To
Shri A K Lahoti
Chairman
TRAI
In the absence of competition, the telecom sector has become captive to a few players, leading to a monopolistic environment that has resulted in 5G spectrum being sold at prices not necessarily in tune with the market and an environment in which the telecom companies have been allowed to increase prices for their services in an arbitrary, unregulated manner.
In this connection, I have addressed the C&AG on 30th June 2024 to conduct a special audit of the recent 5G auctions so that C&AG’s findings could be placed before the Parliament for their scrutiny of the sector’s performance. A copy of my letter is enclosed below.
As soon as the 5G auctions concluded, the telecom companies arbitrarily increased prices of mobile services by around 30%.
Today, I have come across a somewhat questionable statement issued by the Dept of Telecom (DOT) in defence of the three monopolistic telecom companies (https://www.newindianexpress.com/business/2024/Jul/06/tariff-hike-by-telecom-companies-complies-with-the-prescribed-regulatory-framework-dot) in which DOT is reported to have stated, “the tariff hike was implemented in accordance with the provisions of the Telecom Regulatory Authority of India (TRAI) Act 1997, which empowers TRAI as an independent regulator to set telecom service rates in the country. It noted that for the past two decades, mobile service rates have been determined under forbearance by TRAI“I wish DOT had come to the rescue of the customers, rather than rushing into defending the monopolistic service providers!
I am not sure whether DOT’s statement is based on facts, as to the best of my understanding, the three telecom companies are yet to seek approval from TRAI.
Recognising that there is no adequate competition in the sector, in order to safeguard the interests of the customers, TRAI may have to subject the tariff decisions of the telecom service providers to the strictest scrutiny and regulate the same in line with the interests of the customers.
Regards,
Yours sincerely,
E A S Sarma
Former Secretary to the Government of India
Visakhapatnam
7th July 2024
Copy of my letter of 30th Ju8ne 2024 addressed to C&AG on 5G spectrum auctions held in 2024 with little competition, resulting in spectrum being sold at prices not in tune with what market prices
E.A.S.SarmaFormer Secretary to Govt of India
To
Shri G C MurmuC&AG
Dear Shri Murmu,
Please refer to my letters of August 13, 2022 addressed to you on 5G spectrum being auctioned by the Department of Telecommunications (DOT) without adequate competition, resulting in a notional loss of value for the government (
https://countercurrents.org/2022/08/5g-spectrum-is-it-a-distress-sale-cag-may-look-at-it-carefully/& https://countercurrents.org/2022/08/5g-spectrum-is-it-a-distress-sale-cag-may-look-at-it-carefully-2/)
As I had pointed out in my earlier correspondence, “The only way to discover the price of 5Gis through intense competition, with a large number of competent players bidding for it, as against one or two, as is the case now. Once the true potential value is assigned to the spectrum, it will drive the successful bidders to adopt innovative ways to put it to its most efficient use and at the same time make it marketable. To assume that a high price of the spectrum will erode consumer welfare is erroneous, as corroborated by several research studies available. Any policy to price a scarce item below its potential value, in the hope that the private company using it and selling the final product to the consumers at an affordable price, is inherently flawed. Instead, it is always prudent to price it in tune with its potential value and pass on the intended benefit to the beneficiary in some other way, if the company selling it is a privately owned one, as such a company then necessarily seeks to maximise its profitability.”
In the 5G auctions of 2022, there were hardl;y three to four bidders, and in the case of most spectrum bands, the number of bidders was one and, at most, two, making a mockery of competition.
It was not as though the successful bidders had passed on the benefit of low spectrum prices to customers, as in the absence of competition among service providers, they became monopolistic, charging customers dearly, without providing matching customer service benefits.
The spectrum auctions conducted in June 2024 became a repeat of those of 2022, with hardly any competition evident.
To start with, there were only three bidders for 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz, and 26 GHz Bands. According to the information available from the DOT portal (https://dot.gov.in/spectrum-management/3321),
the networth of each of the three bidder is Rs 2,31,000 Crores, Rs 86,000 crores and Rs (-1,16,886) crores respectively, clearly indicating the relative financial strengths of the three bidders, marking a wide variation from the lowest to the highest. Evidently, there cannot be a genuine competition among them. As a result, it is futile to expect the auctions to discover the true value of the scarce spectrum.
I understand from news reports that the two telecom companies that dominate the market have since hiked up tariffs by 20-25% to be effective w.e.f July 3, 2024 (https://www.livemint.com/market/stock-market-news/airtel-jio-tariff-hikes-is-the-telecom-sector-ripe-for-rerating-experts-weigh-in-11719566410261.html). To the best of my knowledge, neither TRAI nor DOT has in in place any system to regulate the telecom tariffs for safeguarding the interests of the customers, nor is there any mechanism for customers to seek relief from unfair practices adopted by service providers, indicating an ideal situation for encouraging monopoly in the sector.In the normal course, had the government pursued a prudent, feasible digitisation policy, consistent with the fact that the majority of the people cannot afford to possess a mobile device compatible with 5G technology, there would not have been any need for the government to rush into selling 5G spectrum bands leading to such a distress sale. About 70% of the smart phones in India are 5G enabled.
About 55% of the Indian smartphone market is currently dominated by mobile devices imported from China, a prospect that should cause utmost discomfort to decision-makers in India.
May I request the office of the C&AG to evaluate the adverse implications of DOT hastily selling 5G spectrum during June, 2024 in a market that is not at all competitive and place its findings before the Parliament at the earliest, as it has wide implications from the public interest point of view?
Regards,
Yours sincerely,
E A S Sarma
Visakhapatnam
30th June 2024
