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Thursday, January 20, 2022

Wrong number

By creating artificial spectrum scarcity, government does ‘Digital India’ a disservice.

By: Express News Service |
Updated: January 10, 2015 12:00:36 am

The Union cabinet has cleared the way for the auction, in February, of 5 MHz of spectrum (in each of 17 circles) in the 2,100 MHz band, which is used to provide 3G services. At the same time, spectrum in the 800, 900 and 1,800 MHz bands, used for 2G services, will also be auctioned. Reportedly, a much larger quantum of 3G spectrum — 15 MHz — will be up for offer by December. But by staggering the auction of 3G spectrum, the government seems to be creating artificial scarcity. Indeed, after the department of telecommunications clinched a long-awaited and much-needed spectrum swap with the defence ministry — the latter agreed to give up 15 MHz of 3G spectrum — it comes as a surprise that only 5MHz will be auctioned in February.

In fact, the Telecom Regulatory Authority of India (Trai) had earlier warned against holding an auction with insufficient spectrum. Fierce bidding can be expected in the 900 and 2,100 MHz bands. But, for a variety of reasons, including insufficient contiguous spectrum needed to launch data services, in most circles, demand for 800 and 1,800 MHz spectrum could be comparatively muted. Most of the 900 MHz spectrum on the block is due to the expiry of 20-year-old licences. So, if operators whose licences are about to expire want to stay in business, they would have to either win back their 900 MHz spectrum or replace it with 2,100 MHz. In such a situation, an auction with artificially created scarcity could seriously upset the financial health of telcos. Keeping this in mind, Trai had suggested that the 900 MHz licences could be temporarily extended by levying a pro-rata charge.

Though the February auction is expected to raise Rs 1,00,000 crore, it would be shortsighted of the government to view spectrum auctions as only a means to generate revenue. The government’s “Digital India” push, for instance, would be a non-starter without greater internet penetration, which is significantly up to telcos to achieve — the fibre optic cable network is progressing at snail’s pace and, in any case, most Indian consumers have leapfrogged straight to mobile internet. But financially depleted firms will neither be able to invest in their networks to improve call and internet quality nor keep prices low for long.

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