Bandwidth for Indian Telecommunication growth

For a country whose telecommunications ministers worry about being labelled ‘call drop’ ministers, the recent auction of 2350 megahertz of telecom spectrum was disappointing.

Only seven out of 11 telecom players in India participated, and there were takers for just around 40 per cent of the prized radio frequency band on offer.

In fact, four operators will fork out 90 per cent of the Centre’s receipts from this auction, around Rs.66,000 crore, half of which will accrue to the exchequer this fiscal, according to thehindu.com.

That translates into a 43 per cent shortfall from the Budget estimates from spectrum sales for this year, though Finance Minister Arun Jaitley has pointed out that the inflows from the black money amnesty scheme would help the Centre balance its books.

The official argument is that the poor response is a function of the high indebtedness (nearly Rs.400,000 crore at last count) of India’s telcos; the latter could, in turn, cite the high base price set by the government, pegging the potential value of the spectrum at Rs.560,000 crore.

Any operator looking to build a national network using the most efficient spectrum on offer — in the 700 MHz band — would need over Rs.57,000 crore. Not surprisingly, not a single player evinced interest in this band.

 In fact, it has been a suboptimal outcome from the perspective of every single stakeholder. India’s telecom success story has been integral to the country’s growth story in recent years, demonstrating to the world its ability to tap and grow the domestic market quickly as well as establish a global footprint.

But a billion consumers, endless minutes of talk-time a day and low tariffs are not enough if the quality of service on offer is deteriorating, both in data and voice.

In many areas, networks that should operate at 65 per cent capacity are working at 95 per cent due to high congestion, leading to poor voice services, as the telecom regulator, R.S. Sharma, noted recently.

Despite the new spectrum with telcos, the sheer volume of voice traffic means that improvements in quality may be marginal. Similar issues plague data traffic.

The focus of the existing telcos’ strategy for this auction has been to acquire enough spectrum to bolster 4G data services in urban markets, where they expect tough competition from the new player, Reliance Jio.

This could have a bearing on the quality of connectivity and the reach of several of the government’s ambitious programmes, from Digital India to direct benefit transfer.

The government needs to learn from this episode and free the bureaucracy from the fear of the auditor and the investigator soon, for better outcomes in all its plans.

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