18, మార్చి 2012, ఆదివారం

2G Spectrum auction as per the Supreme Court Judgment-TRAI Consultation Paper dated 7-3-2012-Consequences to be faced by BSNL-What can be the way out


(I am placing below the gist of my study on the TRAI’s consultation paper dated 7-3-2012 on the issue of auction of the spectrum as per the Supreme Court’s judgment. The said auction has a profound implication for BSNL. I think that a stage has arisen wherein those interested in safe guarding the Public Sector must utilize the opportunity to start a serious battle for saving BSNL. For this purpose, ideological struggle as well as class struggle are necessary. The gist of my study on the consultation paper is not a well structured or well written one and still in a raw stage. However in view of the urgency of the point to be made known, I am submitting this study for the information of the readers---p.asokababu)

Background

a)      Mobile services were started in 1994 by the private operators. Initially two operators were allowed in the 4 metros by granting the license on the basis of a “beauty contest”. In the next phase, on the basis of competitive bidding, 14 licenses were issued in private sector. In 1999 the DoT/MTNL were allowed as the 3rd cellular operator in the metros and circles. The licenses of MTNL and BSNL became effective from 29-1-2000. Licenses for the 4th Cellular Operator were issued in 2001 on the basis of competitive bidding and the price of the pan India license was Rs 1658 crore. In 2008 A.Raja issued licenses on the basis of FCFS(First Come First served)  principle without any competitive bidding at the value of the 2001 price. These 122 licenses were cancelled by the Supreme Court terming the FCFS principle as arbitrary. But there are some more licenses issued between 2003 to 2008 on the basis of the same FCFS principle, but they were not cancelled by the Supreme Court since they were not questioned before it. The Supreme Court directed the TRAI to make recommendation for grant of license and allocation of spectrum in 2G band in 22 service areas by auction as was done in case allocation of 3G band and directed the Government to decide for the auction of spectrum and allocation of the licenses on that basis.

b)      The TRAI issued a pre-consultation paper on 3-2-2012 asking for the views of the stake holders. All the telecom companies except MTNL, but including BSNL have responded. Thereafter the TRAI issued the consultation paper on 7-3-2011 seeking the views of the stake holders on it by 21-3-2012.

c)       In its response to the pre-consultation paper, BSNL demanded for allowing trading/leasing/sharing of spectrum, which is normally against the principle to be followed by a PSU. What is the reason and should we oppose it or support it, is the question. To understand this, we have to understand the history of the allocation of the spectrum in various bands to the mobile service companies.
Allocation of Spectrum-quantity and quality

a)      The spectrum for 2G services was allotted in 900 MHz band and 1800 MHz band for GSM technology  and in 800 MHz band for CDMA technology. At first the spectrum for GSM was allotted in 900 MHz band and the earlier licensees including BSNL and MTNL got it. Since the spectrum in 900 MHz band was exhausted for allotment, further allotments to the later licensees was done in 1800 MHz band.

b)      The spectrum for 3G services was allotted in 2.1 GHz band and the BWA spectrum was allotted in 2.3 and 2.5 MHz band. The 3G and BWA are advanced technologies providing for high speed data transfer.

c)       The issue now is about the getting back of the 2G spectrum allotted to the 122 licensees cancelled by the Supreme Court and its auction, keeping in view the constitutional principles of equality, efficiency and public benefit, competition etc. How to do this? That is the question for the consultation. But to answer this question, so many issues have to be taken into consideration.

d)      To observe the principle of equality, it has to be considered in quantity and quality. What is the amount of spectrum available for the auction and who have to be allowed in the auction, how to ensure equality in the quality of the spectrum allotted to all the operators etc.

BSNL’s problem-famine amidst plenty

e)      Quantity wise, BSNL is the topmost company in holding the spectrum. The initial allotment of the spectrum (2G) to a company was 4.4 MHz for GSM. The contracted allotment was for 6.2 MHz. There are companies having the spectrum more than this contracted amount and companies having less than this contracted amount. If the spectrum over and above the contractual spectrum of 6.2 MHz per circle is counted, BSNL is having a total excess spectrum of 63.4 MHz whereas Airtel is having 31.8 MHz excess spectrum and others are having still less excess spectrum.

f)       Quality wise also, BSNL is in an advantageous position along with MTNL and one or two private operators. The spectrum in 900 MHz band originally allotted for 2G services can be now utilized for 3G services also due to technological developments, but the license condition is not permitting it since it was allotted for 2G services only. BSNL is having 6.2 MHz spectrum in almost all circles and similarly MTNL is having 6.2 MHz quantity spectrum in 900 MHz band in each of the Delhi and Mumbai Circles. Only Airtel in several circles and one or two private operators in a few circles are having such a quantity of 900 MHz band spectrum.

