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May 21 2008, 20:54 IST
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SummaryWires are still horribly crossed over the auction of 3G spectrum. 3G is supposed to revolutionise mobile telephony in India. But the revolution is on hold as typical policy debates go on.

Wires are still horribly crossed over the auction of 3G spectrum. 3G is supposed to revolutionise mobile telephony in India. But the revolution is on hold as typical policy debates go on. One major issue is whether new players or foreign players should enter the process of bidding for new licenses. There are four sets of interested parties with two kinds of views. Existing mobile phone network operators and Trai want, for different reasons, to restrict the scope of license auction. The existing players argue licenses be granted to them as a matter of right, free of charge. Trai, which in seeking to protect consumer interests through lowest possible tariff rates, also thinks new and foreign players should be kept out. Its logic is that the entry of these players will raise bid prices and license fees, which will subsequently be passed on to the consumer. The finance ministry and new and foreign operators are in favour of more liberal auction participation rules. The ministry wants the highest possible number of bidders because this would guarantee greatest revenue for government coffers.

The department of telecommunications (DoT) is supposed to propose guidelines in a manner that will best suit the interests of the maximum number of people, including consumers and suppliers. Recent reports suggest that DoT is leaning towards barring foreign and new players from the bidding process, in line with the recommendations of Trai. The most quoted argument in favour of restricting more players is that there are already around ten bidders on average for each circle, bidding for five licenses, and that this should guarantee a good price to the government without marking up bids so high that consumers pick up the extra tab. As a sop to the foreign players, DoT is going to allow them to pick up stakes in an existing operator. Fortunately, nobody in government is buying into the free license theory. The flaw in DoT’s case is in assuming that all existing operators in each circle have equal financial muscle. That is not the case. Airtel, Vodafone, Idea, Reliance and Tata will easily out-muscle the others. For the government to maximise its revenues, and in the interest of keeping the Big Five operators on their toes, it should seriously consider allowing new and foreign players to join the bidding process.

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