On the face of it, the ongoing >spectrum auction is already a success. Against an initial target of Rs.82,000 crore, the total bid amount has >already crossed Rs.86,000 crore after just four days of bidding. Going by the current bidding intensity, the Centre can hope to mop up at least Rs.1 lakh crore by the time the auction ends. While this is good for the national exchequer, the reality is that an expensive auction is counterproductive from a consumer point of view. It is no secret that higher spectrum costs will put pressure on telecom operators to either increase tariffs or halt or defer their investments in rolling out new infrastructure. Neither is good for achieving Prime Minister Narendra Modi’s vision of a Digital India. It was the high cost of spectrum in the 2010 auction that stunted the growth of 3G and mobile broadband services in the country. The Centre had then received bids worth over Rs.1 lakh crore, with operators jostling to outbid one another. As a result, even after five years of that auction, consumers are yet to experience good quality 3G services. With the average connection speed hovering just around 1.3 Mbps, it is the lowest among Asian countries.
Programmes such as the 100 Smart City project and the e-Governance initiatives require speed — at least a 2 Mbps connection at affordable rates. But for this to happen, telecom operators have to be given adequate spectrum, and at a reasonable price. To be fair, the Centre cannot be faulted for following the auction process for allocating spectrum. Compared to other mechanisms used in the past, such as the first-come-first-served policy and subscriber-linked criteria, auctions are the most transparent way to parcel out finite natural resources. However, the Centre has to take the blame for adopting a faulty auction design. Take for instance the decision to auction only 5 MHz of spectrum in the 2100 MHz frequency band. A block of 5 MHz spectrum is just enough for one player to offer 3G services; with eight operators in the fray, it is not surprising that the bids have skyrocketed to astronomical sums. This coupled with the decision to take back spectrum from incumbent operators, post the expiry of their 20-year licences, have placed a stark choice before telecom companies — they either have to buy spectrum at any cost or face the prospect of going out of business. Access to inexpensive broadband services is the basic requirement for achieving the goal of digitising India. Ironically, the Centre’s success in garnering higher revenues in the spectrum auction could signal the failure of that vision.
