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By opting to award licences for third generation (3G) wireless phone and broadband services through an open and all-inclusive auction, and by ruling that phone users can change their operator without giving up their mobile number, the Telecom Ministry has, by all accounts, hit the right buttons. Auctions are not new to the Ministry; existing licences for mobile phone services across the country were decided in a series of open auctions over the years that brought into play 12 different companies, and excellent fare for consumers to choose from. The competitive pressures the process created among the service providers have been enough to drive tariffs to some of the lowest in the world, and phone penetration (at over 200 million and rising by seven million a month) to a level none had bargained for — one in three in the country (not counting the 35 per cent of the population that is under 15) has access to a mobile connection. Few policy moves, therefore, have come off so well in recent times. So why did the announcement of an open auction for 3G phone and broadband services come as a pleasant surprise?

First, in the run-up to the policy announcement, the Telecom Regulatory of India had been actually talking of restricting the auction of the 3G spectrum to licence holders, which meant that existing mobile phone companies would be the only ones eligible to launch the new services. None will ordinarily grudge them entry into this space, but given the fact that there are several new players waiting to get in and enlarge consumer choice, a summary extension of the current 2G licences would have been unfair to the new hopefuls and to consumers alike. The second reason for doubt arose from the contentious manner in which the Ministry was contemplating to distribute the extra spectrum that had now become available for the conventional 2G phone services. Its intent to licence some CDMA operators to run GSM services; its calling for applications from new aspirants up to October 1 and, after 46 companies showed up, resetting the cut-off date to September 25. And, after all that, there was no clarity on how the limited available spectrum would be handed out. There still is not. All one gets is a war of words among mobile service companies and a volley of complaint letters flying out to the Prime Minister’s office.

When the Ministry finally makes up its mind, one hopes it will revert to the trusted auction mode to determine who among the new hopefuls will take slices of the 2G spectrum and how much they will pay for those. The market for mobile services, already phenomenally large and profitable for mobile companies, is expected to get larger with the concerted push into rural territory. There is surely room for more service providers.

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