Ever since Telecom Regulatory Authority of India (TRAI) on
April 23 recommended base price of Rs.3,622 crore for a mega hertz of spectrum
at pan-India level for the auctioning of 2G spectrum, which is around 10 times
higher than the price for 2G licences in 2008, which was decried by the
Comptroller and Auditor General and the media as a whole and according to TRAI
recommendations, a minimum of 5 MHz should be allotted which would mean that a
pan-India spectrum in 1,800 MHz band will cost Rs.18,000 crore, the operators
and the media started slamming the recommendations saying they are ‘arbitrary,
regressive, and inconsistent’ and will hurt further investment in the sector
and expansion in rural areas. The recommendation set off fears of a steep hike
in mobile phone tariffs which are at present the cheapest in the world. They
said that this is definitely not in the interest of the customers and the
mobile operators, the digital divide is set to increase, this will only push
back the competitiveness of India as whole etc., It is expected that the TRAI
recommended price for 2G spectrum in the proposed auction will fetch a revenue
of Rs.3 lakh crore to the exchequer in the auction of 122 licences cancelled by
the Supreme Court.
There was a report in the business daily ‘The Economic
Times’ on June 5 under the headline ‘Incumbents must pay new 2G price’ which
read as:
“India's beleaguered mobile phone companies are set for a
Rs.1,20,000-crore shocker. A Cabinet note prepared by the Telecom department
proposes to make it compulsory for all operators to match the
auction-determined price for their existing 2G airwaves for the remaining
period of their licences.
Industry calculations show if the Cabinet approves the Telecom
department's proposal, the government can garner a minimum of Rs.1,20,000 crore
from existing operators such as Bharti Airtel, Vodafone, Reliance
Communications and Tata Teleservices.
The proposal has been sharply criticised by AUSPI, the industry
body that represents dual-technology operators, which says it will impact its
members such as RCOM and Tata Teleservices far more than GSM operators such as
Bharti and Vodafone.
"Our calculations show that on an average, each of the
seven pan-India operators will have to shell out about Rs 15,000 crore at the
Trai-prescribed base reserve price to match the auction prices. Dual-technology
players such as RCOM and Tatas will have to pay a higher amount because they
hold second-generation airwaves for both GSM and CDMA services," said a
telecom industry executive.
The Cabinet note, which has been circulated to all
ministries for their comments, says this 'one-time fee' is being imposed on all
existing mobile phone companies for creating a ‘level playing field’.
While examining the implications of the Supreme Court order
(quashing 122 licences issued in 2008 by former Telecom Minister A Raja), it
was noted that several of the operators who have received spectrum ranging from
the years 1994-2009 had paid price ranging from zero to Rs.1,658 crore on
pan-India basis.
Consequently it was observed that in a situation where new
players who will come in will pay for entire spectrum, there will be no level
playing field between them and those who received spectrum at administrative
price," the note said.
While the government plans to impose this one-time fee
prospectively, the Cabinet note further said depending on the outcome of the
Presidential Reference in the Supreme Court, a decision to impose this charge
with retrospective effect could also be taken.
The telecom department has said the airwaves held by
existing players could not be used for deploying any technology of their
choice, but spectrum sold in the upcoming auctions would offer this
flexibility. Paying this one-time fee will provide existing telcos 'with the
same facility of liberalised usage of spectrum', said the Cabinet note,
implying this would enable an operator to offer 3G services on 2G frequencies. The
Cabinet note said spectrum sharing would be permitted only after telcos paid
the one-time fee.
The industry body representing GSM operators said its
members were awaiting clarity on the proposed policy change. "Telecom
Minister Kapil Sibal and other top government officials have been meeting
mobile phone companies to get their feedback on this issue. We are awaiting
clarity and details on the proposal," said Rajan Mathews, director-general
of the Cellular Operators Association of India.
But AUSPI slammed the proposal and said it was "not
legally tenable and completely contrary to the licence conditions to which
licensee and licensor were bound'.
