Pradip Baijal: Don't kill telecom by auctioning spectrum

Previous experiments with auctions, such as the 1995 one in India or the 3G ones in the UK and Europe ended up disastrously and some of these regimes then had to be modified.

There is an ongoing debate about whether or not there is enough spectrum with the Indian telecom operators, whether the subscriber norms have been correctly modified, whether new players can be introduced in voice telephony (currently often addressed as 2G spectrum), whether new players should be introduced in the more efficient 3G networks, and so on.

The answers are very simple, yet different interest groups are complicating the issues. Spectrum availability is the same all over the world""and in cities with large or small populations "" but we have allotted around 5 MHz to CDMA and about 10 MHz to GSM operators. In most parts of the world, double this amount is allotted. There must be something wrong with our allocations. Our allocations were made when no one expected more than one per cent mobile teledensity "" this was the case in 2003, eight years after the introduction of mobile technologies.

CDMA allocations were made for almost an experimental wireless fixed line technology. Once GSM and CDMA are used for the same service and have been charged equally, there can be no case for penalising/encouraging one technology against the other. The number of mobile operators varies from two in China to six in Hong Kong, while we already have seven in large cities. Does this number need to be capped, particularly when we are introducing 3G services in India and should this 3G spectrum be given to existing 2G players alone or auctioned?

A few caveats here. Both 2G and 3G services give voice, data and pictures. I do not find any restrictions in the present 2G licences that say licensees cannot give the improved version of these services by using 3G equipment. Whether 3G spectrum is given to the existing players or new players has to be government policy. Again, 3G equipment can be installed in the 2G spectrum, but the availability of equipment in this range at the right price would be an issue here. 3G kind of services can also be given by Wimax/WiFi in different ranges of the spectrum which have not yet been allotted in India.

While mobiles were introduced in the world in the late 1980s, we debated till 1995 as to whether this was the right technology for the poor Indian! The way we introduced the technology proved that it was not the right technology for the poor Indian "" tariffs being Rs 32 per minute for local calls!

Consequently, in 2003, mobile teledensity in the country was as low as one per cent. Changes in the licensing regime, technology-agnostic unified access, competition tariff and subsidy for mobile towers in rural areas broke all barriers so that today, we have 50 per cent teledensity in areas covered by mobile signal. Delhi and Mumbai are approaching 100 per cent teledensity, equivalent to that in advanced nations.

The lessons learnt are obviously that nation states are poor judges of technology choices and even if we restrict a technology, we will not be able to effectively restrict it as brilliant technologists and entrepreneurs will find their own solutions under any licensing regime. American regulators tried to restrict voice-over-internet for years and ultimately they had to give up; consequently, VoIP flourishes in the US. In India too, a lot of litigation went on between 2001 and 2003 between different technologies.

If we move to the Next Generation Networks (NGN), the requirement of spectrum will go down drastically. Thus, in the alternative policy scenario, we can call it NGN or converged licensing (the bill is pending since 2001) or unified license (the regulators' proposal is pending since 2004), there is no spectrum shortage.

Hence, restricting the number of operators now makes no sense "" it does not happen in any sector, provided we have an unrestrictive Merger and Acquisition (M&A) policy, as we now have. A fettered or state-dependent M&A policy which will now be introduced under the new Competition Act will not do, because encouraged by corporates, state agencies may take different views on different mergers.

There have been other developments too. Defence and security, the other users of technology, have also starting using vastly superior equipment compared to that in the past. Consequently, they are in a position to give up very large chunks of spectrum. However, like other sectors of our polity, they are expecting some quid pro quos. These can be quickly settled.

A word about the procedure for revising subscriber limits. Section 11(4) of the TRAI Act very crisply states, "The Authority shall ensure transparency while exercising its powers and discharging its functions." This provision has led to a globally accepted procedure of issuing a consultation note, obtaining comments of all stake holders on any change, examining the comments and issuing a speaking order "" after all, orders and actions of the TRAI are appealable in a judicial forum. There must be some reason that the present regulator deviated from this procedure while recommending amendments to these limits, one that I am not aware of.

This brings me to the most debated question: should spectrum be auctioned? A 1995 auction of 2G spectrum in India, an initial auctioning regime for FM radio in India, and the auctioning of 3G spectrum in the UK and Europe led to disastrous results and some of the regimes had to be modified.

We, in India today, are on the threshold of a communications revolution, more importantly in the rural areas (perhaps for the first time in our history), thanks to distance-agnostic technologies and low tariff-friendly government and regulatory policies. This has already happened in the voice space but is waiting to happen in broadband, a much more powerful instrument of communication.

The State should not come in the way of this revolution waiting to happen, particularly in rural areas, by auctioning spectrum or defining the technology route. Such policies are elitist as they make broadband unaffordable to the large masses wanting it, and in favour of one technology or another. A converged or unified licensing regime will automatically choose the most competitive and viable technology.

We have to move early in this direction, the sooner the better.

The author is a former head of the TRAI and has telecom clients in his consulting practice. He can be reached at baijalp@gmail.com