Infrastructure Sectors That Boost Growth

 

Apply proven policies in telecom and electricity to rev up the economy.

Shyam Ponappa  |   August 4, 2022 

Does infrastructure spending promote economic growth, or is it the other way around? The arguments go back to questions such as whether building America’s railroads in the 1850s led to growth, or the reverse. While the costs and benefits of building transportation may be contested, partly because of what is measured and what is not, one positive linkage that has emerged is between improvements in information and communications technology and economic growth.

Potentially useful findings are given below.

1. A World Bank study (2021) reviewed the contribution of three categories of infrastructure to growth from 1992-2017: Transport, electricity, and telecommunications. The study covered 87 countries out of 189, because of missing data and to ensure a balanced panel. One finding was that infrastructure, especially electricity generation and telecommunications, significantly affected economic growth. This effect was larger more recently (1992-2017) than before (1970-1991), and developing economies experienced stronger effects than industrialised economies.¹

The researchers considered the contribution of physical capital, human capital, electricity, roads, railways, mobile phones and telephones to gross domestic product (GDP). The first principal component derived from these that explained most of the variation, comprising mainly electricity, mobile phones, and land-line phones, was characterised as the telecommunications and electricity factor. The second principal component, comprising largely roads and railways, was characterised as the transport factor. These factors roughly kept pace with population except mobile phones, which increased very significantly, driving the increase in the first principal component.

The chart of the GDP response to the two principal components demonstrates the effect of the primarily electricity-and-telecommunications principal component PC1, and of the primarily transport principal component PC2. The latter initially reduced output for some years. The implication is a need for policies that prioritise telecommunications, including broadband and internet, and electricity.

2. An Asian Development Bank publication on digitalisation and economic performance in India and China found that the internet and mobile density have a significant impact on economic growth.²

3. A study of factors that drove the surge in India’s service exports by researchers at the Institute of Economic Growth and Symbiosis found that attributes that affect the highest service exports (computers, communication and other services were nearly three times the traditional service exports in 2013), were driven by teledensity, together with financial sector development, human capital, and R&D expenditure (chart 2 ).³

The impact of telecommunications and electricity together with strengths in computers and communications services points to India’s needs: Prioritise enabling policies for telecommunications infrastructure for broadband and internet (integrated with the rest: Electricity and transportation, water and sewerage, logistics/transport, financial support, taxation, and so on). Parallel support is required to develop local ecosystems for equipment, which would have to be imported otherwise.

Effect on Policies 

What matters is how these conclusions affect government’s policies, because policies and regulations permit or constrain what we do and how we live. The solutions required ideally are for overall community needs, and not for what individuals, sectors, or stakeholders might need, as the consideration below indicates.

5G Auction & Prospects

Now that the government has bagged Rs 1.5 trillion from the 5G auction, what are the prospects for growth? If this amount is channelled to support BSNL/MTNL, with more government intervention to make them profitable, consider the probable outcomes.

(a) Things could turn out as planned, resulting in a strong telecommunications sector with four operators propelling growth. BSNL/MTNL certainly need support for their important, widespread services. The issue is whether they can be profitable, given their role. On the one hand are their market position in coverage/saturation and diminished share, while on the other are their responsibilities for essential services for strategic purposes and in difficult, unremunerative locations.

It is unreasonable to expect profitable performance in competition with private operators who can cherry-pick their markets. The very idea that governance through providing essential services must make profits is untenable, as it is for security, defence, or disaster management. Yet, this expectation has led to price cuts that have ended in a race to the bottom. Such pricing is a disservice, because it constrains investment in services, and thereby overall country capacity, to low-quality bottom-feeding. We expect and get low prices, but are saddled with low quality. The sector cannot build high-quality, reliable services, and is falling farther behind global service levels. India cannot possibly compete burdened with such self-imposed handicaps.

(b) Another possible outcome is that there will be unsustainable price cuts as before, with unfair access to spectrum (announced), and unfair competition from corporations. The losses could be perpetual, with the sector and the economy in shambles.

