The Hindu Business Line : Slicing the spectrum

By pricing fairly stiffly any extra slices of the spectrum, TRAI is seeking to goad existing players into using whatever they have more effectively.

The Telecom Regulatory Authority of India seems to have kept a level head in dealing with the growth pangs of the mobile phone industry. With over 8 million people joining the ranks of mobile phone users in July, way over the 6 million that did so in China, the telecom industry has not had it so good, ever. More than 20 per cent of the population owns a phone today as against less than 2 per cent just ten years ago. But progress comes with its own price and to meet this ri sing demand, service providers have each been demanding a larger segment of the frequency spectrum. Spare spectrum being scarce, TRAI’s challenge is to see not just how to distribute it among deserving existing service providers but also to save some that can be auctioned to new players. By pricing somewhat stiffly any extra slices of the spectrum, TRAI is seeking to goad existing players into using whatever they have more effectively, rather than occupying more of the air waves and denying others. Peeved the existing operators might be for having to spend good money either way, but in the circumstances that was the only fair course for TRAI to suggest.

Yet nothing can detract from the excellent performance of the dozen service providers over the past decade. The pace of penetration into the vast population has been phenomenal, with perhaps no parallel in industry. Of course, technology has been of substantial support: mobile phones have not just become cheaper; they have become more versatile and in tune with what users want. However, the major catalyst for this rapid growth has been the intensity of the competition among the various service providers that has not only spurred them to take the service beyond the cities and towns but also kept the price of the service down, verily the lowest in the world. In a virtuous cycle that everyone loves to be in, the cost of the phone and that of using it has been consistently dropping, making it attractive and affordable to more people. The higher volume of business as a result has provided new economies of scale to the service providers. So, in a classic win-win situation, we find profits of most, if not all, service providers rising at a furious pace even as the average spend of a phone user keeps dropping.

For the regulator, the task at hand is to sustain the growth momentum so that the phone permeates rural India just as smoothly as it did the towns and cities. That needs an even larger set of competing service providers, conditioned to doing business with smaller revenue streams in tune with the lower purchasing power that goes with the new territory. For an industry on song, that should not be an insurmountable proposition.

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