Column: Resolve the artificial spectrum scarcity

Updated: May 23 2014, 02:24am hrs
The renewed focus on development proposed by the new government following a decisive mandate is an encouraging sign. The telecom industry especially, is pinning its hopes on a government led by a dynamic and far-thinking leader, who is known to understand and encourage the transformative role that telecom and IT can play in changing the fortunes of the country. Mobile technology enables last mile connectivity and we hope that the new government will leverage the power of this platform for inclusion and distribution.

While there is a need for some fundamental shifts in the policy approach to telecom, which can be addressed over a period of time, I believe that there are some immediate measures, which, if taken, can revitalise the sector and put it back on the path of growth.

Some such low-hanging fruit ready for picking, include a follow through on the spectrum reforms process that has already been initiated, and a review of the very high burden of duties and levies on the sector.

Spectrum is the basic raw material for telecoms and hundreds of MHz is lying idle with the government while the networks are in desperate need for more of it. This artificial scarcity needs to be resolved at the earliest such that it can be used to deliver on the connectivity and broadband objectives of the country.

The first step towards spectrum reforms was taken by the regulator in 2013 by lowering the reserve prices and introducing a uniform spectrum usage charges. This led to a successful auction in February 2014, generating over R61,000 crore for the exchequer. More revenues can be easily garnered if all spectrum lying idle with the government in the 700, 800, 900, 1800 and 2100 MHz bands, is put to auction together at one go. Also, the spectrum trading and sharing norms on the anvil should be introduced at the earliest to allow market based processes to be implemented for all spectrum related transactions.

Another area, in which some quick affirmative actions will yield multifold benefits, is in the space of regulatory duties and levies. The current levies on telecom in India are one of the highest in the world while excess competition is resulting in arguably the lowest global tariffs. This is clearly an unsustainable situation and many balance sheets are severely strained on account of being burgeoned from both sides. As a first step, the level of licence fees and spectrum charges, currently at 15% AGR (average gross revenue), need to be reviewed. The government should declare an easily-traversable glide path to bring these levies down to 9% of AGR over next 3 years and then to 5% AGR in the ensuing 3 years. This can be easily done while maintaining revenue neutrality for the government. In this context, it is also very important that the definition of AGR be made simple and unambiguous and covers only service revenues from licensed activities.

After the above immediate steps, the government needs to look at measures to restore investor confidence in the sector. This can be done by ensuring certainty, predictability and level playing field. Commitments made under policy and licence must be honoured by all stakeholders. All players offering similar voice and messaging services must be subject to similar licence and spectrum rules and levies.

The government must also look to implement future fit initiatives such as M2M (Machine to Machine) connectivity that will facilitate the creation of smart cities and the invaluable internet of things.

In the end, I would like to summarise that the telecom sector, is hopeful of a positive and stable policy environment based on good governance, which will benefit the people, the industry and the country at large.

Marten Pieters

The author is MD & CEO, Vodafone India