The Alternative for Policymakers 

Instead of continuing with unreasonable and ineffective practices that prevent us from realising our potential, even now, the government can change policies to capitalise on our strengths of being imaginative and resourceful, with the capacity to perform well with good systems and processes.

The success of NTP-99 can be repeated, by converting auction payments to revenue-share, this time for spectrum instead of licence fees. The difference is that operator dues can be financed from actual revenues, and not loans on anticipated revenues. This will not only enable immediate investment in networks and services, but as with NTP-99, is likely to result in substantial growth, with much higher government collections, and as a multiplier across sectors.

Legislation can be framed to convert spectrum auction payments to a reasonable percentage of revenues, as for licences. Instead of destabilising markets to favour BSNL/MTNL or corporations, insights can be applied and best-practice regulations can be adapted for our circumstances. The introduction of shared infrastructure through two or more mandatory consortiums led by corporate entities, with BSNL/MTNL as a strategic stakeholder ensuring national security and public interest, will enable even greater leveraging of network assets.

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Shyam (no space) Ponappa at gmail dot com

(1): Timilsina G. et al: https://openknowledge.worldbank.org

(2): D Sahoo et al: https://www.adb.org/publications

(3): Pravakar Sahoo & Ranjan Kumar Dash: "What Drives India's Surge in Service Exports?"

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3620313

Save Telecom With A Reprise Of NTP-99

Radical steps are needed to fix the telecom crisis.

Shyam Ponappa    |   January 2, 2020 

If telecom and connectivity are not revived, one of our most successful sectors since liberalisation will be incapacitated.

To fix this devastated sector, look no further than the National Democratic Alliance (NDA) government’s action 20 years ago to rescue and revolutionise telephony in India through the New Telecom Policy 1999 (NTP-99). It was before India’s growth story and the mobile phone revolution. The telecom sector had stalled, and some 15 operators were struggling for survival under the burden of high licence fee demands, limited customers, and too much competition, with no money to build out networks to earn more revenues to service their overwhelming debt. That was when prime minister Atal Bihari Vajpayee and his team made a bold move, working with industry and professionals to effect what seems in retrospect like magic. They implemented some constructive policies for telecom that set in motion phenomenal growth with vast changes in markets and behaviour.

The situation in 1998-99

The sequence of events began in 1998, when the Prime Minister’s Office (PMO) decided to look into the problems in telecom. After considering studies by ICICI and the Bureau of Industrial Costs and Prices, the PMO consulted with professionals within and outside the government, stakeholders in industry and financial institutions, and formulated the NTP-99. While the policies were not optimal because political accommodation was mixed with objective-oriented processes, a fundamental improvement was that government collected charges from operators as a share of revenues actually earned, instead of up-front payments on auction commitments for licences. This was a difficult political decision, because of a mistaken public perception that it was a giveaway to the operators. The government held firm despite being taken to court, and the decision turned out to be clearly in the public interest, as results detailed below were to prove.

Success did not follow immediately, because the government’s share was set too high initially. However, two developments in 2004 changed the trajectory. Government’s share of revenues was lowered to 8 per cent of revenues, and “calling party pays” was introduced for users, as against both caller and receiver having to pay for a call. This boosted supply as well as demand, resulting in explosive growth in mobile telephony (see Chart 1), making India among the fastest growing and most attractive markets. In hindsight, government collected far more through revenue-sharing than the auction commitments, as shown in Chart 2. Knowing this, it is incomprehensible that governments haven’t built the sector to improve government revenues, instead of bleeding it to the point of collapse.

Source: https://www.ibef.org/download/Telecommunications_171109.pdf
Taken from citation in: http://organizing-india.blogspot.com/2016/03/connectivity-lets-apply-what-we-know.html

Sources - Table
Sources

Column 1 - 1999-00 to 2006-07:

Indicators for Telecom Growth, Study Paper No. 2/2005,TRAI:

https://main.trai.gov.in/sites/default/files/ir30june.pdf

Columns 2 & 3 – 2002-03 to 2009-10:

Peformance Audit Report on the Issue of Licences and Allocation of 2G Spectrum by the Department of Telecommunications, CAG:

https://cag.gov.in/sites/default/files/audit_report_files/Union_Performance_Civil_Allocation_2G_Spectrum_19_2010.pdf

