'Need for caution on spectrum refarming'

It is significant that the Cabinet has moderated the reserve price for auction of 2G spectrum bands, bringing it down by a wide margin from that recommended by the Telecom Regulatory Authority of India (Trai). It’s a welcome move.

While the decision of fixing the reserve price at Rs 14,000 crore for 5 MHz of spectrum seems reasonable, it may indeed increase the overall investment for telecom service providers. The price could also go on the higher side in terms of affordability to the subscribers.

It may be mentioned here while fixing the reserve price, the Cabinet had the advantage of the already determined winning price of 3G spectrum band. It is undisputed that the 2G band is comparatively less versatile and has restricted usage i.e. mostly for voice.

It is not practical for the Cabinet to evaluate the complete set of Trai recommendations, being both complex and also legacy issues. However, now that the reserve price has been set, it will be seen as a benchmark for any future decision by the government in relation to the incumbents. Any move on re-farming of spectrum or payment for spectrum beyond 6.2 MHz, for instance, would require a bit of caution and deft handling of issues so that the sector is not hurt.

Any retrospective correction would invite criticism of regulatory uncertainty. Some of the issues also find mention in the Presidential reference sent to the apex court. These issues would be addressed by the Department of Telecommunications when the unified licensing regime is introduced and telecom service providers would need to migrate to a new regime. So, the decision on the reserve price must not be viewed in isolation.

The Cabinet recently approved the National Telecom Policy 2012, laying special emphasis on affordable and quality telecommunication services. Telecom facility today has been internalised in the family budget of majority Indians. Trai’s recommendations on issues like spectrum auction, re-farming and payment for additional spectrum have wide implications on the financial health of incumbents, new licensees and consumers.

 

(The writer is a former Trai chairman)