Spectrum allocation and pricing in Pakistan and India have differed considerably, one following market-based price discovery mechanisms through auctions, and the other, arbitrary pricing. Two articles, one by Mr. Muhammad Aslam Hayat, a regulatory consultant at Grameenphone, Bangladesh, and the other, by Payal Malik, LIRNEasia Senior Research Fellow, examines the past and present spectrum policy in Pakistan and India, respectively.
Pakistan introduced mobile cellular telephony early, in 1990. Although there was no clear spectrum management policy or roadmap available prior to 2004, the issuance of four mobile cellular licenses and the assignment of spectrum to those licensees were remarkably well thought out.
…In 2003, when action was taken to issue two more mobile cellular licenses, the need for a proper spectrum allocation mechanism and roadmap arose. At that time only 2×5 MHz of the 900 GSM band was unassigned and it was expected that the clear preference of the new entrants would be GSM
…The auction design for two mobile cellular licenses was not ideal but a number of steps were taken to find the winner as quickly as possible instead of focusing on maximising the initial fee…as a result of the regulatory principles, predictability, transparency and clarity of the Mobile Cellular Policy 2004, Pakistan managed to attract foreign investors to participate in the auction.
In contrast, in India, Malik reports that until 2003, all the licences awarded (including the bundled spectrum) had some crude form of market-based price discovery through auctions. However, with growing wireless subscribers increasing the demand for spectrum, it was decided to adopt subscriber-based spectrum allocation criteria as an interim measure, disregarding market-based pricing of spectrum.
Government issued orders on these lines on January 17, 2008, totally disregarding market-based pricing of spectrum. As a consequence and by Trai’s own admission “…several incumbent operators received spectrum beyond the contracted limits free of cost and benefited from the same over several years”.
…However, the most indefensible action of the government in this regard, documented in the press and debated in the Parliament, was not to auction licences in 2008. By allocating 2G spectrum to the licensees in January 2008 at an arbitrarily decided price of Rs 1,659 crore (the price paid by the fourth cellular operator way back in 2001). All principles of efficient allocation of this scarce resource were violated.
…However, there is one window of possibility of cleaning this pricing conundrum. Very soon, many licences will be coming up for renewal. Trai has been reiterating that the contracted spectrum is 6.2 MHz with respect to GSM and 5 MHz with respect to CDMA. The licensee applying for renewal should then be assigned spectrum up to the committed amount as per the current licence. Any additional spectrum that these licensees require to carry out their operations should be priced through a transparent auction.