The much-awaited auction of telecom spectrum in India began on Monday and the large number of bids suggests that the government may have finally got the pricing right. The base prices to sell radio waves are 15% higher than the sector regulator TRAI’s suggested rate, but still lower than those of the failed previous auction that was hit by a cold response from companies, which had cited that high prices could force a sharp rise in telecom tariffs hurting consumers.
Telecom spectrum allocation in India has been hit by a swirl of allegations after the Comptroller and Auditor General (CAG), in a report tabled in 2010, had estimated that the government may have lost potential revenues of Rs 1.76 lakh crore when it allotted 2G spectrum in 2008 through a controversial ‘first-come, first-served’ policy.
In the wake of the 2G spectrum allocation scandal, the Supreme Court in an order in 2012 had cancelled 122 telecom licences and ordered auctioning of spectrum that the government had allotted in 2008. There is no gainsaying in the fact that a successful sale of radio spectrum is critical for the government’s fiscal math amid crippling economic deceleration.
The tricky bit to watch out for, however, would be the impact on consumer tariffs. Sometime in the middle of this year, the number of mobile subscribers in India will cross one billion. That means more than 80%, or three out of four Indians would have a phone connection — though that is literally not true as corporate subscriptions and second connections inflate the number. In the early days of the cellphone, a one-minute call from Delhi to Mumbai used to cost about Rs 35.
Now a one-minute call costs as low as 30 paise — despite intervening years of inflation and growth that make the rupee go less far. When the first mobile phone service was launched in India, the cost of a low end mobile handset was around Rs 25,000. You can now buy one for Rs 1,000. Smartphones, which bring the browsing power of the Internet to your palmtop, can be bought for as low as Rs 5,000.
At the upper end of society, the ubiquitous information technology (IT) and IT-enabled services industry is now worth more than $110 billion (Rs 7,00,000 crore). Call centres and BPO industries now employ hundreds of thousands of workers who are aided by the connectivity spawned by telephony and data linkages.
This revolution has been aided by competition that has clearly benefitted the consumer. In the final analysis, therefore, it is the consumer that has to occupy the companies’, the government’s and the regulator’s central attention and additional costs incurred on buying scarce radio waves should not be an excuse to raise tariffs.