ASSOCHAM cautions Government on spectrum auction

ASSOCHAMNew Delhi: Leading business chamber ASSOCHAM today cautioned the Government against trying to maximize price discovery for the proposed 2G and 3G spectrum auction scheduled for February.

In a statement, the chamber’s secretary general, Mr D.S. Rawat said, “The bitter experience in the 2010 auction of 3G where Government gained huge sum but telecom industry suffered a huge set back with banks that supported the industry’s bids were facing inability to pay back due mainly to 3G price to the consumer was unattractive, should have been a warning.”

On the 2.1 GHz auction for 3G, the latest development is that the independent regulator had suggested a reserve price of Rs 2,720 crores per MHz but the DoT claimed it should be Rs 3,999 per MHz based on inflation indexing of what was received at the last auction and other considerations. The inter-ministerial Telecom Commission therefore has sent the issue back to the TRAI asking it to reconsider its recommendation.

The chamber said the DoT formula had failed to factor in the later developments. The expectations of the industry on 3G regarding its consumer response have not been borne out at the price industry had to fix to meet the high cost of spectrum as well as other technological developments.

“The Government pressing the regulator to raise the reserve price despite the bitter experience of the previous auction is bound to disturb the globally recognized success of the Indian telecom industry that was able to offer the cheapest service to the people earlier due to the government’s earlier policy of keeping the spectrum charge low,” said Mr Rawat.

The Government was aiming for a windfall of Rs 67,000 crores from the spectrum auction for both 2G and 3G airwaves. Telecom industry is facing serious financial crisis unable to meet its debt repayment obligations to public sector banks.

Three of the major operators of telecom services whose 2G license in some circles are expiring are in a desperate situation and would have to bid aggressively to gain the spectrum or go out of business altogether. This enables the supplier of the spectrum in the 800 to 1900 MHz bands for 2G in an advantageous position vis-a-vis the industry. The Government has also further jacked up its advantage by restricting the spectrum to 5MHz only with a promise that a further 15 MHz would be made available.

The Government may be justified as the monopoly supplier of the spectrum in maximizing its advantage but the issue is whether in a developing country it should prioritize reaching out the service to the last man rather than maximizing its revenue, the chamber said.

“If reaching out an affordable service to the last man is the objective then there has to be a reasonable compromise between the money industry has to pay for the airwaves to the Government and the ability of the industry to push into the lowest income docile of the population with affordable telecom service, however justified the Government’s bid for gaining maximum revenue from the auction at a time when it was facing a huge fiscal deficit, might be,” said ASSOCHAM.

ASSOCHAM further suggested that Government takes a considered decision on this need for compromise between the two conflicting objectives as the low cost telecom service has been a determinant factor so far in enabling even the street vendor or low wage worker to own a mobile telephone service.

This affordability has also been a major factor in raising the Government’s share of the telecom revenue so far, the statement added.

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OdishaInc Bureau