g)      Therefore a question has arisen regarding spectrum liberalization i.e., allowing the operators to use the 900 MHz band spectrum also for 3G and other advanced services. The point for the consultation is when this liberalization has to be done? Before the commencement of the auction or after the completion of the auction? But if the liberalization has to be allowed with equality, all the companies should have the 900 MHz band spectrum or any other band equally efficient for providing advanced services. But there is no spare 900 MHz spectrum available to allot to the companies that will now participate in the auction. The alternative is to allot the 700 MHz band spectrum (not yet allotted to any operator) to the new operators barring the existing operators having the 900 MHz spectrum from the auction. But in such case the new operators have to pay a higher amount in the bid for the efficient 700 MHz band spectrum where as the existing operator like BSNL, Airtel etc having 900 MHz spectrum are not paying anything even though the 900 MHz band can be utilized for advanced broad band wireless services after liberalization.

h)      TRAI in its earlier recommendation suggested that the holders of the 900 MHz band spectrum have to pay additional amount since its quality is upgraded. This means the BSNL is having a considerable quantity (6.2 MHz in each circle) of the quality 900 MHz band spectrum and hence has to pay a heavy amount, may be in thousands of crores again, for the spectrum already held by it. Since the Government earlier not allowed it to procure equipment for the expansion of its 2G services and since now it is not having the capital to procure the equipment that may be required for the up gradation of the 900 MHz quality band spectrum it has for providing the advanced services, it has proposed for the trading/leasing/sharing of this spectrum. This reflects the bankruptcy of the Government’s policies in not allowing the BSNL to procure the equipment in time and allowing the precious spectrum allotted to be wasted and the management’s incapacity to make the best use of the quality spectrum available for expanding the services.  Such allowing of the precious natural resource to waste is against the Supreme Court’s judgment directing the State to see that the natural resources are efficiently utilized for the benefit of the people.

i)        Another big question for the consultation is that who should be allowed to participate in the auction for the spectrum now, based on the recommendations to be given by TRAI and decisions to be taken by the DoT on that basis? The operators whose licenses are cancelled are demanding that only they should be allowed to participate in the auction in order to encourage competition. They are demanding that for the start up spectrum of 4.4 MHz/6.2 MHz only they should be allowed since all the existing operators are having this startup/contractual spectrum. They are saying that if the incumbents are allowed, they will have more advantage with established network and hence will bid aggressively and will eliminate them thereby reducing competition. Hence according to them, the incumbent operators should not be allowed in the first stage of the bidding for the initial/startup/contractual spectrum. But the incumbent operators like Airtel, Vodafone etc are arguing that they should be allowed in the auction since more competition in the auction will result in more money to the Government and in case only the cancelled licensees are allowed excluding them, it will result in less demand and more supply for the spectrum thereby resulting in nominal price to the spectrum auctioned. Both are right regarding their point. But the situation is not a welcome situation. To avoid monopoly, competition has to be encouraged and to encourage competition, the participation in the auction has to be restricted to the cancelled licensees. But it will result in loss of revenue to the Government since due to restricted participation, the price of the spectrum would be less. But in case all are to be allowed, it will result in higher price for the spectrum in the auction and hence higher revenue to the Government, but it will result in monopoly and anti-competitive situation resulting in higher tariffs to the subscribers. The result is either the revenue to the exchequer has to be sacrificed or the subscriber has to be taxed.

j)        Real solution

From the above discussion it is clear that the privatization resulted in so many problems regarding the allotment of the precious natural resource spectrum. It is also very clear that the equitable distribution of the spectrum to the private operators with benefit to the exchequer and to the subscriber is not possible due to various reasons. Hence the real solution is that the state should own and utilize the natural resource for the benefit of the people, that is the telecom services sector should be nationalized and effectively maintained so that the benefits of technological evolution are passed over to the subscribers without any controversy. Pending this, the PSUs should be immediately allowed to utilize the spectrum available with them fully, in quantity as well as in quantity, by allowing them to provide advanced services using the 900 MHz spectrum and 3G spectrum and for this purpose they should be allowed to procure the required equipment expeditiously. Such liberalization of the use of spectrum only for the PSUs is not against the Supreme Court’s judgment for equality among the operators since such principle of equality has to be applied between the private operators only and it cannot prevent the state and its instrumentalities from utilizing the natural resource for the public benefit.

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