Time for a review
First, as an example of an error, the judgment states, “Spectrum has been internationally accepted as a … renewable natural resource which is susceptible to degradation in case of inefficient utilisation.”
Second, the judgment states that “the Government of India has already taken a decision to ... allot the same [spectrum] by auction”, quoting Telecom Minister Kapil Sibal. The fact is that the government had not announced such a policy decision before the judgment.
Third, the judgment prescribes auctions as being in the public interest. Are they?
The assumption that auctions are in the public interest warrants a detailed review. Amidst a cacophony of confused opinion based on little knowledge and less understanding, here is the evidence:
Assume for a moment that public revenues are indeed the appropriate measure in the public interest. What does the evidence show? An estimate from the Telecom Regulatory Authority of India (TRAI) in 2005, of auction fees foregone after the transition to revenue-sharing, was Rs 19,314 crore from March 1999 to March 2007. In fact, actual revenue-share collections by March 2007 amounted to double that number, or Rs 40,000 crore. Further, the amount collected by March 2010 was Rs 80,000 crore.
Sources: Auctions - TRAI, 2005:
http://www.performance.gov.in/sites/default/files/departments/telecom/CAG Report 2009-10.pdf
Report No. 19 of 2010 - Performance Audit of Issue of Licences and Allocation of 2G Spectrum of Union Government, Ministry of Communications and Information Technology
16 November 2010
These data demonstrate that over seven and 10 years, revenue-share collections far exceeded auction fees foregone. Over the entire life-cycle (20 years or more with extensions?), the revenue-share collections will overwhelm even the Comptroller and Auditor General’s (CAG’s) imaginary lost revenues.
b) Public interest: revenues, or access and usage?
What is really in the public interest — revenue collections or the benefits of usage? The CAG report and the clamour for auctions assume that revenue collections reflect the public interest. However, the draft National Telecom Policy 2011 (NTP-2011) states as its first objective: “Provide high quality, affordable and secure telecommunication services to all citizens.” It states that revenue generation will be secondary.
In other words, the policy objective is to provide the benefits of accessible, affordable services to users, not to maximise revenues collected. This was the first time the government unequivocally stated an objective that appeared emphatically in the public interest. The Supreme Court has thus far seen it differently, although this has nothing to do with upholding the law.
The confusion is made worse because the preponderance of literature is by “auction experts” focusing on high fees — and not at all on the services that should have followed but didn’t, because the capital went into the auctions instead of building service capability. A notable exception is a more balanced study of spectrum auctions worldwide that considers social gains as well as fees — which estimates social gains at an overwhelming 240:1 (“What really matters in spectrum allocation design”, Thomas W Hazlett and Roberto E Munoz, April 9, 2010:
The next article, which will appear on Sunday, March 4, 2012, will cover erroneous technological assumptions, together with policy issues and possible approaches to a constructive resolution of the gutted prospects of our telecommunications and broadband services sector.
Shyam (no space) Ponappa at gmail dot com