Inefficient allocation, management of spectrum caused govt losses

The government has incurred significant losses due to the inefficient allocation and inappropriate management of telecom spectrum by the Department of Telecommunications (DoT) over the past few years.

In a recent communication to DoT secretary M F Farooqui, the director general of audit, post and telecommunications, R B Sinha, said the government could have earned a few more thousands of crores as revenue towards spectrum usage charges during the past five years if DoT had allocated available spectrum to the existing operators, who had applied for additional airwaves.

However, as the available spectrum was not allocated among the operators, no substantial revenue was received from 50 licencees during the past five years, it said.

The Telecom Regulatory Authority of India (Trai), in an April 2012 report, had stated 581 MHz spectrum was available in the 1,800 MHz band for allocation for commercial telecom services across India. DoT, meanwhile, managed to sell just 127.50 MHz through auctions in November 2012.

According to Trai estimates, the 453.50 MHz spectrum, which is still available for allocation, could be valued at Rs 85,014 crore.

Sinha, in his communication to DoT, also said the decision to fix extremely high and artificially determined reserve prices in the past two auctions had acted as a deterrent for operator’s participation.

Timely allocation of these airwaves and efficient utilisation by the telecom service providers would have yielded substantial revenues in the form of licence fee and spectrum usage charges, besides ensuring better quality of service to the consumers, he added.

Spectrum, which is a scarce, finite and renewable natural resource, is required to be used efficiently, economically, rationally and optimally to derive maximum benefits for the society, Sinha noted in the communication.

DoT has not taken any action to incentivise the efficient utilisation of spectrum, which has also resulted poor quality of services for the consumers, he added.

After the government decided to impose upfront charges for 2G spectrum and take an auction route to determine the market price for spectrum, many leading operators, who were constantly demanding for spectrum for meeting quality of services parameters of Trai, appeared to form a cartel and declined to take part in the auction in 2012-13, according to the communication.

Incumbent operators like Bharti Airtel, Vodafone and Idea Cellular had repeatedly requested DoT to allocate additional spectrum, but there was very little participation from the existing operation in the auctions in November 2012 and March 2013.

According to the communication, while Airtel had submitted 68 applications seeking additional spectrum during 2008-2011, Idea had submitted 29 during that period, followed by Reliance Communications (37), Vodafone India (20) and Tata Teleservices.

According to the communication, it is likely that operators are compromising with the quality of service standards set by Trai. There is also the possibility of inaccurate data in the quality of service reports submitted by the telecom operators, as well as their subscriber base data.

Sinha added that while one service provider had been catering to 9.1 million subscribers with 10 MHz of spectrum in the Delhi telecom zone, another operator had been serving 2.6 million users with 12.4 MHz of spectrum (6.2 in 900 MHz and 6.2 in 1,800 MHz band). On the other hand, a third operator has been serving 2.85 million subscribers with just 4.4 MHz spectrum in the 1,800 MHz band.

It is also stated in the communication that there was wide variation in the utilisation of spectrum by the various telecom service providers even in prime or metro service areas, primarily because of inefficient usage of spectrum by the operators. This has not only resulted in poor quality of service, but also caused lower telecom revenues in the form of licence fee and spectrum charges to the government, according to Sinha’s communication.