Ring in the new order

Any further delay in 3G spectrum allocation will offset the gains made in mobile telecom.

Finally, radio frequency for mobile telecom services that provide high-speed internet access will be on sale in January, well over a year after it was initially slotted. A lot has happened in the intervening 12 months. India’s cellphone user base has swollen to 500 million, the number of service providers has quadrupled, the government has come round to the view that the best way to allocate a scarce natural resource like spectrum is through an open auction, and technology has taken mobile telecommunications a generation ahead. What has not changed in this time are mindsets — regulatory capture by the umpire and rent-seeking by the players.

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The spectrum auction will take place against a backdrop of plummeting average revenues. A new user typically brings less than $8 of business a month to a cellphone operator, mainly in local voice usage. And telecom companies are continuously savaging their rates to get every additional user. Spectrum needs to be made available to the dozen-odd new operators that have been granted licences under controversial circumstances. The government is yet to get the defence establishment to vacate the radio frequencies it intends to put on the block. Hence the six-month lag between auction, the proceeds of which have been factored into this year’s Union budget, and allocation.

Under the circumstances, the additional frequency, when available, has a high likelihood of being diverted to carrying voice traffic on existing and new networks. This would defeat the higher goal of a new technology platform but can be defended on the principle of the greater good for the greater number. The government, too, can defend its revenue maximising obligation. What gets lost are the productivity gains arising from access to the digital economy. Every trip to a bank rendered redundant by mobile banking, for instance, is effort and time saved for use somewhere else. The cellphone is the device that has the highest probability of bringing India’s digital have-nots into the fold. Allow the smartphone to be as smart as its designers made it.