Auction all spectrum, set fair upset price

Auction all spectrum, set fair upset price

The Union cabinet’s decision to offer only 5 MHz of spectrum in the 2100 MHz frequency in 17 telecom circles in the auction planned for February will hurt the interests and needs of both the industry and the consumers. The frequency is needed for high speed data transmission and all telecom service providers need it.

Since only one 5 MHz slot is to be made available, all operators who need the 3G bandwidth will competitively bid for it and it can make the spectrum prohibitively costly. This reminds one of the 2010 auction when operators  desperately went in for the bidding to stay in business and the government earned huge revenues from it. But the industry is weighed down by a Rs 2.5 lakh crore debt burden because of that and the banks to whom the loans are due are under stress.

There is no need to limit the quantity of spectrum and create artificial scarcity of it. Since the defence ministry has agreed to release at least 15 MHz of spectrum, it can also be put to auction at the same time. This is what the Telecom Regulatory Authority of India (TRAI) had recommended. But the government has argued that the defence ministry will hand over the spectrum only in December.

Nothing prevents the government from auctioning it on the condition that it will be handed over only in December. It is ridiculous for the telecom ministry to hint about uncertainty over the release of spectrum by the defence ministry. It is a lame excuse. In fact, in the 2010 auction, spectrum was sold in April and made available only in September. In any case, in the normal course, it will take some months for the auctioned spectrum to be made available to the operators. What the government is aiming is to maximise revenue to address the fiscal deficit problem. But this should not be by hoarding and profiteering.

The consequence is not only that the telecom players’ stressed finances will be further hit. More importantly, they will recover the higher cost from the consumer and the idea of cheap and affordable broadband will take a beating. The promise of Digital India will be impossible to achieve if tariffs are high and connection speed is low. The government should put all 20 MHz of spectrum up for auction, and set a fair upset price, which at present is high. It should ensure that when it gets good revenue, the industry and the consumers do not have to pay an exorbitant price for it.

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