"Playing 'God' with Spectrum"

Playing ‘God' with spectrum

The National Democratic Alliance (NDA), led by the former Prime Minister, Mr Atal Bihari Vajpayee, in power then, never really thought it would lose the Parliamentary elections in 2004. But if it had had some inkling of the impending defeat and wanted another tilt at power, it couldn't have thought of a better ‘Trojan Horse' for the successor government to fiddle around with than the much criticised ‘first come first served' (FCFS) policy of handing out additional ‘spectrum' to mobile telecom operators.

Sounds far fetched? Not really. Consider the evidence. Up until then, it had been a well-settled principle of administrative law that the State cannot dole out any largesse to any section of society, except under the most objective or equitable principles.

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Yet, here was a conscious policy decision taken to give out radio frequency spectrum to mobile telephony operators when even canteen contracts in obscure railway stations are awarded through open tender.

Good overall summary  of the telecom saga.

Spectrum Auctions Not The Way To Go

By far the most interesting take on the 2G decision by the Supreme Court comes from a pink paper:

2G Scam: Supreme Court’s cancellation of 122 licences is mostly unfortunate

The Court posits auctions as the only acceptable method for fair and transparent allocation of national assets. Why ignore a draw of lots among financially and technically qualified aspirants? It equates national enrichment with the proceeds of auction.  

This is a simplistic assumption devoid of economic analysis. Low-cost telecom spreads fast, increasing, with each additional connection, the utility of being connected for everyone on the network. The result is efficiency and productivity gains across the board, leading to faster economic growth. Crores of lives improve and the government nets superior tax receipts, far in excess, over the years, of auction proceeds. Auctioned spectrum jacks up the telecom industry's capital costs, which will either raise tariffs or delay further expansion and upgradation. 

In any case, what sense does it make to transfer huge investible resources from industry to the government? 

So auctions are not the bestest methods of all?  And they tell us only now?  So sad.  But the pink one need not worry.  Our telecom guys have a neat trick through which huge auction prices can be whittled down to manageable amounts:  just take the money from our public sector banks, discussed in The 3G Scam?

Mobile Phone Ownership Among the Poor in India

Is lower than in Pakistan , Bangladesh, Sri Lanka, Thailand.  ‘More poor people own mobile phones, but productive use still a far cry'

According to a 2011 study, “Teleuse@BOP4” by LIRNEasia, an ICT policy and regulation think tank active in the Asia Pacific region, while there has been a marked rise in mobile phone use by BoP persons in rural and urban India, Bangladesh, Pakistan, Sri Lanka, Indonesia and Thailand, unfortunately, the device's use is primarily restricted to making or receiving calls or SMSs. In some cases, it is also used as a substitute for radio or as a torch.

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“The survey in these six countries found that except in Java (Indonesia) BoP mobile ownership was higher in urban areas. But, in India, it was the lowest in both rural and urban areas, at 37 per cent, compared with 65 per cent in Pakistan, 49 per cent in Bangladesh, 71 per cent in Sri Lanka and 89 per cent in Thailand,” says Mr Samarajiva.

The 3G Scam?

Banks nervous about telecom exposure

They need to be.  Their exposure is almost 1 lakh crore.  Half of that may be on account of loans to the winners of the 3G auction.  So one can argue that the auction only fetched half of what is claimed, at present.  And PSU banks - implicitly backed by the government - funded a large part of the 3G auction amount as the report points out.  SBI itself has an exposure of Rs 23,000 crore.  What if the loans go bad as some are already?

No wonder one never hears calls for privatisation of PSU banks. They are sitting ducks for industry to get loans from.

Telecom Manufacturing Base in India: Why Is It Missing?

Make in India

The Indian market for telecom equipment – from switches, routers and base station systems to microwave radios, optical fibre links and mobile handsets – was estimated at Rs 54,675 crore in 2009-10. The Telecom Regulatory Authority of India reckons that just over 12 per cent of this demand was met through domestic value addition. The balance comprised imports, whether in final product form or as parts for local assembly. Moreover, the size of the market is projected to grow to Rs 108,096 crore in 2015-16 and Rs 170,091 crore by 2019-20. Much of it would be powered by the increased rollout of 3G mobile services in the immediate short-term, followed by the more advanced 4G wireless broadband networks.

That such demand can be overwhelmingly met through imports is neither a feasible nor a desirable proposition. It is, indeed, quite incredible how a country with the world's second largest telecom subscriber base of 900 million-plus (from a mere 40 million a decade ago) has not leveraged these numbers to build a robust manufacturing base at home.

 Never too late to start.