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The Telecom Commission has asked the industry regulator to give a complete “analysis” of the impact of its 2G spectrum pricing proposals on consumer tariffs, viability and continued attractiveness of the sector for investors, and revenues to the Government. That, in a sense, amounts to the Government wanting the Telecom Regulatory Authority of India (TRAI) to revise its recommendations on auction of airwaves made last month. These have been criticised by many, quite justifiably, as muzzling competition. TRAI had suggested selling only 5 MHz of spectrum, enough to accommodate just one additional player to operate in each of the country's 22 telecom circles. Considering the context in which the recommendations were made — in pursuance of the Supreme Court's order cancelling 122 licenses held by eight operators — such a limited auction would not particularly serve consumer interest. Moreover, TRAI had sought a base auction price of Rs 3,622 crore for each MHz, working out to over Rs 18,000 crore for that single extra operator seeking an all-India presence. That would again discourage new entrants, including those whose licenses were quashed by the apex court last September.

By asking TRAI to re-examine its recommendations in the light of above concerns, the Telecom Commission has made the right move: It respects the regulator's autonomy, even while reinforcing a basic policy objective of making services affordable and promoting competition. Unfortunately, the latter objective is not adequately met even by the Commission's own proposal of putting 10 MHz of spectrum on the block. According to TRAI's estimates, cancellation of the 122 licenses would free up about 580 MHz, translating into an average of 26 MHz in each circle. It gives ample scope to auction at least 20 MHz immediately. Not offering it entirely — in the name of reserving spectrum for ‘re-farming' to those operators whose licenses come up for renewal in 2014 — is like robbing Peter today to keep Paul alive two years from now.

The best thing for the Government to do is to put up for auction all available spectrum resulting from cancellation of the 122 licences — 20 MHz, at the least — and make it open for anyone to bid. That would include incumbents as well as those whose licences face cancellation. It would be certainly better than selling 5-10 MHz chunks, fixing high reserve prices, and then offering operators the choice of staggered payments. In a wide open field, there is no need for any reserve price or staggered payments either: The very possibility of more number of players bidding would guarantee adequate revenues to the Government. Even with regard to re-farming, finding the additional spectrum may not be all that difficult. The Defence establishment, for instance, is supposed to vacate 55 MHz of 2G airwaves. Nothing stops the Telecom Department from working towards making it available between now and 2014. 

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