|Some work for Mr Khullar|
|Tuesday, 15 May 2012 00:58|
As things stand, new Trai chief has little on his plate
Since, by convention, the government refers back Trai’s recommendations for a clarification only once, and outgoing Trai chief JS Sarma has already replied saying he stands by what he said the first time around, this really leaves little work for his successor Rahul Khullar. But given the serious flaws in the Trai’s recommendations, apart from the allegations that there was inadequate consultation on issues like refarming, the government would do well to reject the Trai recommendations and refer them afresh to Trai under the new chairman—not just to create work for Khullar but to improve both the process as well as the outcomes.
Take the example of the 3-4 paise hike in tariffs per minute that outgoing chief Sarma spoke of—this has been his justification for hiking reserve prices of 1800MHz spectrum by around 10-11 times. Despite these being 70-80 times the price in developed countries (Trai’s recommendations paper has a table on this) which have many times India’s per capita income, how did Trai come up with its 3.6 paise hike figure? As has been pointed out before, it based its calculations on the total spectrum holdings with the GSM players being 576MHz while they actually have 932MHz at the moment. That itself will raise the tariff significantly compared to what Trai said. The calculations also don’t take into account a near doubling of costs associated with the need to set up more telecom towers once you substitute 900MHz spectrum with 1800MHz spectrum. Trai also assumed that the tariff hike can be absorbed across all minutes—since they can be absorbed only across outgoing minutes, as the incoming minute rates are fixed by Trai’s IUC regime, this doubles the effective hike. Do the exercise based on the actual tower costs and a reasonable rate of return (“No more phones for Bharat”, FE, April 26, http://goo.gl/YrJC5) and you get a tariff hike of around 90% based on today’s traffic and around 40% after three years assuming minutes of usage rise 15% annually. In other words, given the large number of assumptions made by Trai, many of which are incorrect, it is only fair industry be allowed to react to the numbers presented.
There is then the issue of the impact on rural telephony. Given that 900MHz spectrum has greater propagation qualities and therefore requires less telecom towers, rural telephony is viable even at the low ARPUs it generates. Take the 900MHz away and replace it with 1800MHz and this goes away. In other words, given the huge controversy created by the Trai recommendations and the implausible nature of the assumptions, it’s a good idea to refer them back to Trai under its new chief.