The saga of 3G spectrum auction carries on endlessly like a longwinded Indian movie with twists and turns that seem to have no other purpose than to keep the audience glued to their seats. The process has already made it difficult for the Union finance minister to raise revenues in time to bridge the Central government’s fiscal deficit. It now appears the proposed auction may well happen in the next financial year. This is just as well because revenue considerations should not be the only factor motivating auction of spectrum. Since the 3G auction process first began three years ago, and the auction dates have been missed on several occasions already, any further delay will mean considerable loss of credibility for the government. However, the price paid in terms of this loss of credibility will now have to be weighed against the likelihood that the revenues raised may not be as high as was initially anticipated because of all the delays. An auction held in the shadow of obvious fiscal compulsion may yield a sub-optimal outcome. While further delay of spectrum auctions may serve to benefit the newer players who got their spectrum at bargain-basement prices in 2008, thanks to the largesse shown by telecom minister A Raja — and the government may not want to be seen as helping the newer players at the expense of the older ones — there is probably an economic argument in favour of postponement. The commercial viability of additional spectrum, especially 3G, has been brought into question by the unbridled competition in the telecom market. It is, therefore, important to weigh the economics of precipitate action, specially if motivated purely by fiscal compulsions, against the economics of competition in an as yet undeveloped market.
It is, of course, true that with the older players’ spectrum-starved networks unable to give quality service, new subscribers as well as some of the older ones are tempted to move to firms which have unclogged networks. The 3G auction will ensure that older players will no longer be spectrum-starved and is, therefore, their lifeline to future growth. Therefore, postponement of auctions comes at a price. But with the telecom and defence ministries unable to resolve the simple question of who owns the spectrum, clarity on such matters would be necessary before further steps are taken. The argument that defence forces are using the spectrum and until an alternative network is readied for them — and this could take some years — they should not be forced to vacate the spectrum, is not entirely convincing. However, if by August this year the matter can indeed be resolved, it may be better to wait than rush through with the auctions. Since all spectrum allocation is done by the Wireless Planning Commission which reports to the telecom ministry, it is obvious the ultimate custodian is the telecom ministry. Of course, a view could still be taken that telecom is only a “custodian” and eventually defence interests cannot be compromised. All these issues should be resolved in a transparent manner by the government before any precipitate steps are taken.
