Following such heated competition in the country's 3G spectrum auction, bidding in India's ongoing Broadband Wireless Access (BWA) spectrum auction was always expected to be aggressive, but many in the industry are still shocked by the high prices being achieved. (See Analysts: Bidding for BWA to Be as Fierce as 3G and India's 3G Auction Ends, Raises $14.6B.)

After 15 days of bidding, the price of a pan-India BWA license for spectrum in the 2.3GHz band has reached 127.75 billion Indian Rupees (US$2.73 billion) -- a far cry from the base level set by the government of just INR17.5 billion ($372 million).

The ongoing intensity of the bidding process shows that the 11 bidders, which may use any spectrum they win to build WiMax or Long Term Evolution (LTE) networks, believe there is pent-up demand for broadband wireless services in the country. (See Bids Flood In for India's Spectrum Auctions, Qualcomm Unveils LTE Plans for India, and India's WiMax Camp Wants Intel's Support.)

While the companies participating in the auction will have defined business strategies to support and justify their bids, state-owned operator Mahanagar Telephone Nigam Ltd. (MTNL) , which offers its services in the two major metro circles (service areas) of New Delhi and Mumbai, stands to lose out as the prices rise.

Just as in the 3G auction, MTNL and its fellow state-owned operator Bharat Sanchar Nigam Ltd. (BSNL) , are automatically awarded spectrum in the circles in which they operate, and have to pay the equivalent of the winning bid in each circle.

BSNL, which operates in 20 of India's 22 circles, has a broadband wireless access strategy, and existing WiMax services. Not so MTNL, which doesn't want to eat into its existing DSL-based broadband services in its two major metro markets.

"Since we have strong wired broadband capabilities, we are not very bullish about WiMax," says a top MTNL official on condition of anonymity. "We also feel that the technology is in direct conflict with 3G. We don't plan to launch any WiMax-related services in the near future. It also calls for very high capex."

But MTNL will be obliged to pay and will have the spectrum, so it plans instead to launch a tender process and appoint WiMax franchise partners that will use its spectrum "on a revenue-sharing basis," says the executive.

If the auction had ended at the end of Day 15, MTNL's BWA bill would be INR44.9 billion ($959 million), but the bidding continues tomorrow, with MTNL facing a $1 billion-plus charge for the 2.3GHz spectrum it doesn't really want.

— Gagandeep Kaur, India Editor, Light Reading