Within a couple of weeks of its lavish praise for India’s growing telecom sector saying that India is positioned to surpass the US as the second largest mobile broadband market in the world within the next four years, GSMA which represents the interests of mobile operators worldwide has criticised TRAI’s recommendations on the auction of spectrum.
The telecom body said that the move would adversely affect the interests telecom players and curtail the investment in the fast growing sector.
“The proposals disregard international best practice in spectrum policy and jeopardize the investment of billions of US dollars in new mobile infrastructure in a sector that either directly, or indirectly, employs almost 10 million people and serves more than 911 million consumers”, GSMA said.
In its recommendations the Telecom Regulatory Authority of India (TRAI) recently proposed a minimum or base price of Rs 3,622.18 crore for every mega Hertz of spectrum in the 1800 MHz band, where radio airwaves have been vacated following the Supreme Court’s verdict on February 2 cancelling all the 122 spectrum licences allotted in 2008 during the tenure if the former telecom minister A Raja.
A pan India spectrum in 1800 MHz band will cost Rs 18,000 crore. The reserve price is several times the base price of Rs 3,500 crore for 3G spectrum auction.
Citing the example of the European countries GSMA said that the European 3G experience more than a decade ago made clear that auctions designed to maximise revenue, hinders the development of the mobile sector and the socio economic benefits that mobile delivers to the public.
“Reducing the ability of mobile operators to invest in network upgrades and expansion would undermine the ability of India to leverage its telecom infrastructure to empower citizens and businesses, especially those in rural communities, to participate equitably in the Internet economy”, GSMA said.
“For example, the TRAI’s proposed reserve prices for upcoming spectrum auctions are so prohibitively high that they will inevitably curtail mobile operator investment in Mobile Broadband infrastructure and increase pricesto consumers”, it added.
Given the strong correlation between mobile penetration and socio economic development the TRAI’s recommendations will not serve the interests of the broader Indian economy.
“Efforts to squeeze money out of mobile operators for some perceived short term gain will only reduce investment in networks, inhibit growth of mobile services and drive up consumer prices limiting the value the public will derive from the spectrum resource in the long term,” said Franco Bernabè, Chairman of the GSMA and Chairman and CEO of Telecom Italia Group.
TRAI’s recommendations would not only drive up the cost of the mobile spectrum, but would also create artificial scarcity of this critical resource. “The GSMA’s member operators in India have invested heavily and worked hard to deliver innovative services to consumers and positively impact the broader Indian economy. They are naturally very concerned about the TRAI recommendations, which have the potential to stifle investment in India’s mobile sector”, it said.
Soon after TRAI’s issued recommendations several telecom operators slammed the hike in the spectrum fee. Vodafone had said that the steep hike in the auction price will only harm the Industry. "We believe that several of these recommendations are retrograde and if accepted, will do irreparable harm to the industry", it said.
"It (TRAI recommendations) will hamper the ability to connect the unconnected and goes against the objectives of National Telecom Policy of ensuring improved rural tele density and right to broadband," Vodafone said.
"Trai recommendations on the hike in reserve prices appear significantly on the higher side and is likely to be a strain on the resources of the bidders, especially with a highly competitive market landscape. Higher reserve price & resultant auction price is likely to lead to an increase in tariffs by service providers," added Jaideep Ghosh, partner at consulting firm KPMG India.