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Look beyond the spectrum

The government must help telecom firms to strike a balance between promises and risks.

india Updated: Feb 19, 2012 22:20 IST
Hindustan Times

Easier rules for sharing radio frequencies by mobile telephony companies and for mergers in the industry, announced by telecommunications minister Kapil Sibal recently, will open up the market for spectrum. As the government goes back to the drawing board over auction of air waves following a Supreme Court order cancelling 122 licences granted in 2008, India will soon have a primary and secondary market for a limited natural resource. Sharing spectrum will ease some of the pressure that pushed companies to jump the queue or bid jaw-dropping sums for it. The telecommunications ministry will eventually have to reconcile the playing rules for companies offering third-generation data services, which are not allowed to share spectrum yet. But the direction of policy is now fairly clear.

Mr Sibal had, last October, laid out his vision of how the telephony business will shape up over the next 10 years. At its core is a one-market, one-platform view that does away with area- and service-specific permits. Clubbing data and voice traffic makes sense because technology has blurred the distinction. The world’s fastest growing telephone directory may swell a bit more, as subscribers in cities get hooked to streaming cricket matches and villagers transfer money on their cellphones. The industry expects one in five Indians will be surfing a high-speed network for business or pleasure by 2015. The average data subscriber is expected to bring in much more business than what voice telephony fetches. Clubbing all telecom circles into one, however, will take some doing because it threatens a lucrative roaming market that brings in one in ten rupees the telecom companies earn. Proposals on number portability, spectrum trading, internet telephony, infrastructure status for the industry and an exit option for telecom companies are long-pending stakeholder demands that Mr Sibal has heeded.

Telecommunications investment in the country ought to top Rs 360,000 crore in the five years to 2012. The money in emerging telecom markets remains in voice traffic while mature networks must seek extra rupees from data. Indian mobile telecom companies are signing up nearly 20 million customers every month, but the easy money is behind them. With cellphones getting smarter and cheaper, data services could emerge as the digital gateway for millions of Indians. The extra revenue telecom companies are eyeing, however, looked elusive as networks spread from cities to villages amid a bruising price war made possible by selling spectrum cheap. Now, operators cannot afford a price war after paying the market price for spectrum. The industry is poised to consolidate with seven companies controlling nearly all of the Indian cellphone market. It is imperative that the telecommunications industry prices its services right. The government must come up with the right formula for spectrum that steers the industry between the big promise, and the big risks, ahead for telecommunications in the country.

First Published: Feb 19, 2012 22:17 IST