High bidding for 3G licences may inflate consumers' bill

NEW DELHI: The next generation telecom services, or 3G, may not come cheap at all. Customers opting for 3G services may have to shell out double their current mobile bills if the forthcoming auction battle results into unreasonably high price for 3G licences.

According to international experience, customers should not pay more than 40% of their current bill if they opt for 3G services.

The department of telecom (DoT), which doubled the reserve price for 3G licences from what telecom regulator Trai had recommended earlier, fears that intense auctioning process for 3G may finally burden the customers, or even hinder the smooth roll-out of 3G services in India.

What’s more, if the finance ministry asks DoT to raise the reserve prices of spectrum, it may further put pressure on the final auction amount, and thereby on the billing of the end users.

Telecom secretary Siddharth Behura told SundayET that too much emphasis on revenue could spell doom for the roll-out itself. “I have no estimate of what could be the total revenue generated by this auction, but we should not be too revenue-centric either. Good, if we can raise a huge amount for the country, but if the 3G service providers are burdened with a heavy price for spectrum, they will pass that over to the consumers. There are some international examples where only technical capabilities of the service providers were weighed in for starting 3G. After all, rolling out the services is more important than anything else,” he argued.

Though the finance ministry has not asked DoT to raise the reserve prices so far, it may question the methodology to derive at the reserve price, SundayET has learnt. A senior finmin official said; “We are not happy with the content of the DoT’s reply after we had objected to the issuing of 3G guidelines without consulting us. Anyway, as spectrum is a scare commodity, we have every reason to know how they have derived at the reserve price. We are writing a letter to the telecom ministry asking the economic rationale behind fixing the reserve price for spectrums,” he said.

Significantly, the UK government in the 3G auction in 2000 gained a whopping £22.5 billion (Rs 182,500 cr), one of the highest amounts raised from such license sales globally. But it hurt the telecom companies and the roll-out was delayed by several years. Mr Behura said: “In the UK, the companies bought spectrum at such a high price that it became difficult for them to roll out the services. At times, companies bid for the sake of bidding and later find it impossible to execute the plans.”

KPMG director (telecom) Romal Shetty said India must learn a few lessons from UK. “India will have to make sure that it does not go the UK way where it took six years to launch the services. In India, I feel, the main market could be the metros, but the companies will have to struggle hard to get people interested in 3G. So far as the pricing is concerned, the customers have to be prepared to shell out at least 40% more of their current mobile bills after they opt for 3G services,” he said.

Source : Economic Times