Auction of 2G spectrum to hit telecom users, DoT tells PMO

In a twist to the ongoing telecom spectrum allotment issue, the government may oppose auction of 2G spectrum, terming it anti-consumer and against open market policies.

The Department of Telecommunications (DoT) has put in place a team to study various methods for allotting 2G spectrum, including offering the first tranche as part of the licence and holding auctions for additional allotments.

According to the DoT, which has prepared an internal note for the Prime Minister's Office (PMO), auction of the airwaves will result in monopolising of mobile services in the country.

"The participants in the auction process will be commercial entities whose objectives are to generate profits. But the profits would naturally come from service revenues based on the number of subscribers and their usage pattern," said a source close to the development.

This would make 2G services "unaffordable" to the common man and result in market dominance of the operators who emerge winners, the source added.

The note points out that auctioning 2G spectrum will make the services "unaffordable" to the common man. This is due to the fact that the highest bidder will get the spectrum, who, in turn, will increase the price of the services to.

According to the note, the auction may lead to a scenario where operators go overboard with their bids to get a larger share of the pie. This cost has to be ultimately borne by the customer, says the note.

However, the government intends to recommend auction for 3G spectrum due to the premium nature of these services.

The DoT is believed to have put in place a team that is working on various models for allotting 2G spectrum. One of the options include providing spectrum as a part of the licence and bringing in the auction methodology for additional spectrum.

A study on tightening the norms for allotting spectrum on the basis of the Telecom Engineering Centre's (TEC's) recommendations is also being conducted.

However, the government intends to recommend auction for 3G spectrum due to the premium nature of these services.

A section of operators like the Sunil Mittal-owned Bharti Airtel and new applicants like AT&T had supported the auction process, while operators like Reliance Communications are against auctions.