Columns 2 & 3 – 2010-11 to 2014-15 are from the TRAI web site:

http://www.trai.gov.in/Content/PerformanceIndicatorsReports/1_1_PerformanceIndicatorsReports.aspx


The present crisis

The telecom crisis today is much the same as in 1998. Our regulatory policies have resulted in price-wars and beggar-thy-neighbour strategies disrupting the market, while most people are deprived of good, reliable services. Thus, while India has incredibly low prices, they are unsustainable, far below what could reasonably be expected from the high volumes and the experience curve reduction in costs. These price levels do not support even the maintenance of current service levels, let alone expanding coverage to the sparsely populated countryside. Urban areas with low prices often suffer unreliable services of low quality, while less populated areas are deprived of services altogether. Further, the squeeze on operators is aggravated because of the Supreme Court upholding the government’s apparently gaming approach to defining “Adjusted Gross Revenues”, imposing retrospective dues on all spectrum holders.

The government needs to gather the resolve to do what prime minister Vajpayee did in 1999: A radical intervention to revive the telecom sector and the economy. PMO officials have reportedly been meeting with the Department of Telecom for months. Now, we need decisive action, including:

• Revenue-sharing for spectrum charges instead of auction fees, as was done for licence fees in 1999, as the major beneficial change. It would also result in more rational use of spectrum as a public resource for connectivity and growth, instead of just for government revenues.
• Removal of additional spectrum usage charges would greatly facilitate communications for development and growth, correcting impediments to efficiency in India compared with the rest of the world. A windfall profit provision could be instituted in the event there are excessive profits, or inappropriate diversion of funds.
• Policies to enable new technologies. For instance, the latest version of Google Pixel hasn’t been introduced in India because 60GHz is available only with limited bandwidth. In 5G, India is already far behind, and will take years to benefit from this without drastic changes in spectrum access.

Additionally:

• Pooling of spectrum to provide broader bands for higher throughput. This can be done through geolocation database-driven shared spectrum, as in Licensed Shared Spectrum (LSA) in Europe, or Authorised Shared Spectrum (ASA) in the US, and harmonising 60GHz regulations with the US FCC, but limiting its use to operators.
• Possibly structuring spectrum sharing through a consortium approach to infrastructure, and unbundled, use-based costs for delivery. This can be done by separating infrastructure (network development and management) from service provision.
• Another possibility is to have two or three vertically integrated consortiums, each with its own infrastructure (which will require significantly more capital investment).
• An active government role in coordinating industry-wide, consultative, goal-oriented action through the formulation of enabling policies and regulations. Multiple government agencies are involved, namely, DoT, MeitY, TRAI, DD, Finance, Law, as well as state governments for uniform Rights-of-Way and tower installation.

Functioning without mobile telephony seems unimaginable today. Instead of being among the leaders using telecom for our benefit, on our present trajectory we are likely to miss these opportunities for years — unless the government finds the imagination and courage to act.

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Shyam dot Ponappa at gmail dot com

The 2G Judgment of December 2017: What Was It About?

The judgment provides a critique of how no proper evidence was presented on existence of an FCFS policy and its improper implementation.

Shyam Ponappa 

  |   January 4, 2018

The recent 2G judgment raises perplexing questions about the case, with pointers in the judgment to issues of concern that we need to address going forward.
 

This preliminary analysis highlights questions that arise from select issues covered in the judgment of over a thousand pages: Can government policy itself be prosecuted as alleged wrongdoing, as the charge sheet apparently tried to do? The judgment states that the FIR alleged in item 1 that the licence fee in 2008 was Rs 16.58 billion as in 2001, and licences were issued on a first come, first served (FCFS) basis without competitive bidding.¹

a. These are factual statements in accord with prevailing policies, and licences could be applied for at the fee set in 2001. The charges question the appropriateness of the policies as there was no competitive bidding or auction.² Arguments for changing the policy to adopt auctions, or to increase fees, appear unconnected with proving wrongdoing.

b. Regarding the FCFS policy, the charges are twofold. One is whether or not there was in fact an established FCFS policy. Another is alleged malfeasance in policy implementation.

