Trai being consistent PDF Print E-mail
Thursday, 12 May 2011 00:00
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Vodafone Essar’s recent letter to telecom minister Kapil Sibal has really set the cat among the pigeons. It’s not too often that you see a regulated company taking on the regulator so openly, and in this case the company is a foreigner to boot. So how real are the charges of flip flops, policy gaffes and favouritism?

There is little doubt even the regulator’s recommendations depend upon who the regulator is. When Nripendra Misra was the head of Trai, to cite one instance, he was of the view that a one-time fee could not be charged from telcos who’d been given more than 6.2 MHz of spectrum as this was part of policy and these firms had been paying a higher annual usage charge; in May 2010, JS Sarma reversed this recommendation.

If regulations change this dramatically as regulators change, that’s a serious problem. Apart from the fact that there are several instances of Trai inconsistency that favour the firms Raja was favouring, examining various Trai recommendations throws up several other hilarious facts.

l So, as telecom secretary in 2005 and 2006, JS Sarma gave several firms such as MTNL, Aircel, BSNL, Bharti, Idea, Vodafone and so on spectrum beyond 6.2 MHz based on a subscriber-linked criterion—as a telco got more subscribers, it got more spectrum. Dr Sarma even notified a criterion for giving firms spectrum up to 15 MHz—to get this in Delhi and Mumbai, you had to have 21 lakh subscribers. Yet, when Dr Sarma became Trai chief, Trai recommended in May 2010 that any spectrum beyond 6.2 MHz be considered ‘extra’ and firms be asked to pay a one-time fee for this!

l In November 2010, the CAG’s report said Raja had caused a loss of R1.76 lakh crore, most of which came from giving away 157 licences for a song in January 2008. Just six months prior to this, Trai’s view was “it must be noted that the decision to award licences at R1,659 crore (for an all-India licence consisting of 22 circles) is essentially a policy decision. While revenue generation is no doubt significant, NTP-99 underlines the need for providing Telecom services at affordable rates.” Since Trai thought Raja had done no wrong, it also recommended that the Raja firms be given another 1.8 MHz of spectrum free, apart from the 4.4 MHz Raja had given them for a song!

l It wasn’t just Trai, in March 2009 the Tdsat had also okayed part of Raja’s policies. While upholding the issuing of 35 ‘dual technology’ licences (which CAG later said were underpriced by R37,154 crore) and issuing licences to some firms a day before the policy was announced, the Tdsat, of which Dr Sarma was a member, termed this ‘early completion of formalities’ and said this ‘is not a matter that would require intervention at our

level’! Wonder how the members of the Tdsat at that point feel about their judgement now?

So far, you can still argue it is a matter of perception, of different people having different opinions. After all, even today, the government does not believe there was a scam or any under-pricing of licences. It’s after this that things get a bit more difficult to explain away. In May 2010, when Trai said the maximum spectrum the government had committed to give telcos was 6.2 MHz, it said firms would have to pay 1.3 times the rate paid in the 3G auction for spectrum between 6.2 and 8 MHz; if this spectrum was in the 800 MHz band, the amount would be 1.5 times. For spectrum up to 6.2 MHz, Trai said 2G and 3G were to be priced similarly.

By January 2011, however, in order to demolish the CAG estimates of losses, Kapil Sibal was saying 2G and 3G were like chalk and cheese, that 2G was about a third as efficient as 3G—the R1.76 lakh crore figure was based on using the 3G auction bids to get a per MHz price for 2G spectrum. A month later, when the Trai report on this came out, it said that 2G spectrum up to 6.2 MHz was worth 53% of what 3G spectrum cost, beyond this it was worth 136% what 3G cost. Pretty much what the boss wanted, you’d say!

Turns out the government has played a bit of a googly here. The Trai recommendations were based on what a group of technical experts had come up with. This is not the place to give the various flaws many have said the report is full of, but for what it’s worth, the experts said spectrum up to 6.2 MHz was worth R1,769.8 crore per MHz and at R4,844 crore per MHz beyond that. In other words, 6.2 MHz was worth R10,972 crore. Except, since the government is applying the Trai recommendations for spectrum above 4.4 MHz, this means the Raja licencees will be able to get 6.2 MHz for just R4,844 crore (they’d got 4.4 MHz for the R1,658 crore they paid for the initial licence). So, if a Bharti is to get its licence renewed in 2014 (that’s when the first lot of licences, for the metros, start coming up for renewal), it would have to pay R10,972 crore (assuming it has 6.2 MHz of spectrum) while a Raja legatee would have paid less than half this! For reasons best known to it, Trai hasn’t protested about how its recommendations are being distorted; indeed, it has not changed its May 2010 recommendations about giving the Raja licencees an additional 1.8 MHz of spectrum for free even now. 

It will also be interesting to see whether Trai protests about how the government has treated its licence cancellation recommendations. While Trai said 69 licences had to be cancelled for not rolling out their networks, the government has issued notices to just 12-13 of these (since it refuses to make the names public, you can’t even know if it is playing favourites). If Trai doesn’t object to this, it means it either got it wrong the first time, or it doesn’t think its recommendations are that important.

If the Supreme Court strikes down the Raja licences as illegal, and all 157 are cancelled, it’s possible the spectrum-pricing distortion won’t arise. But surely there has to be some way to ensure policy isn’t so whimsical in the future? And it would help if the Supreme Court would quickly decide on the appeal against the Tdsat judgement. After all, it is linked to the case the Court is hearing right now. One bench of the Court has asked the CBI to probe the dual technology licences, but another is yet to take a call on whether dual-technology licences were legal— why not at least get the legality/illegality bit out of the way first?

Last Updated ( Wednesday, 30 November 2011 15:57 )

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