Photo: Sneha Srivastava/Mint
Photo: Sneha Srivastava/Mint

Book Review | Dynamics of Spectrum Management

This is a useful book since it starts at the conceptual level and weaves through the history of spectrum management over the years

While the (mis)allocation of coal is in news currently, thanks to the Supreme Court ruling all allotments since 1993 as “illegal", much of the debate surrounding the management of natural resources really caught steam with the 2G (second generation) spectrum scam under the United Progressive Alliance government.

However, even without the scam, India has had a rather chequered history when it comes to spectrum management. Almost all efforts at allocating spectrum have been humbling experiences. The first round of licences allotted in 1995 attracted a staggering bid of close to 20,000 crore from rookie bidders. But the euphoria was shortlived as bidders were struck by the “winner’s curse". Everyone soon realized that the fee payable was far in excess of the revenues. The culprit was an ill-designed auction process, which did not allow bidders to discover the true price.

Even after the apex court ruling, India failed to get the auction design sorted. Higher reserve prices resulted in auctions in 2012 and 2013 turning into damp squibs with almost zero interest shown by companies. The situation was so stark that at one point the Comptroller and Auditor General (CAG) raised concerns of an unholy collusion among the operators to force the government into reducing the reserve price.

What makes spectrum management, including designing the auction, so tricky is the very dynamic nature of spectrum as an economic good. Traditionally economic classification of goods check for two independent characteristics—one, excludability (i.e. is it possible to exclude people from using the good) and two, rivalrousness (i.e. does the use by one preclude the use of the good by another).

Instead of fitting neatly in to one of the four combinations of excludability and rivalrousness, spectrum as an economic good tends to change definition depending on the technology at hand. For instance, if a technology allows time-sharing of a band of spectrum, then it reduces the rivalrousness component. No wonder then, as time has elapsed, and new technology is available, management of spectrum too must evolve.

Dynamics of Spectrum Management is a useful book since it starts at the conceptual level and weaves through the history of spectrum management over the years. In doing so, the book takes a detailed look at how governments, especially in India could design better auctions. It also touches upon some of the emerging issues such as Net Neutrality, which would concern readers as more and more transition to consuming content solely on the Internet.

The book leaves one with three key takeaways, which if heeded to, can not just resolve some of the age old hurdles that companies face but also allow the government to use spectrum as a powerful tool in bringing about development.

First, India has been acutely starved of spectrum primarily because much of it, and especially the better quality one, is stuck—without much use—with the government and defence forces. For instance, the migration from terrestrial broadcasts to digital signals can free up huge amounts of spectrum for commercial services. This notion is referred to as the “digital dividend". Lack of adequate spectrum being made available to the market is the key reason why there is excessive fragmentation in the Indian market. This, in turn, drives up costs.

Second, in terms of its approach, India needs to be more creative and smart while using spectrum. For instance, usage demand and pattern are quite different between urban and rural areas. As such, it might make sense to allocate different sizes of spectrum blocks as well as keep different entry barriers for rural and urban areas.

Lastly, the vexed issue of auctions. Apart from increasing both the quantity and quality of spectrum available for the market, the government also needs to lay down a clear roadmap so that market players can bid more intelligently.

Udit Misra is Assistant Editor (Views) at Mint.

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