"This new proposal puts late entrants like Reliance and
Tata at a disadvantageous position vis-a-vis all those GSM operators whose
licences are due for renewal between 2014 and 2016. GSM operators anyway have
to get their licences renewed as per the existing contract terms during 2014 to
2016," said AUSPI.
It pointed out that 8, 10 and 9 licences of Bharti Airtel,
Vodafone, and Idea Cellular, respectively, were due for renewal during 2014 to
2016 and the impact on these operators would only be for 14, 13, and 6 service
areas only. "However, the new proposal is going to impact practically all
the licences of our member operators," said the industry body.
The upcoming 2G auctions following the cancellation of
licences by the SC will be in the 1800 MHz band. But telcos hold 2G spectrum in
two different frequencies - incumbents such as Bharti, Vodafone and Idea have
2G airwaves in the 900 MHz band, considered most efficient, in about half the
country.
"As per Trai's recommendations, the reserve price of
900 MHz bands shall be at two times the reserve price of 1800 MHz band. In the
absence of auction price, this multiplication factor or reserve price, if
available, may be applied for charging in the 900 MHz bands from the service
providers," the note adds.
The telecom department has also asked the government to
reject Trai's proposal to levy a spectrum transfer charge for M&As in the
sector.”
Along with this report the daily has published its view ‘Focus
on the voter’ which stated, “The EGoM should be clear that its primary
accountability is to the people. Cheap telecom is one reform that has reached
the common man. Undoing that will invite voter wrath. True, the pressure is
high to treat telecom as a source of easy revenue and to be visibly fair to all
telecom operators. Sense lies in resisting these pressures. Treat telecom as a
great enabler and growth multiplier, which will induce added growth and revenue
in other sectors. The telcos’ ability to raise money should benefit faster
rollout of cheap broadband, not feed the government. Keep spectrum costs low.
Immediately after the recommendations of the TRAI were
released ‘The Economic Times’ wrote an editorial on April 24 under the caption “Shoddy
Job-TRAI recommendations will reduce competition, harm consumers” which stated:
“Telecom regulator Trai has come up with a set of
recommendations for auctioning spectrum that will make telecom expensive and
reduce competition, affecting the competitiveness of India’s economy at large.
This is so, despite its two redeeming features. The foremost is the proposal to
‘liberalise’ spectrum, that is, remove restrictions on what kind of technology
and use spectrum in each band can be put to. This would allow the latest
technologies to be deployed in frequency bands currently used to deploy
spectrum-hogging 2G technology. Further, the proposal to collect only one-third
the bid amount upfront, leaving the rest to be paid over a period of 12 years,
is a vast improvement over the method employed in the 3G auctions, of taking
the entire bid amount upfront at one go. This would reduce the capital
intensity of telecom operations. That said, the rest of the recommendations
make for little sense. They do not offer a way out for the licensees whose
licences stand to be cancelled by June 2, as per the Supreme Court order of
February 2. The auctions are recommended to be spread over three years. In the
current financial year, only 5 MHZ of spectrum would be auctioned, as per Trai.
Incumbents are also free to bid. So, it is entirely possible that no single new
operator would get spectrum. This would reduce the number of operators per
circle, once the cancellation of the 122 licences come into force, and almost
certainly jack up tariffs. Further, telcos would bid up the cost of spectrum —
the high reserve prices prescribed guarantee this — and end up shovelling bank
credit to the government’s coffers. The government would reduce its fiscal
deficit, all right, but without effectively reducing its claim on private
savings, so that private investment would remain impacted as if the fiscal
deficit had not come down at all. The government’s review petition asserts its
right to determine policy, but these Trai recommendations foist a high-cost
telecom policy on the economy. The Competition Commission should suo motu
intervene to oppose this regulatory misadventure. The government would do well
to do the same thing.”
