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Dialling a bad idea PDF Print E-mail
Tuesday, 01 July 2014 00:55
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The Jio case is a good example of DoT’s poor record

Given that the Department of Telecommunications (DoT) had already said, prior to the BWA spectrum auction in 2010, that its use would depend upon whether bidders had UASL or ISP licences, there is no case for cancelling the BWA spectrum as a draft CAG report is believed to have recommended. According to the draft report, sections of which have leaked to the press, the BWA auctions fetched less money than the 3G ones held at the same time; and since winners of both types of spectrum are now planning to offer ‘voice’ services, the conclusion is that the BWA lot got an undue benefit. It doesn’t help that, as the CAG points out, a little-known Infotel Broadband Services won one of the bids for the BWA spectrum and, within hours of paying R12,848 crore—an amount equal to 5,000 times its net worth—sold this licence to Reliance Jio. In other words, the CAG seems to be alleging, Infotel was nothing but a front for Jio; and that, had Jio bid directly for the spectrum, the bidding would have hit much higher levels.

There are several strands to the argument that need to be kept in mind. For one, since the DoT had already said a UASL firm could use the BWA spectrum for voice calls—the ISP firm could use the BWA spectrum only for providing internet services—there was nothing wrong here. Two, while it is possible Reliance bidding directly would have hiked the auction bids, this is by no means certain since, in 2010, there were few phones available that worked on the BWA spectrum of 2300MHz—so, with such phones several years away, it is not certain firms would have bid that much more for BWA spectrum.

That said, there were several problems with the auction process. For one, holding the 3G auction before the BWA one meant that existing telcos, desperate for spectrum, had no choice but to bid astronomically for 3G. Had the auctions been held simultaneously, it is possible the 3G bids would have been lower and the BWA ones higher. Two, charging just a flat 1% fee on BWA while charging much higher rates for 3G—they are on a par with regular 2G services—opens up arbitrage possibilities and needs to be fixed. The moral of the story is a simple one: telcos will pay what they will for different lots of spectrum, but keep the rules of the game the same for all of them.

 

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