Was there an FCFS policy?

The judgment finds that the FCFS policy has been misrepresented in the claim that only one application was processed at a time.3 This is analysed and contradicted in detail. The judgment gives several contrary examples provided by the defence, such as later applicants being processed earlier when there was a problem with compliance by the earlier applicant, of successive applicants given letters of intent (LOIs) on the same day, and applicants with LOIs seeking repeated extensions before letting them lapse. The judgment states that no evidence was presented of a systematic FCFS process for the issue of LOIs and spectrum allocation/assignment in the case of 51 prior licences issued. The finding is that because there was a single applicant at a time earlier, a sequential process was followed, but that this was not a conscious policy. Also, that the evidence from the Wireless Planning and Coordination Wing (WPC) is that priority for spectrum allocation was from the date of application for spectrum, and not from the application for the unified access services (UAS) licence (LOI). The judgment concludes that there was no evidence to prove that there was an FCFS policy in the form as alleged in the charge sheet. The sense one has from the instances cited is that there was a loose policy with no standard operating procedure.

Possible malfeasance & evidence

Another allegation in the charge sheet is that the FCFS policy, such as it was, was implemented in a manner that resulted in wrongful gains. From press reports at the time, one expects that this statement of possible malfeasance is the sort for which evidence might be available and presented. So, was such evidence presented?

The FCFS process changed from the date of application for a licence in the order in which it was received to actual compliance with terms of the LOI. This meant submitting all requisite information, documentation and clearances together with bank drafts and guarantees. Earlier, the FCFS criterion was the completed application (as in the instance of a later complete application being processed before an earlier incomplete application). The judgment records that consideration of the proposed change to LOI compliance was publicly known well beforehand and was even published in the press.

The counter is that because of a large number of applicants, the criterion was established for serious applicants who complied with the conditions of LOIs, including all clearances and payments. All applicants were apparently well informed of impending developments at the Department of Telecommunications (DoT). The judgment notes: “Everything was leaking in DoT. There was no secrecy or sanctity… In such a situation, no blame can be cast on any of the accused alone.” However, one is left with a sense that this area has not been conclusively explored.

Some questions remain

A broad question: Is there a way to deliver justice while avoiding the infructuous path of dealing with the several hundred thousand pages of documents over seven years and the opportunity cost so far for all involved in just this case? If so, how do we change course going forward? The charges appear to have conflated the questioning of policy with allegations of improper implementation and culpability. Might separating the questioning of policy from establishing wrongful implementation and culpability be more constructive? Could defining narrower culpable allegations, focused on evidentiary material, obtain conclusions beyond reasonable doubt?

* The judgment provides a scathing critique of how no proper evidence was presented on the existence of an FCFS policy. What is the explanation for a weak case by the prosecution?

* The charges sought to prove that there was a conspiracy of all the 17 accused, and that the first indication of it was the letter from the DoT to the solicitor general regarding LOIs for pending applications. Could the charges have targeted other events and activities based on likely availability of evidence, and if so, what might they have found? Examples: Bringing forward the deadline for applications from October 1, 2007 to September 25, 2007, or the lack of orderly standard operating procedures adopted in changing the priority of applicants from the date/time of application to LOI compliance.

* Regarding wrongful gains, there is no indication if forensic methods were used in tracking transactions and if so, what the methods and findings were.

* What explains the rough-and-tumble process that applicants had to go through in complying with LOIs related to the case?

For the New Telecom Policy in 2018, we must hope to learn from and avoid such adverse situations. One way is to facilitate collaborative and transparent implementation.

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Shyam(no space)Ponappa at gmail dot com

1. Delhi District Court judgment: Cbi vs . (1) A. Raja (A1); on 21 December, 2017.pdf

https://indiankanoon.org/doc/17920655/

2. The Trai (Telecom Regulatory Authority of India) recommended auctions in August 2007 for all spectrum except “2G bands”, but not for licensing. Acceptance by the DoT would have made this the policy, but this recommendation was not accepted.

