The contentious issue of a “level playing field” between older and newer telecom operators, the former with spectrum and the latter who’ve had it cancelled by Supreme Court order and have to rebid at the coming auctions, has had another idea thrown at it.
This new idea has to be taken seriously — it comes from the Union finance ministry, whose present minister-in-charge is Prime Minister Manmohan Singh himself, meaning it’s formally his proposal as well.
The matter is expected to come up at the Meeting of the Cabinet Committee on Economic Affairs. The finance ministry has asked the Department of Telecommunications (DoT) to consider giving existing operators a right to use spectrum up to 4.4 MHz or 6.2 MHz at an administered price (the Rs 1,650 crore they paid for a pan-Indian licence) within a non-liberalised regime (meaning the spectrum can only be used for 2G services, as they now do). Or, alternatively, give them an option to pay an auction-discovered price for the entire spectrum and convert it into liberalised spectrum (which can be used for any service —2G, 3G, 4G, etc).
In its earlier note, the DoT suggested incumbent operators pay for the entire spectrum prospectively at the auction-discovered price and convert their licence into liberalised spectrum. The Planning Commission, which has also given its views on this note, has said operators should be charged prospectively beyond 4.4 MHz for the duration of the licence, based on the auction-discovered price.
In responding, the finance ministry said DoT’s argument of a level field to be created for newer operators by making incumbents also pay the auction-discovered price could be problematic. They note the possibility of access to advanced technology and software and, thereby, higher efficiency and lower costs accruing to the new players. “In any case, new entrants in any sector are likely to face different conditions in terms of the business environment,” the finance ministry note said.
The Planning Commission thinks likewise. “The desire to create a level playing field cannot be transformed into a search for a ‘procrustean bed’ in which all supposed past advantages of incumbents are sought to be equalised.All industries see new entrants entering at different times. New entrants always incur different costs and, very often, face different tax environments from what the incumbents faced. New entrants in telecom are entering a field where the advantages of existing incumbents are known and it will be reflected in the competitive bid for the spectrum price,” it has said.
The Telecom Regulatory Authority of India had recommended that the auction-discovered price be applied to incumbents from 6.2 MHz onwards. While, the Telecom Commission, has said the auction price should be applied from 4.4 MHz.
The Planning Commission has also suggested waiting for the Supreme Court’s reply on the Presidential Reference regarding the general issue, since it would have a direct/ indirect impact on the approvals sought in the draft Cabinet note.
Both, the finance ministry and the Planning Commission agree on the implications of the power admittedly vested with the government to change the licence terms any time. The changes could be open-ended and lead to uncertainty and it would be doubtful that banks or other investors would finance telecom investments if the terms are subject to such open-ended uncertainty, they have said.