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Saturday, 16 November 2013 00:00
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Lowering base prices is not a scam, it’s good economics

Though the Telecom Commission has broadly okayed Trai recommendations on the auction reserve price after hiking them by upto 25%, BJP leader—and former finance minister—Yashwant Sinha’s letter to the prime minister on the brewing scam could well give the Empowered Group of Ministers (EGoM) pause. The EGoM is supposed to clear the Telecom Commission’s recommendations next week and the Union Cabinet after that. Sinha has argued, like the bureaucrats in the telecom ministry had earlier, that Trai’s base price did not capture what the spectrum was really worth. And, he has added that the Trai under the present chairman Rahul Khullar had even defended the earlier set of reserve prices—under a different chairman, JS Sarma—since Khullar’s Trai had said the impact on tariffs would be negligible. If the tariff hikes resulting from spectrum prices were minimal, Sinha argues, the Trai must have thought the spectrum price was reasonable.

While Khullar’s Trai will have to defend its earlier stance on tariff hikes being minimal, this newspaper has consistently argued that Trai under Sarma had erred in its recommendations and that the tariff calculations given by the Khullar Trai were excessively optimistic. What is probably the real clincher, though, is that few telecom firms bid for spectrum based on the old reserve prices, suggesting they were unaffordable. Sinha has argued, citing media reports on CAG alleged observation, the lack of bids was because the telecom firms had acted as a cartel. While that is an easy charge to make, it needs to be proved. And were it true that the GSM firms were acting as a cartel, it would have been a challenge to get the CDMA firms to act the same way, or even new entrant Reliance Industries Limited. Even more surprising is Sinha’s argument that a uniform Spectrum Usage Charge (SUC) will result in big gains to certain telcos who, at the moment, pay 5.5-6% of their revenues as SUC. For one, as Trai’s discussion paper points out, since the current SUC regime penalises firms who have more subscribers along with more spectrum, it encourages firms like MTNL and BSNL to hoard spectrum—that cannot be in the national interest. Uniform spectrum charges also mean telcos will not find it profitable, as many have in the past, to camouflage one lot of telecom services (voice calls, say) as another (data, for instance). A similar charge of a scam in lowering telecom charges—from fixed license fees to revenue-shares—incidentally was made by the opposition when the BJP came up with the New Telecom Policy in 1999. Ironic since it was with NTP 1999 that India’s telecom fortunes changed.


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