The problem stems from the Trai not specifically favouring auctions for new players - it didn't, it says, as it wasn't asked and the law was clear this was the only way.
MAHESH UPPAL
Director, Com First (India) Pvt Ltd
In 2003 itself, it was accepted new players would come in through auctions. Since the Trai never revised its view, it is clear the current licensing violates the law
A company with a Unified Access Service Licence (UASL) can operate mobile and fixed services using the start-up spectrum that is included with it. In January 2008, Communication Minister A Raja awarded 120 such licences to nine companies for roughly Rs 9,000 crore. He did this without a competitive process and at a price which experts had earlier warned — and recent equity sales have confirmed — is a fraction of its market value. He claims that the price and the method of allocation i.e. first-come-first-served (FCFS), is an established government policy. The evidence as well as the history of his department support none of his claims.
First, is there a statement of such policy? The websites of both the department of telecommunications (DoT) and the Telecom Regulatory Authority of India (Trai) do have well marked sections on Telecom Policy. But neither the policy of 1994, 1999 (NTP99) or the addendum to it issued in 2003, mention — explicitly or implicitly — that India awards mobile licences at a specified price or asks applicants to create or join a queue.
In 2003, the government asked for and accepted the Trai’s recommendations on merging fixed and cellular licences into the current UASL and followed it by an “Addendum to the New Telecom Policy 1999” available on its website. In the same document, the Trai had recommended that future licences be auctioned in multistage bidding as they had been in 2001.
The Trai neither revised nor abandoned this view even when opportunities arose. Not even when it recommended that licences for those circles (in the North-east and Jammu and Kashmir) which attracted no bids in the 2001 auctions could be awarded at a nominal fixed price. Responding to a government request in 2007, the Trai recommended that the number of mobile players not be limited, provided there is adequate spectrum for existing and new players. It has complained to the government for acting on its recommendations selectively.
Trai has powers to advise the government suo motu without being asked. It could — perhaps, should — have reaffirmed that a competitive process be adopted. That it has not, is no proof that it favours a fixed price. Indeed, the chairman of the Trai is on record that he does not and has asked for a review of the fees that auctions threw up in 2001 when the market was about three per cent of its current size.
If Raja believes, mistakenly, that the current policy allows the sector’s chief resource, spectrum, to be underpriced as it manifestly has been, then he was duty bound to remove such perception by fixing the problem. Raja is not just bound to follow existing policy; he must amend it if there is need. As minister, he needed to make a suitable reference to the Trai to advise him on new norms for UASL licences. But he chose not to and went ahead with issuing the licences.
Lastly, with dozen of Indian and foreign players queuing for them, are fixed-price licences even conceivable in the DoT’s traditional worldview? When you see that in the long list of tenders on DoT’s website you have those for office stationery and daily flowers on the minister’s table, the answer would have to be — Never!
A S BANSAL
Former CMD, Telecommunications Consultants India Ltd
Licences were given out in 2006 at 2001 prices but no one protested then! In any case, Trai did not come out in favour of auctions - more players will also help cut tariffs
It is fashionable to argue that Communication Minister A Raja’s decision to give 2G mobile spectrum licences on the basis of the government policy of first-come-first-served (FCFS) has cost the exchequer Rs 50,000 crore in terms of lost auction fees. After the media began raising it, some political parties have also begun doing the same.
Old letters of the Telecom Regulatory Authority of India (Trai) Chairman Nripendra Misra are also being circulated to show how the minister’s actions were not in keeping with government policy and with the recommendations of Misra.
Nothing can be farther from the truth. One, bringing in 120 new licensees will greatly increase competition and is therefore pro-consumer. As for the ‘loss’ to the exchequer, this is based on the amounts committed by foreign telecom firms like Etisalat and Telenor in the case of Swan and Unitech.
In both cases, the money to be paid is not immediate, but is to be paid after a year during which both the companies will have completed part of their rollout and will have a revenue base.
So, it is not for the spectrum alone, as has been alleged. Also, all the money paid by these two foreign players is in the companies and will be used to roll out the network, so it is not just for the rights to use the spectrum.
The larger point is that Raja’s actions are fully in keeping with Misra’s recommendations. Today, many wise people, including Misra, are arguing in favour of auctions and stating that this was always the government policy.
Raja’s immediate predecessor minister (Dayanidhi Maran) also gave out around 20 licences, to some of the very firms who are against him at the Telecom Dispute Settlement and Appellate Tribunal on the issuing of licences to Swan and Unitech, on the same basis of the 2001 auctions. But, no one protested against this — the mobile cartel which is orchestrating the current protests has got its spectrum and does not want anyone new to come in with lower tariffs!
Trai Chairman Nripendra Misra examined the issue of auctions and very clearly said there were ‘level-playing field’ issues and so recommended auction in all other spectrum bands other than the ones in which mobile telephony operates today; the Trai was clear that while auctions were one way of discovering the true value of spectrum, spectrum fees were another legitimate way of doing the same — where is the question of the Trai recommendations not being followed?
Misra argues that one of the reasons why he did not give specific recommendations on the need and timing of new entrants, or on auctioning was that he was not asked for these. But as the Trai chief, he is well aware of his powers to give suo moto recommendations, so why did he not give them? He did not give them because, if you read the full recommendations given by the Trai, he had concluded, rightly, that auction was not the best policy. As for how the criterion for selection is concerned, the Trai said that the Department of Telecommunication (DoT) had the right to decide on inter se priority. No rules were broken in the allocation of licences.
