With Friday’s announcement of the broad outlines of India’s policy for ushering in third generation, or 3G, mobile phone services, one of the biggest business events this year seems to be panning out. A 3G phone service, in short, supports high-speed data transfer, potentially allowing movie and audio downloads, Internet surfing and other nifty applications. India is the world’s second largest market for mobile phone services by number of customers and also the fastest growing. It’s also a market that some of the biggest phone firms in the world do not have a presence. NTT DoCoMo Inc., AT&T Inc. and Deutsche Telekom AG, for instance, do not have a local presence here and may pay a hefty premium to get a right to run a phone network here. Bidding is likely to be intense.
All this is good news for the exchequer. But there are several areas the government — and, eventually, customers and taxpayers — could trip up and here are some obvious potholes to watch out for. One, to keep away rogue bidders, put in a rule that any winning consortium pays up its bid amount within a month, else forfeit a sizeable earnest deposit. Sure, this favours big and wealthy shareholders, but phone services is a capital-intensive business and lets only those with access to capital into the business.
Next, make the policy and applications technology-agnostic. The government has set the entry price for broadband wireless providers at a quarter the value of the winning 3G bid. Broadband wireless, the way it is understood today, is primarily used in data applications — WiFi or WiMAX-based Internet access, for instance. But, already, trials on what is called “mobile WiMAX” are running and within a year or two, it may robustly support voice services, making it akin to today’s mobile phone services. That’s a technology risk that 3G bidders will have to take, and let them not have the benefit of a confused policy helping them.
Finally, make sure the rules in the bidding process are transparent. Several auctions have been legally challenged in the past and telecom minister Andimuthu Raja will do well to ensure the committee he has set up to frame rules for an electronic auction does not get swayed towards one lobby or the other.
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