|His Master's Voice|
|Monday, 14 May 2012 00:00|
Like his predecessors, the outgoing Trai chief has also delivered what the government has wanted
Unravelling the mess JS Sarma has left will be a challenge for the government or the next Trai chief as the regulator's recommendations can't be easily dismissed
Though they’re supposed to be independent regulators, with one honourable exception who was sacked for this, all Trai chiefs have given recommendations that suit the government of the day. To that extent, JS Sarma’s tenure, which came to a close yesterday, is unsurprising. What made it different, however, is that since Sarma had to deal with two telecom ministers, a CAG report and a Supreme Court judgment, he made a lot more course corrections. Unlike his predecessors, Sarma’s appointment itself was controversial since, at the Telecom Dispute Settlement and Appellate Tribunal (TDSAT), he was one level above Trai; and decent regulatory practice requires governments not granting new jobs to regulators after their tenure is over as this can influence their behaviour while in office. It didn’t help either that, at the TDSAT, Sarma was among those that okayed then telecom minister A Raja’s controversial decision to give RCom ‘dual-technology’ spectrum a day before the policy was announced—TDSAT termed this ‘early completion of formalities’ which ‘is not a matter that would require intervention at our level’!
Within a few months of Sarma heading Trai, the Delhi High Court ruled in favour of STel which felt aggrieved by Raja advancing the cut-off date for processing applications. Since this meant the government would have to give licences and spectrum (which it didn’t have) to those who had applied in 343 circles which had not been processed due to the cut-off date being advanced, the government appealed this in the division bench where it lost and, in March 2010, the Supreme Court also upheld the Delhi High Court’s order. On May 11, 2010, Trai came to Raja’s rescue.
First, it said the government should delink licences from spectrum—that is, give out licences but not to give free spectrum along with this as had been the practice in the past. Sarma has defended himself saying this recommendation was subject to the SC’s order. But the SC order had come out in March 2010 and, by quashing Raja’s cut-off date press release, it effectively meant Raja would have to cancel all the licences given out by him or he would have to give licences to the 343 telcos as well. The Trai’s recommendations thus saved Raja since, if the 343 firms insisted on licences after the SC order, he could give it to them without the spectrum!
By this time, there was also a furore on the losses caused by A Raja, so it was a shock to see Trai saying the government had to give licensees 6.2MHz of spectrum—since they’d already got 4.4MHz of spectrum at bargain-basement rates, Trai was saying they could get another 1.8MHz for no charge. And for those who thought Sarma’s predecessor Nripendra Misra had gone awfully wrong by saying spectrum in the 800/900/1800MHz band could not be auctioned, Sarma’s Trai repeated this on May 11, 2010, and said “the Authority concludes that it is not feasible to auction spectrum in the 800, 900 and 1800MHz bands”.
On November 16, 2010, CAG put the losses at R1.76 lakh crore at the top end, and said that 85 licences needed to be cancelled immediately as they were given out to ineligible firms. Two days after this, Trai recommended 69 licences be cancelled for non-fulfilment of rollout obligations! But given the firms got their spectrum between April 22, 2008, and May 6, 2009, Trai should have sent out notices between April 22, 2009, and May 6, 2010. Sarma, however, woke up to this responsibility only after Raja had resigned (November 14, 2010) and the CAG report had come out.
On January 7, 2011, Raja’s successor Kapil Sibal said Raja had caused no loss to the exchequer and that comparison with 3G spectrum (this is where the CAG got its R1.76 lakh crore figure from) was erroneous since 2G spectrum given by Raja was just a third as efficient as 3G spectrum. Three weeks later, on January 30, 2011, Trai’s experts’ panel said spectrum of less than 6.2MHz should be valued at 53% of the 3G value while, for spectrum above 6.2MHz, a valuation equalling 1.36 times the 3G price had to be taken! That was really convenient since it tied in with Sibal’s zero-loss theory but, as we’ll see later, Trai junked even this when a new set of circumstances presented itself.
On February 2, 2012, the Supreme Court cancelled 122 licences and said auctions were the way of the future. When the government asked Trai for its recommendations on this, Trai made yet another volte face. It recommended auctions for even the 1800MHz band that it felt, in May 2010, could not be auctioned. It jacked up the reserve prices of spectrum dramatically for all bands—while the 1800MHz band was to be the standard, the reserve price in the 800/900MHz band was to be double this presumably due to its superior propagation characteristics, and 700MHz spectrum was to be double of even this. Interestingly, Trai junked the differential pricing of spectrum above and below 6.2MHz in the 1800MHz band, and the 2100MHz (3G) band was now to have the same base price as the 1800MHz one—presumably it was now saying both bands had the same carriage capacity! What is curious is that the 2300MHz band was to have a base price that’s a sixth that of the 1800/2100MHz band—sure, they have different propagation qualities but is the difference so huge? Or is this, like the infamous WLL licences a decade ago, meant to benefit one set of telcos (those with BWA licences) since Trai has recommended telcos should now be free to offer any service they like in any band?
How the government is going to get out of the Sarma mess is unclear. As per the rules, if Trai reiterates its recommendations, as Sarma says he will, they have to be accepted in toto. If they are to be rejected, and this has been done many times in the past, Sibal or the new Trai chief will have to prove the recommendations were seriously flawed—and this will have to be done publicly, or the CAG/SC, among others, will come down heavily on them. The irony is that, till now, Sibal has been saying, incorrectly, that the government has only been following what Trai recommended. Talk about being hoist on your own petard.