Increasing role of Auditors General and Control Authorities in telecom policy and the challenges posed

Posted on June 2, 2013 / 4 Comments

In my recent visit to Colombia to assess the ICT sector for the OECD, I found that the Office of the Controlaria (Auditor General) was playing an increasingly central role in telecom policy, second-guessing decisions by policy makers and regulators years after the fact, for example requiring a Mayor responsible for the decision by a municipally owned telco to introduce ISDN many years back to compensate the municipality out of his personal funds for the resulting losses. The broader issues of government ownership raised by this story are discussed in detail in my LBO.LK Choices column.

The Indian Comptroller and Auditor General was involved in telecom regulation from the 1990s, for example claiming that TRAI under the leadership of Justice Sodhi was negligent in not optimizing government revenues through BSNL. It played a decisive role in the 2G scandal that has been dragging down the Indian telecom industry for the past 2-3 years by making an inflated assessment of the losses caused. Now it is claiming that the lack of participation by mobile operators in spectrum auctions with artificially high reservation prices is evidence of cartelization.

CAG had earlier calculated that the spectrum allocation to the companies without auction in 2008 caused government presumptive loss of Rs 1,76,000 crore. In 2012, there was muted response from the industry to bidding for spectrum that was freed from cancellation of 122 licences. The auction fetched the government about Rs 9,407 crore out of Rs 28,000 crore expected, as per the minimum price fixed for the spectrum.

The CAG added that declining to participate in auction negated their telecom operators position of seeking additional spectrum. “If additional spectrum was vital for maintaining TRAI prescribed QoS, then reluctance of the operators to take spectrum at price in the last two auction appeared to be a significant departure from their earlier stand,” CAG said.

The auditor’s communication raised finger at leading operators who had been requesting for additional spectrum. No comments were received from the companies named in the report.

Full report.

The challenge before all who care for the advancement of the ICT sector is how to ensure that the powerful officials within the Auditor General offices actually know something about the basics of economics and technology before they take actions that affect the industry.

4 Comments

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Payal Malik
June 2, 2013, 9:37 pm
The ex-Indian auditor is an economist. He is from Delhi School of Economics For the 2G losses calculation, you could get the number from the resale of the license, which was in the o
1. Rohan Samarajiva
  
  June 2, 2013, 10:20 pm
  
  I do not think one can impute a value for what could have been earned in one auction at a specific time for specific frequencies from a different auction at a different time for different frequencies.
  
  The claim that non-participation in an auction with high reserve prices is evidence of cartelization seems questionable. Everyone knows that India has some of lowest HHIs in the world. If auctions are about discovery of the value of a resource, why not let the price be discovered without rigging the game with reservation prices? Why disregard the possibility that the value is below the reservation price?
Abu Saeed Khan
June 5, 2013, 6:16 pm
Headlines from India:

1. DoT contests CAG’s claims of loss due to cartelisation

2. CAG has no jurisdiction to question Trai norms, says DoT