The Hindu Business Line : Auction the spectrum

THE PLAN OF the Telecom Regulatory Authority of India to consult all stakeholders on the issue of efficient utilisation, allocation and fair pricing of frequency spectrum is welcome, but the actual process may turn out to be tricky. Differences have already surfaced over the issue of parity in the allocation of spectrum to players offering mobile communication service using alternative technology platforms (GSM and CDMA) with both parties exerting pressure on the Government. But such tactics are totally unwarranted as both GSM and CDMA operators had agreed to the original terms of spectrum allocation while migrating to the `unified licence' regime late last year and their moves represent an attempt at reopening a settled issue.

Since spectrum is scarce and valuable, TRAI should at the earliest move towards a competitive mechanism for allocation of spectrum. The best way of achieving this will be for TRAI to freeze the allocation of spectrum at existing levels, which fall within the commitment levels of 2x6.2 MHz for GSM and 2x5 MHz for CDMA. There is no justification for raising the committed spectrum to 2x10MHz (except to the extent already allotted) for all GSM operators or enhancing the CDMA spectrum to match the GSM levels. This will ensure efficient utilisation of spectrum at least from this point onwards. Based on freezing the spectrum, a substantial amount of spectrum in GSM will be opened up for allocation through a competitive mechanism.

It is relevant to note that the existing percentage of revenue-share option has outlived its utility and is found to be an inadequate incentive for mobile operators to utilise spectrum efficiently and invest in new base stations in line with an increase in subscriber base. Among the options available for allocation, "spectrum auctions" may be the better approach compared to the normative way or what has been labelled by the industry as a `beauty contest' model to spectrum pricing. There is already considerable experience and understanding of the auction model which is said to have few pitfalls. In contrast, the normative approach can lead to inefficient utilisation of spectrum and inappropriate technology, both by the existing and new mobile operators.

It may also be desirable for TRAI to delink the spectrum available for 2G (the existing technology for GSM and CDMA) from bandwidth-rich 3G services. This will ensure that the scarce spectrum available for GSM or CDMA does not get unnecessarily utilised for bandwidth-rich multimedia applications. And second, all operators interested in offering 3G services can obtain the spectrum through a competitive auction held for the purpose. This will at least ensure that new entrants to the 3G arena will be in a position to compete on an equal footing with the existing operators. This will also go a long way in providing greater clarity and distinction in the allocation of spectrum between 2G/2.5G and 3G services, even in a unified access regime.