While sticking to its earlier recommendations on the base price for 2,100 Mhz spectrum in the 3G band, the Telecom Regulatory Authority of India (Trai) on Thursday gave a stinging reply to the telecom department, which virtually amounted to tutoring them in elementary economics.
In a 37-page reply, the regulator has criticised the department of telecommunications (DoT) for being fixated on the 2010 auction determined prices and making that as a sole benchmark for fixing the current reserve price. It has said that 2010 auctions were done in a scenario where spectrum was scarce and therefore relying on that price alone was a faulty approach. The Trai has arrived at the reserve price by a median of four approaches, including the 2010 auction prices.
The regulator also criticised the DoT against cherrypicking its recommendations stating that either the methodology adopted by it should be accepted in totality or new methodology should be relied upon.
It has said that by merely driving up the auction price by putting scarce spectrum for auction, government revenue would be realised but it cannot be termed as market discovered price. Furthermore, such scenario leads to strong, incumbent operators strengthening their grip on the sector through their deep pockets and competition suffers. In short, it has maintained that the lofty goals set by the DoT would not be achieved through such an approach.
The Union Cabinet had on January 5 decided to put only 5 MHz of 3G spectrum in the 2100 MHz band in 17 of the 22 telecom circles, along with 2G bands (800, 900 and 1800 MHz) for the upcoming auctions. The 15 MHz of spectrum that the defence ministry had agreed to swap with the telecom ministry in the 2100 MHz frequency band is to be auctioned later, the Cabinet had decided.
Earlier, Trai had on December 31 recommended a reserve price of Rs 2,720 crore per megahertz for 2100 band of 3G airwaves. Trai has pointed out that a split auction of 3G airwaves will artificially increase the market price of 2100 MHz in February 2015 auction because of the severe supply constraint.