|Let Trai defend itself|
|Wednesday, 02 May 2012 12:10|
Telecom Commission has done well to toss 2G ball back to Trai
Given how the recommendations of the Telecom Regulatory Authority of India (Trai) on as simple a matter as re-auctioning the spectrum of the 122 licences cancelled by the Supreme Court threatens to deal a body blow to the telecom industry, the Telecom Commission has done well to ask Trai to explain its proposals. Instead of dealing with just the 122 licences that were cancelled, Trai went in to a larger look at spectrum policy and even recommended taking back spectrum held by existing operators in the 900MHz band and replacing this with spectrum in the 1800MHz band (‘re-farming’, in jargon). It spelt out a possible auction timeline over the next few years and, by virtue of its aggressive base price recommendations, played a big role in determining how India’s telecom services would get rolled out—auctions for the 700MHz spectrum for 4G services, for instance, are to be held only in 2014; and, by virtue of saying telcos with 800MHz spectrum would have to shift to the 1900MHz band, Trai decided that extra spectrum for 3G services (which use this band) will have to wait until spectrum is freed up in the 900MHz band (which could take between 5-10 years!). The re-farming recommendation also means that just one new pan-Indian licence can be auctioned right now as compared to six that have been cancelled by the SC.
While Trai chief JS Sarma is on record saying the cost/tariff impact of his recommendations will be just 3-4 paise per minute, industry is on record saying the impact will be 25-30%. This newspaper’s calculations (No more phones for Bharat, April 26, http://bit.ly/K21c0z) show the number is likely to be even higher. Indeed, while Trai bases its calculations on industry having 576.2MHz of spectrum, its report says 1160MHz has been given out in various 2G bands—just based on this, Trai’s 3.6 paise becomes 7.2 paise, or a 16% hike. Ironically, a table in Trai recommendations points out the reserve prices are 80-100 times the spectrum auction-prices in various OECD countries which have income levels many times India’s. Trai’s most controversial recommendation, that of re-farming, similarly has the potential to make rural telephony unviable—the 1800/1900MHz of spectrum it wants to give telcos in place of the 800/900MHz they have right now requires them to put up around double the number of telecom towers they have right now—and Trai needs to show why this is not true.
Given Trai has already spelt out many of its assumptions in the recommendations it made, it is not entirely clear what clarifications it is expected to give. Perhaps it would be a better idea to get industry experts/consultants to be part of the exercise so that the assumptions made by either side can be meaningfully thrashed out.