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Thursday, 13 April 2006 00:00
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Even as the telecom market grows exponentially (40 per cent last year), the regulation of this vital industry is coming up short. For many months now, mobile phone service providers have been demanding more spectrum allocation—for free, to be given to only existing players—at a time when the industry probably did not need the extra spectrum. Opinions have differed on whether the spectrum should be charged for, on what basis it should be allocated, and whether new bidders should be allowed. Logically, a scarce commodity should be priced and there should be no closed shop operating.
 
It so happens that a group of ministers (GoM) was set up to decide on these issues, in November last year. So far, the group has not met even once! So it is hard to blame Communications Minister Dayanidhi Maran for taking things into his own hands and announcing the release of fresh spectrum based on criteria of his choice.
 
The problem, however, is that while Mr Maran has alleviated the problem faced by certain telecom operators, he has not addressed many of the issues raised. The issue of whether GSM-based providers (Airtel, Hutch, BSNL, Idea and so on) should get more spectrum than the mobile phone companies that use CDMA technology (Reliance and the Tatas, primarily), for instance, was something that the GoM was supposed to decide. Bidding for spectrum would also resolve the spectral efficiency issue since the market rather than the government would decide on the matter, and the government could then claim neutrality between different technologies. The other argument in favour of auctioning is that, under the current regime, only the existing players get spectrum whereas, if it gets auctioned, even newcomers would have a chance. This is particularly important since, even after the FDI norms in telecom were liberalised and raised to 74 per cent, there has not been even one application to set up mobile phone services in the country even though this is the fastest-growing segment in the telecom industry.
 
The other problem with the GoM not meeting was that no private players got to make their point of view known. The first time that spectrum norms were decided, for both GSM and CDMA, committees were set up to go into the issue. In the current case, however, only the government-owned BSNL was consulted. Today BSNL is a competitor as a GSM operator, so CDMA users can rightly feel aggrieved.
 
As for setting up so many GoMs to decide on complex issues, there is some logic to this approach in a coalition government with more than a dozen constituents, as it helps to prevent unilateral action by every constituent and ensures proper consultation at committee level before positions are finalised and taken to the Cabinet. However, if the same one or two senior ministers have to chair all GoMs (mostly the defence minister, and in some cases the finance minister), then the system breaks down because of overload. Either some of the GoMs should be scrapped, or more ministers should be made chairmen.

 

 

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