A 2G scam that predates Raja: Did telcos steal spectrum?

Source: First Post, By Aditi Roy Ghatak and Paranjoy Guha Thakurta

The spectrum scam neither started with A Raja, nor, for that matter, when the BJP-led NDA government was in power, as is often alleged by the Congress. Spectrum has been misallocated and undervalued ever since the government gave up its monopoly over the country's airwaves in 1994 when Sukh Ram was Communications Minister.

The untold story of the history of India's spectrum scandal is being revealed here for the first time after four months of investigation into old records and dozens of off-the-record interviews with experts who disclosed how phrases like 'cumulative maximum' were deliberately used to interpret complex rules, thereby depriving the exchequer of its dues.
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Technology has a curious way of rendering even popular and often wise English expressions redundant. Whoever said that money could not be made 'out of thin air' was mistaken. India has just shown that not only can humongous sums be made out of thin air. Indian ingenuity has accomplished what is arguably the world's largest ever reported financial scam 'out of thin air', in this instance, a close to $40 billion scam relating to misallocation and undervaluation of second-generation or 2G electromagnetic spectrum used mainly for mobile telecommunications.

Whereas the 2G scam has hogged the headlines, there is a strongly suspected but uninvestigated case of 'stolen' spectrum, for want of a better word, which started in 1994 when the government of India gave up its monopoly over the telecom sector. So effectively have the tracks been covered that not even seasoned telecom experts with no vested interests sense the possibility of a scam while others dismiss it as ridiculous.

Thus, contrary to questioning the need for placing licences of 1994 vintage under judicial scrutiny on grounds that they have no relevance to the Supreme Court's February 2012 judgment cancelling 122 licences.

The investigation conducted by the two journalists who have written this series of articles suggests that it would be an excellent idea to have the entire licence-spectrum regime of the last 18 years examined thoroughly so that those who have secured spectrum beyond their contractual obligations and possibly through malfeasance be brought to book. One school of thought suggests that the companies that received extra spectrum only be asked to pay the appropriate price for a finite (and, therefore, scarce) natural resource that has turned them into multi-billionaires in a decade or so. Another view is that the letter and the spirit of the law demands that purloined resources be returned and letting those who misappropriated these resources get away by paying for what was not theirs to begin with, would be tantamount to standing the law on its head. Spectrum, as every Indian knows, is an invaluable asset in today's age of communications-driven growth. After the hullabaloo over the 2 February 2012 judgment of Supreme Court Justices GS Singhvi and AK Ganguly (now retired) settles down, the question that should exercise the mind of the interested Indian is how all this began in the first place and how come no one is talking about the roots of the phenomenon called 'stolen' spectrum. Not that everyone is entirely ignorant; the government knows; members of the Joint Parliamentary Committee, set up to examine matters relating to 'Allocation and Pricing of Telecom Licences and Spectrum' during 1998, actually had a presentation made to them by the Department of Telecommunications (DoT) clearly suggesting the anomalies in the spectrum allocation, even though the presentation did not underscore this point of stolen spectrum and none of the MPs present asked pointed questions to the officials of the DoT. To set the stage for this series, it may be worthwhile to revisit recent developments in the telecom space. The Indian telecommunications network currently has in excess of 900million wireless connections and India has the world's second largest telecom subscriber base - which is also the fastest growing market with between five million and 10 million additions to the SIM (or 'subscriber identity module') card base every month over the last year. The private sector is at the commanding heights of this market with an 85 percent control, thanks to policies that have provided easy market access for telecom equipment and a regulatory framework that the government promised would be fair for the service providers and affordable for a wide cross-section of Indians.Yet, the government's actions have been far from fair, irrespective of the party in power. The only Union Minister for Communications to have got seriously implicated in recent times is Andimuthu Raja, who has spent 15 months behind bars. The important development in recent times is the sudden scramble to seek clarity on pricing of spectrum and allocation, especially after the Telecom Regulatory Authority of India (Trai) released a consultation paper on "Auction of Spectrum" on 7 March 2012. A quick look at the questionnaire leaves an impression that Trai is inclined to accommodate the incumbent dominant operators at any cost by seemingly trying to develop some consensus on contentious issues through comments from industry associations and other stakeholders, overlooking well established-principles of "no loss to the exchequer" and raising eyebrows yet again on its ability to be an impartial regulator. The Trai paper principally deals with the quantum of spectrum to be auctioned, liberalisation of spectrum (ie use of spectrum for any kind of service), refarming (or reallocation) of spectrum in the 800 Mhz (megahertz) and 900 Mhz bands, the structure of the auction, the spectrum block size, the eligibility criteria for participating in the auction, the reserve price, roll-out obligations, spectrum usage charges and spectrum trading.