3. (Ibid) Page 524, Paragraph 753

NPAs & Structural Issues

To fix one you need to fix the others.

Shyam Ponappa 

  | October 5, 2017

An aspect of financial services often overlooked is that they serve as second-order infrastructure, essential for commerce, industry, and daily living. A disruption in the financial sector slows everything by cutting productivity. Other reasons for decline, such as structural issues in power supply, telecom/broadband, and in farming, are accepted as part of the landscape. That is why devising corrective measures is not so simple. Setting aside political considerations, misattribution does not help in problem-solving. Resolution needs root causes to be identified and addressed. 

Consider the example of the guillotine approach to non-performing assets (NPAs). Imagine if an inspection of water and sanitation in your locality were to result in the shutting off of the water supply because conditions are deemed unsanitary. There would be a scramble for sourcing water, while economic activity and productivity would tank. What if it were a metropolis, or the whole country?

This is what happened with the abrupt change in booking NPAs. From around 2.5 per cent between 2006 until 2011, they began to rise in 2012 (see Chart 1). 

Chart 1: NPAs as a Percentage of Gross Advances

Source: RBI - dbie.rbi.org.in

Public sector banks in particular responded to the government’s accommodative efforts after the 2008 crisis. As growth fell, NPAs rose, especially for long-gestation, regulation-dependent infrastructure loans. In 2015, the Reserve Bank of India (RBI) adopted a hard line as the economy was gaining momentum after slumping in 2014 to 6 per cent. Earlier, the RBI was faulted for allowing the ever-greening of loans. An abrupt change without a gradual coming to terms to manage cash flows resulted in a crisis.

Leaving aside malpractice/fraud, NPAs resulted from factors such as aggressive, unsustainable lending, regulatory delays, the domestic and global slowdown, and commodity price shocks, as when export duties were imposed in Australia and Indonesia on coal. Cash flows drive demand, and a weak economy can make or break a business. 

Apart from crippling banking and financial services, the consequences of the NPA shock were enormous, especially for sectors such as iron and steel, construction, power, telecom, transport, and agriculture, with knock-on effects on MSMEs across sectors. Could a phased, more gradual, differentiated approach have yielded better results? Probably, just as when water supply fails, interim arrangements involving pipes, equipment and tankers have to be made to tide over the crisis.  For stressed loans, the requirements were for a differentiated approach to the category of wrongdoing, including overreach, and support for stressed sectors undergoing a downturn.   The need was and is to prevent disruption in cash flows from a systemic perspective, conserving employment and assets in untainted enterprises with the potential for recovery.  This also retains momentum and market sentiment to the extent possible.

Ways Out?

1. NPAs in the mid-90s were outrageously high. Yet, what followed especially after 2003 was high growth until the global financial crisis of 2008. The NPAs were reduced and ceased to be a problem (see Chart 1). One explanation is that banks did significant NPA provisioning from profits in bond trading, as interest rates on 10-year government bonds fell 8.1 per cent from 1997 to 2003. A booming economy from 2003 did the rest, although there were no changes in the underlying causes that led to the NPAs. Hence, bond trading could be a way out provided interest rates fall, and so could economic growth. 

2. Regarding interest rates, the dilemma is of high rates for domestic savings because people save with banks in India, and for foreign investors in bonds, against low rates for consumer demand and for capital investment. Given our acute need for growth and misaligned real interest rates, this needs rectification (see Chart 2). 

Chart 2: Real Interest Rates-India, China, Indonesia, Thailand , South Korea – August 2017

Source: https://www.bloomberg.com/news/articles/2017-08-02/india-s-real-interest-rates-compared-with-other-asia-economies

3. There’s a need to insulate banking from political influence, while ensuring rigorous procedures for evaluation and monitoring. Any system can be gamed, however, and to work well, players need competence, integrity, and the freedom to exercise both. Banks are not well suited for funding long-gestation infrastructure because their deposits are more short-term. This is an institutional and market deficiency that needs to be bridged through developing bond markets, and channeling long-duration funding from pensions and insurance.

