3G Arrives

[hariharan]

    The telecom ministry had its moment of glory on Friday while announcing new policies for third generation (3G) mobile systems, wimax and number portability. Ideally, this could have been a move towards greater consumer choice, lower prices and better competition, while attracting sizable revenues for the exchequer. Collectively, this impacts the work and social environment of nearly half of India’s 1.1 billion population in the next three years. But the government’s 3G policy lacks consistency and discourages new competition while increasing ambiguity.
   
Just seven months ago, telecom minister A Raja and regulator TRAI insisted that new entrants in 2G telephony deserve spectrum at a hugely discounted 2001 price of Rs 1,651 crore. This logic has been reversed in 3G, with new entrants singled out for harsh treatment. New players can enter the bidding ring only after assembling resources worth $1 billion, twice what will be paid by existing operators. The reason why new entrants in 2G deserve a financial advantage at the cost of the exchequer while those in 3G must face unprecedented financial entry barriers, is a mystery. Discouraging global players only ensures that government revenues are compromised yet again. The competitive landscape also stands weakened by allotting 3G spectrum to public sector firms BSNL and MTNL six to eight months ahead of private operators. Further, a phased allocation of 3G licences will distort the market.
 
  Discrimination also invades the M&A arena. Guidelines permit a 2G licensee to acquire 3G spectrum. However, the M&A norms block 3G winners from merging with 2G operators. The policy assumes that the value of 3G spectrum awarded today, six months or even a year later is the same. It expects all bidders to match the highest bid price regardless of the delay or quality of spectrum allocated. Ambiguity persists on the intermediate steps, number of blocks per circle and timing of the actual auction.
   
Eventually, the consumer will get world-class 3G services. That, of course, is a clear gain for the people at large. In that sense, a policy announcement on 3G was overdue and we welcome it. Mobile bills might become higher but that’s a consequence faced by all countries that have moved from 2G to 3G. But even though the government hopes to raise Rs 30,000-40,000 crore from 3G spectrum auctions, it has probably lost a chance to implement a clear, as opposed to ambiguous, policy and perhaps to raise even more money through auctions on a level playing field.