A department of telecommunications expert panel has come up with some far-reaching recommendations. The panel has recommended that the price of spectrum beyond the first chunk allocated to telecom firms while receiving licences should be linked to market prices (to be determined in an upcoming auction). The panel also said that merger rules should be changed to allow trading of spectrum rights and simplify revenue-linked spectrum and licence fee levies.
Illustration: Jayachandran / Mint
The recommendations have come not a day early. Phone firms operating in India—the world’s second largest telecom market by customers behind China and the fastest growing— price their services the lowest in the world (at as little as 63 paise a minute) yet report healthy operating margins at some 40%. To be sure, this is partly because they run very lean operations (most firms today have outsourced management of their networks and one, Bharti Airtel Ltd, has even given out managing its last-mile connectivity) and regulations mandate that they pack in more customers per unit of spectrum (often resulting in poor service quality).
Still, there is a huge blot on the country’s telecom laws that do not extract maximum value for its citizens by giving away spectrum free. An auction last year in the US—admittedly, North America is the top market by revenues on the world telecom altas—brought the Federal Communications Commission, that country’s telecom and broadcast regulator, some $28 billion in bids. Despite its growth potential (just two in five Indians have a phone), India may not turn in such valuable bids for a planned auction for so-called third generation, or 3G, phone services later this year. But what is sure is that the imputed value of spectrum in use by all phone firms today (benchmarked against what is expected in 3G bids) will be enough to meet the country’s annual deficit or, better still, underwrite large chunks of its health and education spending. In the longer term, it will also bring about efficient use of spectrum and usher in related benefits in the rest of the economy.
Some would argue the expert panel has not done enough. But this is the start of a process to clean up India’s opaque and favouritism-ridden telecom regulations. It will be tempting for the new government not to take up the committee’s recommendations—telecom licences have for long been a cash cow for crony capitalists and businessmen who thrive in bending the rules for commercial benefit in this country—but it is hoped the new administration will take an informed view in the interest of India’s citizens.
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