4. There are compounding effects from imposing the Aadhaar/UID without the requisite connectivity, processes and safeguards, likewise the hasty imposition of the goods and service tax (GST). There is little doubt of benefits when properly applied, but that needs time and support for thorough implementation; meanwhile, the immediate need is for relief. Rescue measures are needed to lighten the burden of the GST and its reporting requirements on MSMEs (up to a higher ceiling?) over a long period. Interim solutions could be flat rates for a larger set, augmented by support for implementation.

5. Meanwhile, structural issues resulting in NPAs need to be fixed. Three obvious areas:

a) Farming, with its large population, small holdings, outmoded practices, low productivity, and the issues around pricing. Pricing is an essential aspect, as are direct benefits, for example, subsidies through cash transfers depending on income. But simply increasing farm prices addresses only one aspect of a multifaceted problem. What’s needed is to change the way production and marketing are organised. Practicable strategies are needed for produce, perhaps like the approach in dairy farming for milk production and marketing. Systems need be designed (worked out) and implemented properly, with design elements to promote and safeguard honest, competent, disciplined behaviour.

b) Telecom and broadband services need policies based on a complete change of mindset and market structure, such as shared networks and equipment including spectrum, protection from anti-competitive action, and revenue sharing instead of auctions.

c) Electricity supply: Power generation and distribution are both stressed by low economic activity, while many states continue with lax practices of under-recoveries for electioneering.This cannot be resolved as long as profligacy and indiscipline continue.

Fixing NPAs alone won’t do. Changes are required in key sectors for genuine resolution.1

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Shyam (no-space) Ponappa at gmail dot com 

1. “Indian Banks – Perception and Reality”, Ashima Goyal: www.epw.in
http://www.epw.in/system/files/pdf/2017_52/12/SA_LII_12_25032017_M_and_B_Ashima_Goyal.pdf

The Supreme Court Delivers

Now, the spectrum and licence issues need resolution

On September 27, 2012, the Supreme Court of India delivered the opinion of a bench comprising five Judges on the Presidential Reference regarding the auction of 2G spectrum.

Shyam Ponappa / Oct 04, 2012


The Supreme Court’s opinion on the Presidential reference* dismissed two preposterous claims. One is that it is beyond the ambit of Parliament and the government to formulate economic policies. The second is that the government must allocate resources only through auctions. It’s like the end of a self-destructive nightmare. True, our heedless kleptocracy as a society of rogue politicians, bureaucrats, defence personnel, and complicit citizens, led to this pass. Even so, the anarchic “destructionism” of these claims is as reprehensible as the kleptocracy they seek to tear down. Fortunately, the Supreme Court opinion rose above the populist clamour.

There’s still a mess to clear. The big picture is that the Supreme Court left its decision on spectrum auctions unaddressed. In matters of detail, some points need resolution based on facts. These are discussed below to dispel prevalent myths.

Myth 1: Auctions maximise govt revenues

“Auctions may be the best way of maximising revenue…”: paragraph 116 of the opinion. This contravenes the evidence after the National Telecom Policy -99 (NTP-99), that revenue-sharing maximises government revenues as well as public benefits. It also ignores the many auction failures.

Consider the evidence: auction revenues foregone were estimated at under Rs 20,000 crore for 1999-2007, because the sector was mired in losses and was unable to provide services effectively or pay those dues. By comparison, actual collections from revenue-sharing by March 2007 were more than double, at Rs 40,000 crore. Collections by March 2010 were Rs 80,000 crore. Current annual contributions to government revenues may be about Rs 18,000 crore on Adjusted Gross Revenues estimated at Rs 1,40,000 crore, plus taxes, amounting to perhaps Rs 36,000 crore.

Re public benefits, access to telephony grew from a few million users in 1999 to about 700 million today (excluding around 250 million shadow subscriptions).

An ameliorating caveat in paragraph 12 states: “…if the State arrives at the conclusion … that maximum revenue would be earned by auction of the natural resource in question, then that alone would be the process”, and this is expanded in paragraph 119:

“Where revenue maximisation is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations.”

