The Telecom Regulatory Authority of India’s (TRAI) recommendation that the base prices for spectrum to be auctioned be drastically slashed is eminently sensible. For one, it is pragmatic — the ground reality is that cash-strapped operators are no longer in a position to fork out astronomical sums for bagging airwaves. For another, it is in keeping with the larger interest — that of making telecom and broadband services affordable to the country’s masses. TRAI has proposed a reserve price of Rs 7,480 crore for spectrum in the 1800-megahertz (MHz) band for a 5 MHz pan-India slot. This is in contrast to a corresponding minimum price of Rs 14,000 crore that the Government had fixed in the last two auctions in March and November, which did not fetch even a single bid for all contiguous spectrum of 5 MHz. Even in the few circles for which there were takers, nobody bid more than the official base price. In other words, the reserve prices — arrived on the basis of what operators had paid during the 3G auctions in 2010 — were completely out of sync with changed market circumstances.

A lower reserve price will determine what operators are willing to pay for spectrum, which is exactly what auctions are meant to facilitate. The situation today is markedly different from the heady days of 2010; this is, therefore, bound to reflect in spectrum valuation. So, it makes sense to keep the base price low enough to attract bidder interest and simultaneously ensure competitive participation. To this end, TRAI’s recommendation not to allow operators to retain spectrum once their existing licence terms end is welcome. The current 20-year licences of many operators are set to expire next year. By forcing them to repurchase auctioned spectrum, for which there may be other claimants (including new operators), the Government will be able to protect its revenue interests by ensuring everyone bids for what is a scarce resource.

The Government should view TRAI’s proposals as an opportunity to breathe life back into a sector that has suffered a great deal from misinformed public opinion thanks to the Comptroller and Auditor General of India’s fanciful estimates about the ‘presumptive losses’ caused to the exchequer from previous spectrum allocations. While there is absolutely no justification for the opaque and possibly corrupt manner in which spectrum was parcelled out in 2008, the results of the last two auctions have exposed the fiction that the nation suffered a loss of Rs 1.76 lakh crore. These auctions failed because artificially high base prices were fixed in order to escape criticism that a precious national resource was being sold on the cheap. Spectrum is indeed ‘precious’, but this doesn’t justify making revenue maximisation from its sale the sole objective of public policy. Also, spectrum is ultimately only a means to deliver telecom and broadband services. And these should be made affordable for the aam aadmi .

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