Leapfrogging makes no sense in India today

Don Sambandaraksa
08 May 2012
00:00

India has long been a land of many wonders, from Buddhism to the Taj Mahal, and regulator TRAI must rank among them with recent turns of events.

All the Indian telcos, which are usually at each others’ throats, have come out saying that they cannot operate under the new licensing system proposed. The GSMA has condemned the high reserve price. The chorus of opposition has been loud and clear.

At best, the Indian regulator could be accused of being overly optimistic and idealistic. What it is trying to do now that the 2G licences have been cancelled and are to be reauctioned is to withdraw the 900 MHz from 2G use and refarm that valuable spectrum for 3G. The problem is that while such a move might be laudable in small, developed countries such as Macau or even seriously considered in affluent Western Europe, it simply does not match up with the needs on the ground - which is for cheap 2G voice and SMS.

To compound things, the decision to auction off only 5 MHz of 1800-MHz at a time is simply to increase prices through creation of artificial scarcity. TRAI would like to think of this being an effective way at milking income for the country. Others, most notably the GSMA, view it as one step too far and one that would be detrimental to the country’s development on the whole and impact GDP negatively.

It all started easily enough. In 2008, 122 new licences were issued but on a first come, first serve approach with the price being the same as the prior licences issued in 2001. However, when there were more applicants than spectrum available, the natural thing was to have conducted an auction. That did not happen.

Instead, what happened was that there was an arbitrary line drawn under the applicants. Getting into such a list in time smacks of insider prior information and corruption - especially as in some cases, applications only had to be filed the same day for licences to be granted in time.

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