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A study by the UK-based international spectrum pricing experts has termed the recommendations of the Telecom Regulatory Authority of India on pricing 2G spectrum as “flawed and not fit for purpose'.
The study, done by Plum Consultancy and commissioned by Vodafone, stated that neither of the methods proposed by the experts, appointed by the TRAI, provides reliable estimates of the value of spectrum.
Not fit for purpose
Ms Phillipa Marks, Director, Plum Consultancy said, “The experts' report contains basic errors and omissions that need to be corrected. It is flawed and not fit for purpose. It is unfortunate that this was not done at an earlier stage of the process, together with industry consultation. This lack of disclosure is poor practice. Due to the significance of spectrum to the Indian industry, it is imperative that regulatory bodies do not allow such errors to persist.”
Ms Marks is also a member of the Ofcom Spectrum Advisory Board in the UK. She advised the New Zealand government on creating the first ever national market in spectrum in 1989, and developed the approach to administrative pricing now applied in the UK, and proposed in Australia and Hong Kong – and which is claimed to be replicated in the TRAI report.
The report said that the approaches proposed by the TRAI should not be used to determine the market or opportunity cost value of incremental spectrum at 1,800 MHz.
Value of spectrum
“The market value of spectrum can be directly observed through auctions or market trading of the spectrum concerned. In the absence of a spectrum auction at the beginning of a licence period, the market value can be observed through a functioning secondary market for spectrum – that is, by allowing operators to trade spectrum and observing the traded prices for spectrum. We note that this optimal market-based solution has been rejected by the TRAI,” the Plum Consultancy report said.
TRAI has suggested Rs 1,769 crore/Mhz for spectrum up to 6.2 Mhz and Rs 4,571 crore for air waves above 6.2 Mhz. This is expected to cost around Rs 16,000 crore for the existing players immediately and more than Rs 40,000 crore in the long term.
Incumbent GSM players including Bharti Airtel, Idea Cellular and Vodafone have opposed this proposal while new players including Uninor have supported it.
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