From the looks of it, interest in an auction for radio frequencies for third-generation telecom services like high-speed internet access and streaming video on cellphones will predominantly be confined to Indian companies. There are indications that the process may be delayed beyond January because the prospects of raising
Rs 30,000 crore ($6 billion) from spectrum sales appear bleak. The charitable explanation is that the financial meltdown is subduing international interest, but multinational telecom companies, like AT&T and Verizon, argue that the bidding rules, as drafted, favour local incumbent players. The parcels of frequencies going on the block are too small to roll out the wide swathe of telecom services — from plain talk to online gaming — they would need to offer to make their India operations viable. A decade ago, pure-play 3G services bombed spectacularly in Europe, compelling their providers to offer talk and text messages on networks designed to carry live football.
The business that an average Indian provides his telecom company is a mere Rs 275 a month, and falling. This is a function of — and is offset by — the 10 million new mobile connections being added every month, mostly in the countryside. Telecommunications in India are principally a local-call service while available technology is inching towards speeds of 100 Mbps on hand-helds. This is the present. The future is another matter. As cellphones get smarter and cheaper, 3G telecom services could emerge as the digital gateway for millions of Indians. More than the bounty for the government, the auction of spectrum is critical for the promise of technological transformation it holds out. Online banking, as a very minor example, saves the customer the cost of travelling to and from the bank.
It is not our case that the government should sell a scarce resource like radio frequencies short. But any delay beyond February runs the risk of putting the auction off till a new government is in power. Concerns of foreign telecom companies must be addressed on priority to avoid subverting the price discovery mechanism for spectrum. India’s learning curve in telecom regulation has been steep, it has taken us 15 years to realise that the most efficient way to farm out radio frequency, as with any other finite natural resource, is through open bidding. We’ve been travelling on the information dirt track far longer than we needed to.