Unreasonable expectations

The Telecom Regulatory Authority of India’s proposal to auction all the available spectrum across seven frequency bands may seem like a good move on the face of it. Access to more airwaves will help telecom operators roll out highspeed broadband services, a key pillar for achieving the targets under the Digital India campaign. In reality, though, the telecom regulator’s recommendations on valuation and reserve price of spectrum in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands are contrary to these objectives. Take, for instance, the pricing recommended for the 700 MHz band. The efficiency of this band in terms of coverage and capacity is comparable to the 800 MHz band; yet the regulator has priced the former at nearly twice the reserve price of the latter. TRAI has not offered any rationale for fixing a higher price for the 700 MHz band except for admitting that it had no better approach than its own recommendations made in 2012. Then, it had based the pricing on the outcome of auctions held in rich European countries, including Germany, Sweden and Norway, where universal access to broadband had already been achieved. In India, access to cheap broadband service is still a distant dream for most citizens. Four years after the launch of 3G services, there are just about 93 million 3G subscribers, barely 9 per cent of the total mobile user base. That’s because telecom operators had to buy 3G spectrum in 2010 by paying over ₹1 lakh crore, leaving them with little to invest on network expansion. Even here, the quality of access leaves much to be desired. The average connection speed, hovering around just 1.3 Mbps, is the lowest among Asian countries

Clearly, TRAI appears to have not learnt any lessons from past experience. If all the spectrum being made available is bought by telecom operators, they will have to pay over ₹5 lakh crore, which is higher than the total industry revenue. While higher income from spectrum auctions will boost the exchequer, the reality is that an expensive auction is counter-productive from the consumer point of view. Higher spectrum cost will put pressure on telecom operators to either increase tariffs or halt investments in new infrastructure. Neither is good for achieving Prime Minister Narendra Modi’s vision of a Digital India or the 100 Smart Cities project.

To be fair, the Centre cannot be faulted for following the auction process for allocating spectrum. Compared to other mechanisms used in the past, such as the ‘First Come First Served’ policy or subscriber-linked criteria, auction is the most transparent way to parcel out finite natural resources. However, it must decide whether it wants to use the telecom sector as a milch cow to bridge its deficit or as an enabler of social growth, through access to affordable broadband. If it is the latter, then TRAI’s recommended pricing must be rejected.