Editorial – February 2015

The germ of all scams in the telecom sector has been the pricing of spectrum and the process involved. First let us consider the process. The auction conducting company mjunction Service Ltd is a joint venture of the Tata group with SAIL. Tata has telecom operations and is likely to participate in the spectrum auctions. The auctioneer selection rules laid down by DoT clearly prohibit any equity relationship between the bidding auctioneer and a telecom service provider and vice versa. On this ground, mjunction should have been rejected. But it was selected as the auctioneer. This is the process scam.

Now, the pricing scam. DoT’s pricing formula will lead to a massive loss of Rs 28,580.80 crore. The inferior spectrum band of 2100 MHz is being sold at a higher price and the superior bands of 900 MHz & 1800 MHz is being sold cheap. The 2100 MHz is considered inferior because of coverage efficiency. It requires more number of towers to provide coverage in a given area, whereas, the same extent of area can be covered with lower number of tower sites when spectrum is in 900 & 1800 MHz bands.

The loss alert of Rs 28,580.80 crore came from within DoT itself, when Member Services in a Telecom Commission meeting raised the issue of price correction for these bands.

The revenue loss facts are often drowned out by the benefit to consumers’ argument, which happens not because of the operators but despite them. It (consumer benefit) happens because of the disruptive power of technology and because of the culture of consumer democracy. And we all remember how the ‘zero loss theory’ and a crowd of all such fallacies fell flat.