This has not prevented erroneous conclusions in the press that auctions are the only valid process, notwithstanding that the conditions stipulated in the order, eg, that government’s actions be “fair, reasonable, non-discriminatory”, were always operative, if not adhered to in instances of abuse, as in the 2G scam.

Myth 2: Maximum govt collections are in the public interest
Government collections as the public interest criterion may work for colonial powers extorting revenues from subject states, or possibly for utopias whose political economy is so balanced that such cross-subsidisation works. Developing economies like India presumably can and should seek the welfare of their people. The same populists crusading for maximum government collections accuse governments of corruption and waste. This doesn’t provide a coherent approach to infrastructure, where each capital-intensive sector is configured to deliver a specific service. For instance, the energy sector has to deliver power, while telecommunications must deliver communications services. Neither can be expected to deliver toilets or water. Yet, many well-intentioned people seem to nurture such irrational expectations.

The spectrum and broadband link

The first prerequisite for broadband is high-speed connectivity. The second is reasonably priced services. Our objectives are, therefore: (a) a broadband network, (b) available anywhere (c) at reasonable prices. Our networks are deficient, however, particularly in rural and semi-urban areas. A host of factors are responsible, ranging from limited public sector network rollout, combined with a private sector focus on the most lucrative urban centres, with incentives skewed to voice telephony. Applications need connectivity based on networks that require spectrum.

Problems and solutions

Consider an application like distance education. The need is for networks and services of high quality (followed by the additional requirement of content). What is apparent is that such applications cannot be effective without the connectivity. So we’re back to the need for networks, of fibre where feasible, and wireless elsewhere. This brings us back to the need for spectrum.

Reviewing facts

As regards the facts relating to the 2G judgment deserving review:
The solution the Supreme Court has not considered is that operators need only to use spectrum, for which they can be charged a fee. The evidence of widely available Wi-fi shows that innovation and usage thrive if spectrum is available. The Supreme Court, the government, and the public need to recognise that allocating spectrum to operators is only one way to use spectrum.

There need be no alienation of spectrum at all, if policies allow open access and charge fees. Then, spectrum could be used like any infrastructure network, eg, airports, highways, or rail, on payment of usage charges. The sharing could be in at least two ways. Operators could pool spectrum for collective use. For this, (i) regulations must allow pooling/active facilities sharing, and (ii) operators must agree on terms and procedures. Another way is for mandatory spectrum sharing using the database-driven systems being implemented in the US by Spectrum Bridge and Telcordia. Similar deployments are planned in the UK, the European Union, and in Singapore. The TV white space is shared because this range is available for sharing, and not because other bands cannot be shared.

There are immense societal costs of duplication in capital investments in multiple networks, including the last-mile spectrum access, of operators using dedicated networks with limited passive facilities sharing (such as towers), compared with the benefits of open-access to common networks, if policies changed. These would employ active facilities sharing (equipment, and not just construction) to reduce capital equipment, construction costs, energy for towers, carbon emissions from a more limited physical network, possibly reduced radiation from a rationalised network with small cells with lower-powered equipment, and the multiplier effect on the finite available spectrum.

Enormous productivity benefits could accrue through ICT applications in infrastructure such as smart grids for energy, transportation, education, healthcare, and government services, as well as many commercial applications.

The Supreme Court could also uphold contractual obligations, by discriminating against actual transgressors in the 2G spectrum allocation, while rehabilitating those who operated within the law.

  
shyam[no space]ponappa at gmail dot com 


* http://supremecourtofindia.nic.in/outtoday/op27092012.pdf  Changed - corrected below

* RE: SPECIAL REFERENCE NO.1 OF 2012

[Under Article 143(1) of the Constitution of India]

SEPTEMBER 27, 2012

[S.H. KAPADIA, CJI, D.K. JAIN, JAGDISH SINGH

KHEHAR, DIPAK MISRA AND RANJAN GOGOI, JJ.]: 

supremecourtofindia.nic.in/pdf/SupremeCourtReport/2012_v9_pii.pdf  Changed - corrected below

https://main.sci.gov.in/judgment/judis/39596.pdf