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Telecom Commission does well to accept Trai's view, but a swap with defence is needed.
Given the opposition mounted by the bureaucrats in the telecom ministry to the regulator's recommendations on lowering the reserve price of auctions, the Telecom Commission has done well to largely accept what the regulator was in favour of. Over the past year, auctions have repeatedly failed because the base price was too high and therefore out of step with the changed economic realities. Along with more liberal merger and acquisition norms, the government can now look forward to reasonably successful auctions in January. What has to be kept in mind is that while there is a tapering in the growth of new subscribers for plain-vanilla voice calls, natural as any market matures, the market for data — people using their smart phones/dongles to surf the internet — has taken off dramatically. Naturally then, firms will pay the highest amounts in the auction for the spectrum that helps them serve this fast-growing market, and not as much for the spectrum used to service just the "voice" customers — that means they will pay more for 900MHz and 2100MHz spectrum, and less for the 1800MHz spectrum.
The problem here is that there are limited amounts of 900MHz and 2100MHz spectrum and given the financial shape the companies are in, they are unlikely to overbid as madly as they did in 2010 for the 2100MHz spectrum. In which case, the government's best bet will be to somehow get more spectrum in these frequency bands. That's not as difficult as it sounds. While the telecom and defence ministries have a pact on sharing spectrum, the telecom ministry has unused spectrum in the 1900MHz frequency which it can trade with the defence ministry to free up spectrum in the 2100MHz frequency. This will enable the government to auction three extra slots in the 2100MHz frequency, which is loosely referred to as the 3G band.