Another editorial in the same daily on June 7 under the
heading ‘Give them glasses – Hon’ble empowered minister suffer from acute
myopia on telecom spectrum’ which read as:
“Nipping a burgeoning
loo scam in the bud, shedding tears over petrol prices and taking mental
strides across the lavish lawns of the Rashtrapati Bhavan evidently keep our
hon’ble ministers preoccupied and leave them with little time to engage with
something like spectrum pricing, which, after all, will only determine the
future competitiveness of India’s economy. So, an empowered group of nine
ministers met and blithely decided that only a fraction of the available
spectrum would be put up for auction. The EGoM did not have the time to decide
on the reserve price for spectrum. The consequence of auctioning only 13.5 MHz
of spectrum in any circle, instead of the entire spectrum that is available,
would be not just to make the cost of spectrum excessive, but also, probably,
drastically reduce the degree of competition. Incumbent players are allowed to
bid for 2.5 MHz each. If all the incumbents bid aggressively, the result would
be to leave no spectrum for a new entrant like Uninor or Sistema Shyam to get
back the licence that has been ordered cancelled by the Supreme Court. Both
reduced competition and high spectrum costs would jack up the cost of telecom
for consumers and delay their access to high-speed broadband. These consumers,
lest the ministers forget, also double up as voters.
It would appear that our ministers take the short-sighted
view that telecom should yield as much ready revenue as possible for the
government. The right approach would be to see telecom as an enabler and growth
multiplier, something that would greatly add to growth in a whole host of
non-telecom sectors. This additional growth made possible by low-cost telecom
would yield revenue far in excess of what the government can squeeze out of
telecom itself, making it a high-cost activity in the process. The notion that
spectrum is being held in store for future refarming purposes is untenable.
More spectrum can be released, more frequency bands like 700 MHz can be brought
into play and technology is changing, in any case. The EGoM should shed myopia
and decide to put all available spectrum in the 1,800 MHz band up for auction
and keep the reserve price low.”
This daily deserves to be complimented for coming out openly
with observation on auctioning of the spectrum and its impact on the industry,
economy, society and the end-user, the common man. But the rest of the media-
both print and electronic, which were making a hue and cry over alleged
spectrum scam/ loss to the exchequer of Rs.1,76,000 crore, have shied away from
publishing editorials and columns in dailies and debate and discussions in news
channels on this subject, possibly out of guilty consciousness.
Whatever benefits in keeping spectrum cost lesser that
accrue to the industry, economy, society and common man, as listed by the daily
in the editorials stated above, are those that the former Telecom Minister
A.Raja had all along been contending as
result of the steps by him – teledensity increased from 30 crore mobile users
to 80 crore, now reaching 100 crore mark, and the mobile tariff brought down
from Rs.1.50/minute to 10-20 paise/ minute and the digital divide greatly
reduced – ushering in a communication revolution, resulting in telecom serving
as an enabler and growth multiplier, greatly adding to growth in a whole host
of non-telecom sectors.
But all these fell on deaf ears of the people amidst the
frenzied noise and din made by the media of a ‘mega scam’. So, who were
suffering from acute myopia on telecom spectrum and treating telecom as a
source of easily earning as much revenue as possible for the government, who
require glasses? Certainly not the EoGM of the UPA government, but the CAG, and
the media, with their poor cousins the CBI and courts.
Didn’t they know all along that any cost paid by the
operators for getting the allocation spectrum for providing mobile services to
customers (people) will be recovered from the customers (people) as mobile tariff?
They are commercial firms and not charities to offer service incurring loss to
them. So, had the operators been charged Rs.1,76,000 crore more for 2G spectrum
as ‘desired’ by the CAG, Media and the Opposition parties, people would not
have been getting cheap telecom services, there would not have been spurt in
teledensity with about 100 crore having access to mobiles. They (the CAG, Media
and opposition parties) had been demonstrating their ‘extraordinary’ genius and
hence they were very well aware of all these consequences of upward pricing of
the spectrum. Hence the media was willingly lying/ misleading the people.
Of course, as the ET view states, the primary accountability
of not only the EGoM and the UPA government, but also of the media and others
stated above, is to the people, who have been so far misled by the
disinformation campaign. Cheap telecom is one reform that has reached the
common man. Undoing that will certainly invite people’s wrath, not against the
sullied but against those who sullied – all those who had been crying hoarse
about a scam. People cannot be taken for granted for ever and they are wise!
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