demand is greater than supply, the prices for the subsequent round will increase based on price increment rules as laid out in the NIA.
Column number 4 is the aggregate demand (AD) at the clock round price. The definition given in the NIA for this metric is as follows — “The total number of Bids for the Blocks in the LSA at a value equal to the Clock Round price in the last completed Clock Round.” Hence, this value is measured in the total number of blocks (min salable quantum of the spectrum) demanded by the bidders for that band/circle. In case this value is greater than the total blocks put out for sale, then demand is greater than supply, else visa-versa. Now if this value is listed as zero, then there can two possibilities — a) that there is no demand for that band/circle for that round price, which is higher than the preceding round; b) there is no demand for that circle in all past rounds including the current round. In other words, AD for a specific round can still be zero when all spectrum for that band/circle gets totally sold.
Column number 5 is called excess demand (ED) for that round price under consideration. The definition given in the NIA for this metric is as follows — “The total number of Blocks for which bids have been received in an LSA in a particular band at a Clock Round price equal to the Clock Round price set in the last completed Clock Round minus the number of blocks available in that LSA in that particular band.” To put it simply, it is just simple subtraction of “Total Blocks put out for Sale” and “Aggregated Demand” for that round price. In other words, if the AD is zero then ED is just a simple multiplication of “total blocks for sale” x -1.
Column number 6 is called the Provisional Winning Price (PWB) per Block for that Band/Circle at the end of a particular round. This means if the auction was to end at that round all the winners will have to pay this price for all the spectrum that they end up winning in this auction. You might notice that the PWB price can be lower than or equal to the round price. The former might be the case when the demand at the current round price is less than the total blocks put out for sale. The reason — if the auction was to end at that round the bidder who chose not to bid in that round (with an increased price) cannot be forced to pay the price at par with the bidder that agreed to pay the higher price. This situation happens only if the bidder with a lower price, manages to be within the group of winners (based on a ranking rule defined in the NIA).
Column number 7, is the last column, and it lists the price increment that will be applicable for that band circle based on the rule defined in the NIA. This rule is linked to the ED. Price increments will happen from the point when ED is 0 or positive. The value of such increments will scale depending on the magnitude of the ED (clause 9.8.7, Page 76 of NIA).
How to calculate the quantum of spectrum sold?
Now the question that will come to the readers mind is — how do we calculate the quantum of spectrum sold based on the information provided in the “Daily Public Report”? This we can do easily by using the following set of logical steps.
- If the PWB (Column №6) at that round price is listed as zero, then the spectrum sold in that circle is Zero, i.e there have been no bids (since the first round) in that band/circle.
- If the round price (Column №3) is greater than the PWB price (Column №6) then we can assume that all spectrum put out for sale is sold. If not, then there was no case for any price increments, as the ED, in that case, would have been negative.
- If the round price (Column №3) is equal to the PWB price (Column №6) AND (Column №4) “AD” is less than the total blocks put out for sale, the total spectrum sold will be AD (Column №4) x Blocks Size for that band/circle. This situation will happen when the demand in that band/circle is less than the supply. Hence, the price will not increase in the future rounds and therefore “AD” will be held constant for all future rounds for that band/circle.
- If the round price (Column №3) is equal to the PWB price (Column №6) AND (Column №4) “AD” is greater than the total blocks put out for sale, then we can assume that all spectrum put out for sale is sold. The reason — Since the ED is positive all the spectrum put out for sale is sold, and therefore price increments will be applicable for that band/circle in the next. You can check out 1800/UPE for this case reference.
Now outflow of that band/circle is just a simple multiplication of the total spectrum emanating out of the above logic and the PWB price for that round.
Conclusion
These are the cases that came to my mind that I have captured in this note. In case you find any scenarios missing I will add those as well to the list in the next version of this note. Happy to hear valuable comments from the reader, and hope you find this useful.
(Views expressed are of my own and do not reflect that of my employer)
PS: Find the list of other relevant articles in the embedded link.
