That a regulator wants to thwart competition spells sad irony. Trai is taking on the finance ministry after opposing its telecom counterpart—it insists on excluding global players from the proposed auction for 3G spectrum, limiting it to current players and new licensees. Trai’s “logic”: Competition is ample, and allowing in firms with strong financial muscle would raise the bid prices excessively.
Now, if global players who have not yet got a share of our telecom pie bid aggressively, incumbents, too, will —the combined value of 2G and 3G spectrum for them is huge. But proper auction design can avoid the “winner’s curse”. And enhanced competition would contain consumer tariffs, while the exchequer nets a better premium for a scarce resource.
Also, with many new licensees lacking resources, consolidation will happen— limiting auctions will thus unduly benefit existing players. Trai is mouthing incumbents’ wish, and being inconsistent, too: It recently proposed to boost competition by resale of spectrum.