30 JANAURY 2016
The trouble with spectrum pricing
The Telecom Regulatory Authority of India’s latest recommendation on the reserve price for the auction of the 700 MHz wireless spectrum could be a case where the pricing of a public asset may end up having the exact opposite effect: making a scarce resource so expensive that its meaningful utilisation is compromised, and thus rendered unavailable to serve the larger public good. That the telecom regulator, which has been in the vanguard of trying to spur both government and industry to become more responsive to the larger public interest, should have opted to set such a high valuation benchmark is a touch ironic. About 14 months ago, TRAI had, in a missive to the Department of Telecommunications, spelt out the rationale behind its recommendations on valuation and reserve price of spectrum. While the specific backdrop of that particular communication was the likelihood of the government opting to hold a supply-constrained auction, the broader arguments it made then remain as germane. The regulator had pointed out that a very high per unit price realisation, while possibly helping meet immediate fiscal needs, would only bleed the industry of resources. The high price of spectrum would also affect private investment in network expansion and infrastructure. The financial viability of the industry, TRAI posited, was crucial both for its own health and for the government to earn recurring revenues. All these issues are still relevant, as underscored partly by Bharti Airtel’s recent results. The company has reported its first quarterly profit decline in two years, largely on account of higher spectrum amortisation expenses.
It is no one’s contention that the telecom regulator had not approached the task at hand with full transparency and openness in its quest to arrive at meaningful valuations for seven frequency bands. A consultation paper that sought comments from all stakeholders was followed by an open house discussion. TRAI spelt out the points made by varied participants, including many from the industry who argued against an auction of the 700 MHz airwaves at a time when the network and device ecosystem is not sufficiently developed. Still, considering the performance efficiency of the particular spectrum band and its utility in improving and expanding high-speed wireless broadband services across rural areas, the regulator recommended that the government put on the block the available frequencies in this spectrum at the next auction. It is in plumping for its own April 2012 formulation of four times the reserve price of the 1800 MHz spectrum that TRAI appears to have made a less-than-appropriate choice. This is particularly so as spectrum sharing and trading have been operationalised in the intervening period, boosting overall supply. The regulator’s recommendation, for almost Rs.11,500 crore per MHz, if accepted, holds risks for an industry that serves a crucial socio-economic objective.
Giving cities the smart edge
The Central government’s framework for 20 cities to become ‘smart’ over a five-year period can cover new ground if it makes intelligent use of information technology to deliver better civic services. Rapid and poorly regulated urbanisation has overwhelmed urban governments, rendering them incapable of providing even basic services such as clean water, sewerage, pedestrian-friendly roads, public transport, uninterrupted power, street lighting, parks and recreational spaces. So weak and uncoordinated is governance that commercial entities have wilfully violated building regulations and put up unauthorised structures — with severe impact on congestion, air quality and flood management — and governments have gladly regularised the violations later. The smart city plan now proposes to intervene and bring some order by upgrading the physical infrastructure in select enclaves, and incentivising the use of information and communication technologies. Urban Development Minister M. Venkaiah Naidu has come up with a generalised definition of a smart Indian city as one that “enables a decent life to the citizens, and green and sustainable environment, besides enabling adoption of smart solutions”, but the exercise should lead to measurable outcomes.
The first batch of smart cities would create virtually new business districts in several cities, marking a departure from the disaggregated urban development witnessed over the past few decades. This area-based development approach makes it imperative that the resulting demand for mobility to and from the ‘smart’ area be made an integral part of the plan, with an emphasis on walkability, use of non-motorised transport and access to public transport. Ahmedabad and Bhubaneswar have shown high ambition by opting for a common travel card. Others such as Indore, Davangere and Belagavi plan Intelligent Transport Solutions, something that has been unattainable for even a big metro such as Chennai. Although it enjoys high visibility, the smart city programme is merely a framework for urban development aided by the Centre with a small initial seed fund of Rs.500 crore, while additional finances have to come from public-private partnerships and local revenue. State governments, including those left out of the first list, could unlock the potential of all cities with development policies that aim at structural change. Improved public transport, for instance, has an immediate positive impact on the local economy. Technologies such as GPS to inform passengers in real time on their mobile phones, and common ticketing, increase the efficiency of transport use. Universal design in public buildings and streets would help all people, including those with disabilities. The challenge for Smart Cities 1.0 is to provide proof of concept quickly and make outcomes sustainable. Care also needs to be taken that the effect is not to create gated communities of best practices and civic upgrade in a wider landscape of urban distress. It is crucial that these urban enclaves cater to the housing, health, education and recreation needs of a wide cross section of society, and that the convergence of the Smart Cities programme with existing urban renewal projects countrywide be smooth.