The trouble with spectrum pricing

The Telecom Regulatory Authority of India’s latest recommendation on the r >eserve price for the auction of the 700 MHz wireless spectrum could be a case where the pricing of a public asset may end up having the exact opposite effect: making a scarce resource so expensive that its meaningful utilisation is compromised, and thus rendered unavailable to serve the larger public good. That the telecom regulator, which has been in the vanguard of trying to spur both government and industry to become more responsive to the larger public interest, should have opted to set such a high valuation benchmark is a touch ironic. About 14 months ago, TRAI had, in a missive to the Department of Telecommunications, spelt out the rationale behind its recommendations on valuation and reserve price of spectrum. While the specific backdrop of that particular communication was the likelihood of the government opting to hold a supply-constrained auction, the broader arguments it made then remain as germane. The regulator had pointed out that a very high per unit price realisation, while possibly helping meet immediate fiscal needs, would only bleed the industry of resources. The high price of spectrum would also affect private investment in network expansion and infrastructure. The financial viability of the industry, TRAI posited, was crucial both for its own health and for the government to earn recurring revenues. All these issues are still relevant, as underscored partly by Bharti Airtel’s recent results. The company has reported its first quarterly profit decline in two years, largely on account of higher spectrum amortisation expenses.

It is no one’s contention that the telecom regulator had not approached the task at hand with full transparency and openness in its quest to arrive at meaningful valuations for seven frequency bands. A consultation paper that sought comments from all stakeholders was followed by an open house discussion. TRAI spelt out the points made by varied participants, including many from the industry who argued against an auction of the 700 MHz airwaves at a time when the network and device ecosystem is not sufficiently developed. Still, considering the performance efficiency of the particular spectrum band and its utility in improving and expanding high-speed wireless broadband services across rural areas, the regulator recommended that the government put on the block the available frequencies in this spectrum at the next auction. It is in plumping for its own April 2012 formulation of four times the reserve price of the 1800 MHz spectrum that TRAI appears to have made a less-than-appropriate choice. This is particularly so as spectrum sharing and trading have been operationalised in the intervening period, boosting overall supply. The regulator’s recommendation, for almost Rs.11,500 crore per MHz, if accepted, holds risks for an industry that serves a crucial socio-economic objective.

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Printable version | Jul 31, 2021 6:22:27 PM | https://www.thehindu.com/opinion/editorial/The-trouble-with-spectrum-pricing/article14026848.ece

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