Telecom: Why PSUs like BSNL must fight competition on performance, not preference

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Published: January 31, 2017 6:26:56 AM

PSUs should withstand competitive pressure based on performance rather than preference

BSNL is seeking allocation of airwaves in the 700 MHz band to launch 4G services. (IE)BSNL is seeking allocation of airwaves in the 700 MHz band to launch 4G services. (IE)

BSNL is seeking allocation of airwaves in the 700 MHz band to launch 4G services. The company has written twice to the DoT, first in September 2016, and then in early January, to allocate 5 MHz block in the 700 MHz band. The chairman and MD of BSNL has admitted in a recent letter that they have again asked the DoT.

While no one can deny that BSNL should have sufficient spectrum, can it be provided out-of-turn allocation of spectrum. Has preferential allocation to BSNL served any useful purpose?

In 2010, the DoT put up the spectrum in 2300 & 2500 MHz band for auction. The government decided to reserve one block of 20 MHz in Mumbai and Delhi for MTNL and one block of 20 MHz in the remaining service areas for BSNL. Both were granted the privilege of not participating, but were required to match the winning price for the relevant frequency band in the clock stage, as consideration for the spectrum.

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The frequencies ear-marked for use by MTNL/BSNL were hand-picked and meant for 4G. They even got the early-mover advantage. But BSNL, rather than making use of this, returned the spectrum and claimed refund. As per BSNL, there was no business case at such a high cost. The money was refunded to BSNL/MTNL, an option that has not been given to any private operator. If it is offered to private operators, there may be many who will exchange it with 700 MHz or even seek refund.

Now, it appears that BSNL has developed a liking for 700 Mhz spectrum. The DoT had put this spectrum on auction, but the entire lot remained unsold. In case BSNL wanted it, it could have picked up the spectrum in the auction. Not only this would have ensured allocation of vital spectrum to BSNL, but would have also helped the DoT create some excitement for the auction. The DoT could have established at least a benchmark price for this band. Ostensibly, BSNL found this to be too expensive or was sure again that it may not make a business sense.

The action of BSNL is either driven by the desire of “hit and try” because BSNL knows that if allocation of this 700 MHz spectrum does not work out to be viable, it can always return it.

When A Raja was telecom minister, the spectrum was allocated on administrative pricing basis to new operators, which ultimately turned out to be a scam. At the same time, BSNL/MTNL were allocated out-of-turn spectrum to top up their spectrum allocation to 10 Mhz, despite the fact that their existing allocations were in excess of their eligibility for allocation.

This out-of-turn allocation was criticised by TDSAT, which said that PSUs cannot be offered preferential treatment and a level-playing field should be ensured. It ordered immediate withdrawal of such allocated spectrum.

PSUs should withstand the competitive pressure based on their performance, rather than preference. The regulators will do a great service to the sector if they ensure that the principle of level-playing field is upheld.

The author is founder & CEO, Tathya Consulting.

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