The Hindu Business Line : Paying $2 b for 3G

The recommendation by the telecom regulator that the Government auction the frequency spectrum for broadband wireless access and third generation (3G) mobile services is important for two reasons. One, it brings to public attention the immense economic value of the airwaves, and the potential revenue that the exchequer can extract from it — the base prices suggested by the regulator should secure an estimated Rs 9,500 crore in bids. There are many, especially among the GSM mobile operators, who see no reason for the Government to extract upfront its pound of flesh from companies wishing to deploy these services. Collecting licence fees through a revenue-share mode has been seen as the more benign and acceptable option as huge entry fees tend to inflate the costs of operations, push phone charges up and thereby undermine the national attempt to widen the customer base. Yet right from the start of the debate it was clear that the Government could not give the spectrum away cheaply. The Defence Ministry currently uses some of the frequencies, and needs funds to create alternative communication links. The $2 billion-plus that the spectrum auction promises is, therefore, revenue that no Government can let pass.

But it is more than the money that makes the auction such a compelling, even imperative, idea. The crucial fact is that the frequency spectrum available for 3G services is less than what is needed; it is just enough to support six or seven service providers, a number that is already present in the telecom arena. There is no logic for the Government to hand over the spectrum to the existing players as the 3G service is distinctly different from the predominantly voice communication provided now. The Government knows the value that stiff competition has brought to mobile telephone users in the shape of progressively lower tariffs over the years. There is no doubt it will place its faith once again on competition to make a success of 3G, which promises to provide high-speed data access on the go. That will involve opening the door wider to invite new players, and there is no better way to accomplishing that than through an open, transparent auction. As Britain found six years ago, auctions beget the best response when there are new entrants shoving and pushing at the door hard enough to prevent incumbent players from forming cosy cartels. That auction for five licences fetched over $34 billion.

With over five million new subscribers added each month in this country, mobile telephony has proven to be the magic technology to take telecom services quickly to the huge population that has stayed unconnected all these years. By next year there could be more mobile users in India than in the US. But mobile services need frequency spectrum in increasing doses as subscribers grow in number. The spectrum being limited, the onus is clearly on using it efficiently. Only when service providers pay the full price for the airwaves will they drive themselves to using them efficiently.

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