New telecom policy promises fair play

The key point in the new telecom policy announced by Union minister Kapil Sibal on Saturday is that of delinking operating licences from spectrum allotment.

This was perhaps inevitable because the controversy around 2G spectrum allocation during his predecessor A Raja’s tenure was that licensee had hold of spectrum as well, which then could be bartered with a third party.

This was at the heart of the scandal, when licencees leveraged their share of spectrum in attracting investors for their venture which was manifold over what they paid the government in the first-come-first-served system. This leverage did not change significantly in the 3G spectrum auction except that it fetched a higher market price in the bidding process.

In the new framework, the two-in-one allotment gives way to separate payments for the licence and for spectrum. The Telecom Authority of India (Trai) will announce the price mechanism for spectrum, which will be reckoned at market rates. Further, the spectrum allocation would not be on the basis of a one-time payment. It is to be a revenue-sharing arrangement.

Sibal has said that this new shift in policy will pave the way for a level playing field and that it will also encourage competition. The existing operators and those waiting to get in fear that this would mean that their operating costs would go up and that they cannot peg their services at a low tariff anymore. It is true that competition will keep prices on an even keel because Indian consumers are hyper-price-sensitive. It would also mean that tariffs will have to be rational and there cannot be ruinous cut-throat competition.

Whatever may be the economic nitty-gritty of the policy, the big picture issue is that the phenomenal telecom revolution based on the nearly 700 million mobile telephone subscriber base should remain intact, and governmental intervention should only help in its further growth. That is a reasonable expectation. It can only be sustained if the rules are fair. Sibal promises the new changes will ensure fairness. The success of the new policy will be judged on that basis alone. This would not, however, put a lid on the clandestine and murky dealings that unfolded through the backchannels, involving politicians, industrialists, lobbyists and journalists and created a political stink — the 2G spectrum allocation scam — that has reached the skies. There are enough people around to spoil a good party.