Sunil Jain: What is Nripendra Misra saying?

RATIONAL EXPECTATIONS

saying, now that he's telling us what he isn't!

The problem stems from the fact that while Misra doesn't accept the industry's argument that the government has a legal obligation to provide existing operators spectrum for the rest of their lives without any entry fee, he doesn't have the courage to fully move away from the existing system, either. So, in the 3G recommendation a year ago, he said the spectrum should be auctioned, and he reiterated that by saying, in this recommendation, that all spectrum apart from the 800/900/1800 band (the ones currently allocated to mobile phone firms today) should be auctioned. And given that he hasn't followed procedures, the chances of his recommendations getting struck down are very high "" indeed, there is precedent for this.

First, the areas where Misra has issued clarifications. After having argued that the existing subscriber norms were too liberal, and pointing out that there was no visible drop in service quality even though some mobile phone firms were servicing more subscribers than the existing norms envisaged (a point made in this column, 30/7/07), Misra raised the subscriber requirements 2-5 times (in some cases, even 8 times). Since several existing firms, including the government-owned ones, were allotted "extra" spectrum on these existing relaxed norms, naturally this means several firms have got "extra" spectrum. While arguing this, Trai concluded these firms be asked to return this over a period of time. But since this set off a storm, Misra has written to the Department of Telecom (DoT) saying this was just a "conclusion" and not a "recommendation"! While you could call this the subtlety of a Brahmin mind, the signal sent out is loud and clear "" put pressure, and Trai will buckle.

But if existing telecom firms are not going to get extra spectrum in a hurry with the hiked subscriber requirements, who's going to get it? New firms, obviously. But how is this to be allotted to them? Since Misra has said "the Authority ... is conscious of the legacy i.e. prevailing practice", everyone assumes this means the current practice of first-come-first-served is to continue. That's why the number of applications for fresh spectrum is already up to 160, and is showing no signs of stopping.

In an interaction with this newspaper (See Lunch with BS, "The Spectrum Master," September 12), however, Misra has said he has never recommended first-come-first-served as the basis for spectrum allocation. To be fair, Section 2.38 of the recommendations says this as well, but no one paid much attention to it. The reason for this is simple "" while Misra has lobbed the ball back in the DoT's court, if Trai/DoT do not go in for auctioning spectrum, there are no other ways to allocate the spectrum in a non-subjective manner.

Now look at the consequences of Misra's recommendations. Under the recommendations, firms like Bharti, Hutch and Reliance cannot get more spectrum for the time being as the subscriber requirements have gone up dramatically. But there is nothing to stop these firms from taking over any new firm which has just got spectrum on a first-come-first-served or any other basis "" hence the spate of applications for new licences, either by dummy companies set up by these firms themselves (what else do you make of applicants called Cheetah and S Tel?) or by those hoping to sell the spectrum to these firms. Under the existing law, this is not possible for two reasons. The first, since an operator cannot hold more than 10 per cent of the equity of another in the same circle, existing firms cannot set up dummy companies to get extra spectrum - this is, however, easily circumvented and Essar, for instance, managed to convince the DoT that it owned under 10 per cent of BPL, the firm it bought two years ago with great fanfare! Second, if a firm bought another, there was a cap on the spectrum the combined entity could hold (15MHz for cellular firms) "" since the recommendation now is that this be scrapped, a Bharti/Hutch/Reliance can buy a Swan/Cheetah/Shipping Stop Dot Com and retain its new spectrum! So why bother to hike the subscriber requirement?

There is then the issue of the validity of Misra's recommendations. As various telecom firms have pointed out, the new subscriber criterion was not part of the consultation paper put out by Trai "" as per procedure, Trai puts out topics on which it wants to make recommendations, gets the industry response and then makes its recommendations. So, since Misra didn't ask telcos for their opinion on this issue, the whole process is flawed. In the IPLC case, the TDSAT overturned the Trai order since it had not shared all the data used by it with VSNL "" Trai then shared this data and repeated the consultation, and came to the same conclusion, though after a gap of eight months. Perhaps Misra didn't think of this since bureaucrats, even fair ones, are not trained to operate in such a transparent fashion.

sunil.jain@bsmail.in