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Spectrum row ends with gains for government

It was long due. However, it needed a strong minister with a clear-minded approach to implement the new spectrum policy regime envisaging market pricing and scientific management of spectrum.

india Updated: Jan 31, 2011 22:03 IST
Manoj Gairola

It was long due. However, it needed a strong minister with a clear-minded approach to implement the new spectrum policy regime envisaging market pricing and scientific management of spectrum.

Within 75 days of taking charge as the communications minister, Kapil Sibal has announced a new spectrum policy under which from now on, all spectrum will be allotted at market price. Even incumbent operators would have to pay for 2G spectrum they hold beyond the contracted spectrum of 6.2 MHz.

This was not really a difficult task but required strong political will in view of strong lobbies working in the telecom sector. What Sibal has done is to simply accept major recommendations of the Telecom Regulatory Authority of India's (TRAI) report on “Spectrum anagement and licensing framework” submitted to the department of telecommunications (DoT) in May, last year.

His predecessor A Raja had sat on it for six months.

Contrary to popular belief, the powerful lobby of incumbent telecom service providers was strongly opposed to market pricing of spectrum. For a very long time, incumbent operators were successful in getting spectrum beyond 6.2 MHz without paying any one-time entry fee to the government. They got spectrum up to 6.2 MHz along with the licences. The licences were silent on spectrum beyond the “contracted” spectrum.

Initially, they were also opposed to any move to auction 3G spectrum. In 2005, the chairman of a leading telecom service provider had mocked the head of another large corporate group by saying that he should donate “extra money” to Prime Minister’s Relief Fund. The head of a large corporate group had wanted 3G spectrum to be priced, but the promoter-chairman of the successful Indian telco wanted no entry fee for it.

The formula for spectrum pricing is yet to be decided, but the government may be richer by up to R37,000 crore, if one goes by CAG estimates.

Though the new policy may pinch operators, the consumers will not be affected. This is simply due to the reason that the Indian market is hyper competitive. There are about 10 to 12 players offering services in a circle. So competition will keep a check on prices.

“Pricing of spectrum at market driven process will not have any impact on tariff for consumers,” said Mahesh Uppal, director, ComFirst, a telecom consultancy firm.

So the shift from “promotional” to “market driven” price policy of spectrum will hopefully ensure that no more scams take place in allotting spectrum.