Asking incumbent mobile licensees to pay today’s price for airwaves acquired when mobile telephony was still a virgin business amounts to penalising them for their entrepreneurship.

It would be wrong on the Government’s part to impose a one-time fee on incumbent mobile telecom operators for their ‘excess’ subscriber-linked spectrum, whether it is linked to the price discovered in the upcoming 2G auctions or otherwise. The ostensible logic behind the move — already cleared by an Empowered Group of Ministers — is to create a level-playing field between the incumbents already having spectrum and the new players who would be paying more through the auction route. Moreover, the proposed impost, it is argued, is only on the additional spectrum being held by the incumbents, over and above the original 4.4 MHz bundled with their operating licence. Lastly, the fact that the auction price-linked levy will be applicable only for the remaining part of their 20-year licence period makes it seem all the more equitable.

The above arguments are flawed on many counts. To start with, a level-playing field can only be ensured for a given point of time and not over different time periods. A realtor ‘A’ planning to develop land acquired five years back always has an advantage over a rival ‘B’ who has bought an adjoining plot only today. Not only would it be outrageous for ‘B’ to demand that he get the plot at the rates prevailing five years back, but the lower cost of land for ‘A’ can even be seen as a reward for the risk he has borne in investing in a relatively underdeveloped area. The same holds for spectrum: Old operators cannot be told to pay today’s price for airwaves acquired when mobile telephony was still a virgin business. Just as in property, level-playing field can apply only to new spectrum on offer.

As regards ‘excess’ spectrum, it is necessary to point out that this was given based on a subscriber-linked policy framed in 2002. Under it, operators were allocated incremental chunks amounting to 1.25 MHz each on achieving specific subscriber milestones. Over a period, it resulted in their accumulating spectrum totalling 10 MHz or more. This policy was discontinued only after the Supreme Court’s February judgment ordering all spectrum to, henceforth, be auctioned. But for the Government now to turn around and ask operators to pay the auction-determined price for the entire additional subscriber-linked spectrum allocated since 2002 would raise serious questions on the sanctity of contracts signed with it. Subscriber-linked criteria were, after all, part of the policy prevailing then. True, it did create perverse incentives for operators to over-report subscribers to qualify for additional spectrum entitlements. But that still does not justify imposing a new auction-based pricing policy on spectrum allocated under an earlier policy. At best, the operators can be made to surrender spectrum not matching their ‘genuine’ subscriber base prior to the new policy’s adoption. This genuinely excess spectrum can then be added to the auction pool.

(This article was published on October 16, 2012)
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