Price tag on airwaves

India’s attempts to clean up its regulatory environment in telecoms is in knots. For telecom companies, caught in the high voltage spectrum scam, the only constant emerging is the unpredictability of the policy.

The latest blow is the recommendation by the Telecom Regulatory Authority of India that prices spectrum differently for different category of players. So currently players pay nothing at all for 6.2 megahertz of spectrum that’s tagged to a licence fee, but additional spectrum attracts a pretty stiff charge. The biggest problem with that rule is that it fails to recognise that the end use of airwaves, be it 6.2 megahertz or more, is essentially to enable all of us to communicate. Something that phone companies charge consumers for.

There is, then, every reason the government needs to treat all national commodities as goods that come with a price tag, based on demand and supply. That applies not just to natural resources such as gas, oil and coal, but also to airwaves.

Those who argue against a market discovered price say that too many people chasing a scare resource will artificially drive up the price of spectrum and ultimately it will destroy mobile telephony firms because companies simply won’t be able to afford such high raw material costs. Besides mobile telephony ought to be subsidised because it also services rural India.

History shows us otherwise. The UK, which got £22.5 billion for five 3G licences in 2000, still boasts of a very competitive market. Sure, ownership may have changed hands but that’s not such a bad thing, because it’s introduced more innovation in pricing, marketing and forced companies to look at paring costs and trimming the fat.

Let’s look at the rural mobile telephony arg-ument, specific to India. Truth is, with urban phone usage reaching near saturation, the rural market is the next big frontier for growth. There is as much of a case for giving away spectrum free for rural use as there is for giving away raw material free to makers of soaps and shampoos because they sell in villages. Besides, there is a universal obligation telephony fund in place for rural rollout.

Businesses have an innate ability to create value, be it in rural or urban pockets. For phone companies, that may come via cheaper handsets and sharing of infrastructure. The government should leave it to them to work out their business model.

Its job is to make sure that it doesn’t subsidise the cost of doing business for some private players by under-pricing resources, which makes for a case of cherry picking. That is exactly the nub of the telecom spectrum scam and the image they are trying to shake off.

India and mobile phone usage have moved on from 1999, when the government was forced to bail out the early mobile phone entrants. That year you could also get real estate in South Delhi for about Rs 50 lakh, and onions at Rs 30 a kilo could sink a government. This government has survived onions at nearly Rs 100 a kilo, and a South Delhi outpost could cost Rs 5 crore. So when phone companies, old and new, argue that a heavy price for spectrum will mean very high call rates which will make consumers wince, it’s a bluff worth calling. What it could lead to is more efficient use of spectrum, the elimination of speculator investors and innovative pricing.

For the Department of Telecom to shed its image as a fix-it ministry, it has to adhere to uniform value for the same commodity, over a fixed period. It can’t wing it by being the grocer that gives away a few boxes of truffles free, but charges a king’s ransom for some. Truffles, sniffed out as they are and chased after by the gastronomes of the world, can’t really be free at all, be that the first box or the second.

Anjana Menon is Executive Editor, NDTV Profit. The views expressed here are personal