A+| A| A-
Spectrum Price
Taking the evolution of auction pricing from arbitrary bureaucratic “beauty contest” to highly sophisticated auction where academicians have ruled the practical space, this article outlines the monopoly and missteps of civil servants and argues for the professionalisation of the regulator and elimination of redundant bureaucracy.
The Telecom Regulatory Authority of India (TRAI) recommended a reduction of 35% to 40% in reserve prices for spectrum auction, but the industry association—the Cellular Operators Association of India (COAI), consisting of Jio, Airtel, and Vodafone Idea
—was not happy, since they had wanted a 90% reduction (Bhargava 2022). In an auction, the reserve price is set to signal the minimum price expectation by the seller below which they are not bound to sell the product. The COAI had also protested TRAI’s recommendation to permit Captive Wireless Private Networks, thus depriving the already stressed industry of a profitable segment. Here, the TRAI was giving the client industry more options, thereby making the demand more elastic, which is a good thing. But what is the controversy about the reserve price? Why should this price matter?
TRAI’s reduction of reserve price entailed going down from `6,600 crore per megahertz (MHz) to `4,000 crore for the 700 MHz band, and from `492 crore to `317 crore for the 5G-related bands; the 700 MHz band reduced the customer serving cost to one-third. Intriguingly, the TRAI report mentioned government revenue of `5 lakh crore for a proposed sale of one lakh MHz of spectrum, corresponding to only `5 crore/MHz as the reserve price (Bhargava 2022). To understand price discovery through auctions and the friction between TRAI and the industry, we need to go back to the days when the spectrum was allotted.
Dear Reader,
Or
To gain instant access to this article (download).
(Readers in India)
(Readers outside India)
