Prime Minister Manmohan Singh has said that radio spectrum should be allocated in a fair and transparent manner, not create entry barriers and keep in mind the potential revenue the government can earn.

These welcome comments are in line with the global best practice of auctioning the most important resource in the telecom industry, rather than allocating it based on subjective whims.

(Illustration by: Jayachandran/Mint)

Mint has criticized the telecom minister’s allocation policy earlier as well.

The PM’s wishes can’t come true if Raja has his way. Consider the recent events. With the telecom tribunal ruling, the ministry is to go ahead and allot spectrum to new applicants—including those CDMA service providers who want to enter the GSM market—even as it proposes to issue letters of intent to 16 new applicants, once again arbitrarily revisiting its own deadlines. These applicants will pay the licence fee and wait for spectrum, if any. And even as the haste to give GSM spectrum to Reliance Communications Ltd, a CDMA player, has rightly raised eyebrows, the ministry assures favourable consideration to Tata Teleservices, the other CDMA player. Meanwhile, a group of ministers will finalize tighter criteria for existing GSM players who seek more spectrum for their expansion plans.

But since the spectrum that will be available will serve only a fraction of the needs of 450 applicants, any process apart from a transparent auction would only lead to more controversy.

What is particularly strange is that the telecom minister insists he is legally bound to give additional spectrum to GSM incumbents as per current policy even after a leading company, Bharti Airtel, has offered to pay more and said its offer may be taken as a base bid in the event of an auction!

The market’s dynamics are totally different from when the pricing and the criteria of spectrum were last determined. In the event of higher demand, the resource has to be that much more judiciously utilized. There’s little doubt that the government’s spectrum management has not delivered the efficiency in use required. The fact that the Telecom Regulatory Authority of India and the department of telecommunications did raise the bar for subscriber criteria shows that the terms of the incumbent GSM operators were unduly skewed in their favour. So, their call for being served before others seems rooted in the inefficient use of their allocations. There’s no weight in the GSM lobby’s claim of contractual bindings for additional spectrum—the fact is that was to be given subject to usage efficiency and availability. The telecom minister is only resorting to gimmickry by quoting such hurdles. There’s only one inference from all this— the refusal to go for 2G auction stems from a rent-seeking approach.

The PM’s point on using all technological options to make spectrum use more efficient is the direction to take. It is estimated that even today, on average a mobile operator in China serves twice as many subscribers per Mhz as compared with India. Finally, Indian policymakers are still ignoring the fact that spectrum is scarce only in the high-density urban areas, not the rural. Factoring in this could ease pressure and lead to more efficient spectrum policymaking.

Despite the PM’s thinking, the telecom ministry seems trapped in the licence raj mindset.

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