That’s essentially what the Trai is saying
Given how the government’s refusal to extend the 900 MHz band licences expiring next month is the main reason for why the industry is in such a mess, Trai has done well to try and retrieve the situation. Whether that works depends on the telecom ministry accepting its recommendations, and it probably won’t, but it is rare to find a regulator saying that if matters are not handled carefully, not only will the industry be in serious trouble, customers can find their phones cut off and bankers could find themselves sitting on high NPAs. In the event, Trai has said that if the government cannot guarantee a lot of spectrum in a common pool, it shouldn’t hold an auction. That’s hard talk coming from a regulator—of course, it would have been nice if Trai had said this earlier since it was always obvious that, in the absence of enough spectrum, industry would bid too much and would end up in all sorts of trouble.
Since the government didn’t give telcos the extension that even their licences allowed, this ensured that the telcos who stood to lose their 900 MHz band spectrum bid very aggressively last February. But the big difference between last February and next February—tentatively when the next auction will be held—is that this time around, there is no fallback spectrum available. Last February, the telcos who could not bid enough to win back their 900 band spectrum could—and did—bid for the 1800 band spectrum also available. Next February, however, this 1800 band won’t be available as the government doesn’t have much left with it. So, as Trai puts it, telcos will be bidding in a do-or-die battle—if they don’t win back their 900 band spectrum, their only option is to shut shop. That’s where the consumers and the banks come in—consumers will face service disruption till the new winner sets up a network, and banks will see NPAs as their telco customers go out of business. The other option is for existing telcos to bid unreasonable amounts and that creates its own problems.
It is in this context that Trai comes up with its solutions, some practical, some idealistic. Trai recommends, for instance, that defence spectrum in the 1800 band be kept to the 20 MHz agreed upon in 2011—while this releases another 10-15 MHz, getting defence to agree is not going to be easy. As the finance secretary pointed out to his telecom counterpart—FE reported this on Monday—unless the telecom ministry starts honouring the commitments in the 2009 MoU, the defence ministry will not even swap spectrum which will free up another 15 MHz of 3G spectrum that is vital for the industry. Trai’s suggestion, that all the spectrum—in the 800/900/1800/2100 MHz bands—be put in a common pool and that a firm roadmap be drawn up for auctioning 700 MHz spectrum is critical since, as we have seen in the 3G as well as the last auctions, supply constraints create bad results. While government is free to reject Trai’s recommendations, and focus only on those that deal with the floor prices, it can’t say it has not been warned about how it will kill the goose that lays the proverbial golden egg.