Global Insight Perspective | |
Significance | The Ministry of Finance has raised objections to the 3G spectrum allocation guidelines recently issued by the DoT. |
Implications | Since the 3G policy contained clauses with financial implications, it is mandatory for DoT to consult with the Ministry of Finance. |
Outlook | The move could result in further revision of the financial terms in the guidelines and, therefore, delay the spectrum auction. |
According the Economic Times and The Hindu newspapers, India's Ministry of Finance said it had not been consulted before the 3G spectrum allocation guidelines were issued, when it was mandatory for all other government departments to consult it on all issues which have financial implications. Finance Secretary D Subbarao, in a strongly-worded letter to the DoT yesterday, said "the guidelines issued on 1 August 2008 by the DoT on auction and allotment of spectrum of 3G and broadband wireless access (BWA) telecom services, contain clauses with financial implications such as determination of the spectrum acquisition price and reserve price for auction, fixation of spectrum usage charges and penalties for hoarding of spectrum. However, the Ministry of Finance has not been consulted in the matter."
In a bid to drive home the seriousness of the issue, the Finance Secretary has told DoT that as per the Transaction of Business (TOB) Rules, it is mandatory to have consultations with the Ministry of Finance "as a pre-condition to all issues which have financial implications". Subbarao also added that the Union Cabinet, in its meeting on in October 2007 had decided that spectrum would be decided mutually between the DoT and the Ministry of Finance. "The issuance of (3G) guidelines without any consultation with the Ministry of Finance, either within the forum of Telecom Commission or outside, is inappropriate and contrary to the Cabinet decision," said the Finance Secretary.
In response, DoT officials said it had several rounds of meeting with the Ministry of Finance before announcing the 3G policy guidelines. They said that it was at the insistence of the Finance Ministry that the base price and the spectrum charges were revised upwards. DoT officials said that stiff penalties for not fulfilling the roll-out obligations had also been imposed to ensure that no operator hoards spectrum.
Outlook and Implications
Earlier this month, the DoT unveiled the long-awaited guidelines for the auction of spectrum for offering 3G and BWA services. The DoT has set a reserve price of 20.2 billion rupees (US$471 million) for auction of pan-India 3G spectrum for GSM operators and about 5.05 billion rupees for pan-India WiMAX radio frequencies. Based on DoT's current schedule, the auction for 3G spectrum will be held within the next three months, spectrum allotted by the year-end and services launched by mid-2009. The objection from the Ministry of Finance, however, could result in further revision of the financial terms in the guidelines and, therefore, delay the spectrum auction. Earlier the telecom regulator TRAI had also raised concerns with some aspects of the guidelines. The regulator had said that the DoT's decision to allot 3G spectrum to CDMA players without an auction was against the principles of equality. The guidelines give existing CDMA operators the option to seek 2x1.25 MHz in 800 MHz band at a price equivalent to the highest winning bid by GSM operators in 2.1 GHz auction. TRAI has also sought to have a say in fixing the terms and conditions for allowing new players in the 3G space (see India: 1 August 2008: Indian Government Releases Guidelines for Allotment of 3G, BWA Spectrum).