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Bharti Airtel has added a new dimension to the ongoing tussle within the mobile telecom industry on how the Government should distribute the next tranche of GSM frequency spectrum. Its offer to pay at least Rs 2,650 crore for a 4.4 Mhz slice of a pan-India GSM spectrum not only sets a new value for the airwaves, dwarfing the Rs 1,650-crore price the Government has been collecting in recent weeks from aspirants for a new operating licence, but also makes the general plea fo r an open auction of the new frequency spectrum more forceful.

It is self-evident that whenever a public good, such as the frequency spectrum, is in short supply, an open auction is the appropriate method of determining who shall get the privilege to use or exploit it.

It is self-evident that whenever a public good, such as the frequency spectrum, is in short supply, an open auction is the appropriate method of determining who shall get the privilege to use or exploit it. The government can then go on to use the revenue realised in the auction for the larger good of the community. Such a course of action, for long used to determine, for instance, who can quarry for minerals, becomes downright imperative when the public good is in short supply. With the mobile telephone industry expanding at a break-neck pace and yielding considerable profit to providers of the service, there is a very long queue of companies eager to join the fray, some with crossover technology from the CDMA camp and many others entirely new to the telecom business. As the spectrum available can serve not more than half a dozen of them, its value has swelled considerably from the time the licences were first auctioned — the spectrum was then bundled with each licence. The current dozen service providers would love to pocket the new spectrum themselves, as a matter of right. Pushed to the wall, they would be willing to pay and take that. Yet for mobile phone users, it stands to reason that if the number of service providers increases, the keener the competition will be among them, leading to lower and widely-affordable tariffs.

Little wonder the Government faces pressure from many quarters as it attempts to resolve the issue. The Minister for Telecommunications, Mr A. Raja, conceded he would be the first to choose the auction mode, but claims that he is constrained by earlier government policy to grant new service provider licences on a first-come-first-served basis, and by extension of the logic, the required spectrum. But the circumstances have changed dramatically since the policy was spelt out, most of all the explosive growth in the customer base and the immeasurable attractiveness of the market — the price of Bharti’s stock has multiplied ten times in the past four years. There is every reason why the Government should now auction the spectrum, promising aspirants who have already paid the licence fee that the money would be adjusted against their winning bids or refunded fully in case they lose. To make the field level, the existing service providers who wish to retain spectrum in excess of the regulator’s norms must undertake to pay for that spectrum at the price determined at the auction.

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An auction, it must be

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