One of the most conspicuous signs of India’s economic progress is the ubiquity of the mobile phone. We currently have 330 million subscribers, which will double by 2012. But instead of helping this service grow, bureaucrats are slowing the arrival of the next generation of mobile telephony with unjustifiable delays.
Illustration: Jayachandran / Mint
On Monday, the department of telecommunications (DoT) announced a further delay into the auction of the 3G (third generation) wireless spectrum. Earlier this month, DoT had delayed the auction from 16 to 30 January. This time, it hasn’t announced a new date for the auction.
The delay has been caused by confusion over the reserve (base) price of spectrum rights. DoT’s initial price was Rs2,020 crore, which the ministry of finance wants doubled. DoT appears to be looking for approval of this change from all corners: the Telecom Regulatory Authority of India, the ministry of law, as well as the cabinet committee of economic affairs. But no such approval is required for reserve pricing.
DoT should quickly accept the finance ministry’s directive and start the auction with the Rs4,040 crore price. As we’ve argued before, the government is justified in charging more, not just to cover up fiscal deficits, but also because of the high value of the telecom sector. Consider that Unitech sold 60% of its telecom arm to Norway-based Telenor last year for Rs6,120 crore, when Unitech’s state licence cost it only Rs1,650 crore. Any private entity is free to charge a high price for an item if it knows the buyer will reap large profits. There is no reason why government shouldn’t do the same, given that it already assumes control over public goods such as airwaves. Bidders are willing to stomach this as a one-time sunk cost without passing it to users.
Yet, DoT is dragging the process. Besides this delay, the process via which the price was suddenly changed hasn’t inspired confidence. There’s also debate surrounding foreign companies which may win 3G bids, but may not be allowed to operate in India without diluting their equity stake (operators in India can only be 74%-owned by foreigners). 3G aspirants who don’t operate 2G would also need to get 2G licences just to work in the 3G spectrum.
These administrative hurdles are hurting service providers who are scrambling to get more bandwidth as their subscriber base expands. They’re also leaving millions of potential subscribers, keen on 21st century conveniences, asking for more.
Why is DoT dragging its feet on 3G auctions? Tell us at email@example.com