It will have to make the right decision despite a glaring differential

Unlike in the past, when an Empowered Group of Ministers finalised “decisions” of the full Telecom Commission, this is the first time that the EGoM on spectrum, which meets on Thursday, will have only detailed, complex and often contradictory views and data to go by.

The task, therefore, is not to ratify or modify a decision, but take one and in an area where most of its member-ministers have little expertise. The information is a complex mesh of economics, technology, finance, business case, depreciation models, consumer interest, network externalities, underlying costs, tariff implications, legal precedence, and at best, a guess on how technology would play out. The options are wide-ranging, and the decisions difficult, considering their dramatically different impact on the industry and consumers.

TRAI vs. industry

In the absence of a firm decision by the Telecom Commission, the EGoM will have to reconcile dramatic gaps in the information being provided by the Telecom Regulatory Authority of India (TRAI), on the one hand, and the industry, on the other.

TRAI sees a negligible 1.5 to 4 paise/minute increase in tariffs on account of a reserve price of Rs.18,348 crore for 4.4 MHz of spectrum, while the industry projects up to a Re. 1 hike in tariff depending on the circle and amount of spectrum allocated.

The EGoM will have to make the right decision despite this glaring differential. Topping this would be any change that TRAI might have made in the last month on account of interventions by its new chairman on the impact on tariffs.

Presidential Reference

Many of the issues that the EGoM must decide upon have also been placed as questions in the Presidential Reference, which is being heard in the Supreme Court. The legal outcome could have a major influence on the EGoM’s decision.

The questions in the Presidential Reference include whether 80 existing licences awarded since 1994 are legal or whether their spectrum should be taken back or re-priced and at what level.

Originally, Home Minister P. Chidambaram himself, along with the former Telecom Minister, A. Raja, conveyed to the Prime Minister on July 4, 2008, in the context of 2008 licensees, that spectrum up to 6.2 MHz would not be subject to specific pricing.

Based on the same premise and after linking it to the 3G auction price as recommended by TRAI, the Comptroller and Auditor-General (CAG) submitted its uppermost Rs 1.76 lakh-crore revenue loss estimate.

Internal conflicts

Telecom Minister Kapil Sibal, also a member of the EGoM, had during his famous “zero loss” press conference, attacked the CAG for calculating loss based on 6.2 MHz which, he claimed, was wrong as the government had only allocated 4.4 MHz.

Recently, the Prime Minister, in his role as Finance Minister, and Planning Commission Deputy Chairman Montek Singh Ahluwalia also raised issues on the wisdom of frequent changes in the quantum of spectrum and its impact on investor confidence, which means the EGoM must additionally reconcile the conflicting positions within the government, licence agreements, DoT’s affidavits in TDSAT, Mr. Sibal’s public position and the issues linked to the Presidential Reference — and yet make a decision that can pass public and legal scrutiny.

The EGoM is further aware that this is not a typical “policy” matter where courts, in case of a legal challenge, would refrain from re-evaluating its decision. Since the issues are techno-economic, any variance from TRAI’s statutory recommendations of a Rs.18,348-crore reserve price will need to be justified in great detail.

Lurking political pressure mounted by the GSM lobby, on one side, and dual technology lobbies and industry, on the other, with SP chief Mulayam Singh Yadav and other politicians lobbying on their behalf, also await any decision. All this while the 2G auction clock is ticking on relentlessly, with less than 50 days to complete the task.

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