“THE policy regime for making spectrum available should be fair, transparent, equitable and forward looking. It should not create entry barriers to newcomers or barriers to the continued growth of the important sector. At the same time, the revenue potential to the government must not be lost sight of. After all, governments across the globe have harnessed substantial revenues while allocating spectrum. In the final analysis, the key issues are correct pricing, fair allocation rules, and a pro-competitive stance. In the past, the Department of Telecommunication (DoT) and the regulator have successfully enabled the rapid growth of this sector. I believe that working closely with the independent statutory regulator, we can balance multiple objectives in a fair and reasonable manner.”
So said Prime Minister Dr Manmohan Singh while inaugurating the India Telecom Conference on December 12, 2007.
Notwithstanding determined efforts by DoT to act on PM’s advice, UPA Government has miserably failed to unveil 2G spectrum policy. Far from doing that, it is now caving under pressure from dominant cellular operators to either reject or dilute recommendations made by statutory telecom regulator.
The policy delay has harmed the interests of new entrants, the competition, consumers and the inclusive growth of poor for which funds have to come from rational pricing of spectrum.
Even formal incorporation of PM’s advice by DoT in the agenda note in November 2008 for Telecom Commission did not help the Government collect one-time spectrum charge from companies that hold spectrum in excess of the licensing norms.
The core issue is rational allocation of spectrum between dominant operators and new entrants, several of them do not have any spectrum to start operations. The related issue is rational pricing of excess spectrum allocated to dominant players over the years in a non-transparent manner, without exploring the possibility of auctioning it for the benefit of new entrants as well as the national exchequer.
The Government has now let the policy agenda become subject of fresh machinations by cellular operators. And the Prime Minister Office (PMO) has admitted that last month while advising DoT to entrust to empowered group of ministers (EGOM) the issue of 2G spectrum and other matters dealt by Telecom Regulatory Authority of India (TRAI) in its voluminous recommendations titled ‘Spectrum Management and Licensing Framework’ submitted in May.
PMO’s letter to DoT sent in the last week of June 2010 especially referred to “media reports and letters being received in respect of them, which indicate potential controversies.”
TRAI’s recommendations include market pricing of 2G spectrum including collection of one-time spectrum charges for excess spectrum by taking into account the recently auction-determined price for 3G spectrum.
TRAI said: “The Authority is conscious of a concern that assignment of spectrum beyond 4.4 to 6.2 MHz is likely to be perceived as resulting in loss of revenue to the Government, particularly in the context of the current price of spectrum. At the same time, the licence conditions stipulate the contracted spectrum.”
It articulated this point further as: “Besides, several incumbent operators have received spectrum beyond the contracted limits free of cost and have benefitted from the same over several years. The Authority would like the Government to take a well considered decision in this regard keeping all factors in view.”
Telecom Minister A Raja, who has the knack of stirring controversies, has also joined the high-stake policy game. Pointing out corporate representatives had been meeting him to voice their views on TRAI recommendations, he earlier this month directed Telcom Secretary PJ Thomas to constitute an internal committee within DoT. This committee should process TRAI recommendations and subsequently prepare a note for consideration of full Telecom Commission, Raja advised.
Raja would like Telecom Commission’s advice to be placed before EGOM headed by Finance Minister Pranab Mukherjee for taking the government’s decision on TRAI recommendations.
He has desired that the report of internal committee “should be very comprehensive and should bring out the pros and cons of important recommendations so as to facilitate a proper informed deliberation at the level of Telecom Commission and decision at the level of government.”
Raja has also hinted enlarging the ambit of spectrum row. He is understood to have said: “any change in the letter and spirit of NTP ’99 (National Telecom Policy 1999 that was formulated by NDA government) on licence and spectrum issues, no doubt, have to be subjected to the scrutiny of the Cabinet and Parliament.”
The spectrum war has already resulted in fissures within the Cellular Operators Association of India (COAI), which supposedly advocates the interest of GSM-based mobile telephony. Tata Teleservices have already quit COAI. A new other discriminated companies may follow suit.
According to a telecom analyst, the worsening of spectrum controversy suits dominant players such as Bharti and Vodafone as they can continue doing roaring business without paying one-time upfront fee for excess spectrum with retrospective effect from the date of allotment.
The delay is also expected to result in postponement of hike in annual charges that they currently pay for both regular and additional spectrum.
Under the unified access service licensing (UASL) regulations introduced in November 2003, a company is allowed to provide all types of telecom service including the most sought after mobile telephone service after payment of one-time entry fee and annual spectrum charges.
The licensing regulation envisages allotment of start-up spectrum of 4.4 megahertz (Mhz) to all operators for GSM-based cellular service to begin with. It also has a provision for additional allocation of spectrum to take the aggregate to a maximum of 6.2 Mhz depending on the availability of radio-frequencies in telecom circles.
USAL does not explicitly provide for allotment of additional spectrum beyond 6.2 Mhz cap, It, however, does entitle DoT to resort to discretionary case-by-case approach in doling out excess spectrum.
USAL model agreement says: “the licensor (Government) has right to modify and/or amend the procedure of allocation of spectrum including quantum of spectrum at any point of time without assigning any reason.”
The Government has abused this power to dole excess spectrum to dominant players in a non-transparent manner instead of providing it new entrants to promote competition, leave aside auctioning the 2G spectrum. This has resulted in revenue forgo of thousands of crores of rupees by the government and the consequent frittering of opportunity to improve the lot of millions.
The issue of 2G spectrum allocation and pricing including auction has been discussed by a few official committees since then but the policy is yet to see the light of day.
A DoT-constituted committee, for instance, recommended alternatives to faulty norm of allocating additional spectrum to dominant players.
In its report submitted in December 2007, the committee said: “We also note that spectrum is a scarce resource, and if its allocation is not market-driven, at least in part if not in full, its value vis-à-vis capital expenditure on the network infrastructure does not get factored in.”
The hidden hand of influential corporate houses has ensured delay in government’s decision on spectrum allocation and pricing.
The spectrum row has put PM’s credibility at stake. If he backs down from his own advice, he would be seen as favouring certain cellular operators, thereby harming competition and inclusive growth.