After a painful scandal that paralysed India's parliament for years, involved the Supreme Court and catapaulted a new prime minister into power, the spectrum saga reached a Bollywood-style happy ending last week when the NDA government announced it would net Rs 110,000 crore from the auction of airwaves.
While communications minister Ravi Shankar Prasad says the impact of the higher prices that telecom operators will pay would mean only a marginal rise in tariffs for consumers, credit rating agency Fitch thinks the spectrum cost "will exert pressure on telcos' balance sheets and cash flow, and limit their ability to invest in capex over the medium term" -- In other words, expansion will be curbed by spectrum charges.
Clearly, telcos will have to somehow burden the consumers for the price it pays for spectrum. Much of the money for the spectrum will come from borrowings and telcos will certainly feel the cost pinch amid competition (and mergers may be one way out, reducing competition).
While the new debate started, came news that the Telecom Regulatory Authority of India (TRAI) has floated a consultation paper on Net Neutrality -- which is most desirable as a progressive idea that delinks Internet connectivity with the applications and content that run on it. For the telecom industry transitioning from 3G to 4G connections, it is a tempting idea to charge apps such as Skype and WhatsApp, which are taking away the revenues that telcos used to get from voice calls and text messages. Should India allow such regressive practices? One should think not.
On the other hand, telcos do need some help.
Let's look at this. A scandal erupted when spectrum owned by the government (public) was given away cheap and in an opaque manner to telcos by the UPA government -- but this was done in the public interest to keep calls cheap. Now that the spectrum is being paid for on the basis of transparent auctions, it is a private good. But Net Neutrality is a public good of sorts because it levels the playing field for content and app players.
I think the government should find a link between spectrum auctions and Net Neutrality. Reasonable, transparent compensation to telcos while making Net Neutrality mandatory and policeable seems to be the right way to go. But tariffs must be kept reasonable to aid consumer interest.
That would be poetic justice.
In the first phase of India's mobile and telecom boom, voice calls and text messages ushered in a revolution. For the second phase of the revolution, let telcos charge for better broadband quality, and keep the Net neutral - with some help from the state.