The recommendation of doubling the subscriber base criteria for additional spectrum allocation to GSM operators, as made by the technical wing of DoT, comes as rude shock to the telecom industry. It does not bode well for either existing players or fresh investors. Investors play the game with a long-term perspective, and any radical change in the sector?s core policy would only serve to destabilise business plans. It would also hurt consumers, since such sharp changes in the allocation criteria are likely to lead to a further congestion of airwaves and deterioration of services. The latest recommendation smacks of a compulsive desire to keep the sector at the mercy of DoT?s whim.
The spectrum allocation policy has been a mess right from early last year when a group of ministers came out with a suggestion to provide spectrum on the basis of the subscriber base of operators, and share this between GSM and CDMA operators in a ratio of 2:1, the latter technology being more spectrum-efficient. The rationale of this was questioned by observers who pointed out that this would give operators an incentive to artificially inflate their consumer base, especially in the absence of an independent audit of their figures, and that this could worsen the sector?s tendency towards monopoly dominance. The latest idea is bad not only for its tightfistedness, it has an undertone of arbitrary behaviour that seems like a throwback to the 1920s, when the unrelenting bickering between different departments and public agencies over spectrum use resulted in the decree that one-third of the resources in every spectral band would be given to each of the two claimants, namely the armed forces/security agencies and civilian ministries, while the rest would be allotted on a case-by-case basis. The current plans are no better. The way out of this mess is to identify a simple and effective way to price scarce spectrum resources to ensure its most efficient use. This may require DoT officials to study the field of ?mechanism design?, for which the Economics Nobel Prize was awarded this year. It would be an exercise well worth the effort. Auctions can be formulated in such a way as to minimise the ill effects of any information asymmetries between DoT and the operators. Incentives to falsify or hide data can be optimised to everyone?s benefit.
