Beauty parade likely for 3G licenses in India

Posted on September 20, 2006  /  1 Comments

According to this article that appeared today in India’s Business Standard, TRAI seems to be considering using a base price + beauty pagent mechanism to award 5 licenses (of 5MHz each) for companies to introduce 3G services.

The prduence of using beauty pagents needs to be questioned. The failures of 3G auctions in Europe in 2000 has been mentioned as one of the reasons for opting for a beauty pagent. However the failures of those auctions stemmed from operators’ over-estimating the potential of a new and untested service. It is unlikely that operators would make the same mistake again – my argument being once-bitten, twice shy.

Economists would argue that auctions, with sufficent safe guards to eliminate (or at the very least minimize) collusion/signalling and to enforce rollout is the best method of allocating scare resources. I am not an economist but the arguement makes sense and the process can occur in a transparent and efficient manner. License allocation by beauty pagents don’t have a reputation for transparency. Recent auctions, such the recently concluded USD 13.9 billion license auction in the US (Washington Post article), have learnt from past mistakes (The FCC included some provisions in the current auction to take care of problems that emerged in the big 1990s auctions when one winning company filed for bankruptcy and succesfully took FCC to the courts to prevent them from repossessing their licenses- see the related IHT article ).

Lets see what TRAI’s final decision is, but at the very least I hope they provide sufficent justifications for their choice.

1 Comment

  1. It looks like TRAI is considering auction for 3G freq but by setting quite a high base price from which bidding would start. Mobile (GSM) operators aren’t happy

    TRAI recommends 3G auction prices
    The regulator recommends setting up of National Frequency Management Board
    Thursday, September 28, 2006, Voice & Data

    NEW DELHI: The Telecom Regulatory Authority of India (TRAI) has recommended a maximum base price of Rs 80 crore for allocation of 3G spectrum to operators.

    While highlighting the recommendations, Nripendra Misra, chairman of TRAI, said that the base price for allocation of spectrum for 3G services has been recommended at Rs 80 crore for Delhi and Mumbai, Rs 40 crore for Chennai and Kolkata and Rs 15 crore for other C category cities. “Now the telecom operators will have to bid for spectrum which will be above the base price recommended,” he said.

    Misra said that after receiving comments from the stakeholders the regulator has come up with the recommendations, which will be submitted to DoT by September 30.

    He said that the DoT would generate a revenue of around 1400 crore from the base price for allocation of spectrum to the telcos.

    The regulator has also recommended for setting up a National Frequency Management Board (NFMB) for long-term vision and planning for spectrum availability. Misra said that the board would be constituted with members from TRAI and DoT, which would have the final say in allocation and roadmap of future of spectrum.

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