Anatomy of the 3G Auction

The Rules of the Game

T he auction is designed to be a simultaneous ascending
auction, meaning all spectrum types – 3G GSM, 3G CDMA
and BWA – are auctioned simultaneously. Entry into the
game comes from buying “eligibility points”, which can only
be bought per circle by paying an “earnest money deposit”
which is a fraction of the circle’s reserve price. E.g., the
reserve price for metros is Rs. 320 crore, the earnest deposit is
Rs. 40 crore, giving the bidder 32 points with which to bid. A
bidder who intends to compete across all 22 circles will need
Rs. 505 crore (350 eligibility points). The corresponding
numbers for CDMA 800 MHz and BWA auctions are Rs.
126.25 crore (350 points) and Rs. 252.5 crore (350 points).

The auction itself is a series of “clock rounds”. In each round,

the bidders can bid for as many circles as desired. The initial
price will be the reserve price set by the government. At the
end of each round the system will rank the top bidders and
determine the reserve price for the next round depending on
the “excess demand”. This ensures that prices keep going up
as long as there is interest from bidders. Those who don’t bid
actively are penalised and their eligibility points will come
down in subsequent rounds. This ensures that all serious
players are kept active in the game. The auction ends for a
circle when the number of bids is equal to or lesser than the
number of slots available. The lowest common bid in the final
round will become the common winning price to be paid by
all winners.