Next Gen Telecom

Why Auction of 2G Spectrum mightn't be viable option- TRAI's Lie!

Now, as 122 2G Licenses are cancelled by Supreme Court of India, the argument of Supreme Court to cancel 2G licenses and re-auction them back might be challenged, based on TRAI recommendation paper released on 11 May 2010 on ‘Spectrum Management’.

There’re two assumption to this, based on which recommendations (Para3.44, 3.45) are made, on not to auction 2G spectrum (Band 800, 900 & 1800 MHz).

The other option is assignment through Auction. As brought out earlier, each operator holding the UAS licence is entitled to the committed spectrum of 6.2/5 MHz. From Tables 2.6 & 2.7, it can be seen that in most service areas, the amount of spectrum that is available after meeting the obligation of the contracted spectrum is very limited. It is only in six service areas that current spectrum availability is beyond the requirement of meeting the contractual obligation. Secondly, in Para 3.27 above, the requirement in each service area has been shown to be 8 MHz, which means that any criteria for allocation will only be in respect of this 1.8 MHz. Since operators will be meeting the eligibility conditions for assignment of the spectrum at different points of time, it is highly doubtful if auction would be an appropriate mechanism. Ideally, auction would be a useful instrument to discover the market price when the number of contenders is large. Thirdly, in the current situation where different licensees have different levels of spectrum, auction can disturb the level playing field. Operators are at various stages of operations, with some having licenses close to expiry, and others having recently been allotted new licenses, and still others who have been allowed to operate on dual Technology and have recently been allocated spectrum. All old operators have received spectrum (based on SLC) without any kind of auction /competitive pricing. The operators are all competing in the same market and for the same addressable population. In order to maintain a level playing field, it would be necessary to avoid the auction route for the newer operators for whom an auction would raise the cost of providing Service vis-à-vis the operators who already have more than 6.2MHz of spectrum. Given the competitive market conditions this cost can most certainly not be passed on to the consumer. A free auction of 2G spectrum wherein any service provider may compete for additional spectrum carries a serious risk of Spectrum hoarding, since the business model of an established operator would be different from that of a new operator, giving an unfair advantage in the competition.

In fact TRAI has openly recommended in para 3.46 that, auction of 2G spectrum in band 800, 900 & 1800 band isn’t feasible at all.

The Authority concludes that it is not feasible to auction spectrum in the 800,900 and 1800 MHz bands.

Though TRAI has recommended that spectrum should be delinked from licenses and subscribers based criteria shouldn’t be applied for spectrum allocation, it has also recommended that spectrum in above three bands can’t be auctioned, all for good reasons (unless it’s refarmed). 

So when Supreme Court of India has directed TRAI to re-auction the spectrum freed in next four months will it ensure the level playing field for 7 operators who messed up things? Has SC of India taken into account the plight of those (8-10{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} of the total subscriber base)?

When almost half of players in market are getting affected with the verdict, then why only incumbents & others who escaped the consequences of verdict, should not be brought into the justice range?

Or there could be one more alternative. Those who received spectrum/license, say before 2008, and now enjoying the free fruits of that, should be asked to match the prices of spectrum they are holding (2G or in 800, 900 & 1800 MHz band), to the prices discovered by forthcoming  2G auction process. Why let suffer only few, when earlier licenses awarded too should be brought under scanner?

If the verdict is applied only to licenses after 2008, then please remember that, National Telecom Policy was formed in 1999, without any revision during last decade. Till the new policy rules are applied, entire decade of TRAI’s regulation can be brought to justice, if wished.




Tags : 2G ScamIncumbentsTelecom SpectrumTRAITRAI Spectrum RecommendationsUAS Licensee