Excess spectrum: Airtel, Voda gain edge; RCom, Tatas lobby hard

By Aditi Roy Ghatak and Paranjoy Guha Thakurta

Consider the law as it applies to the aam admi. If you steal or are in unauthorised possession of something that does not belong to you but someone else, the law is supposed to put you behind bars. The authorities are then meant to take away the purloined possessions and, eventually, the judiciary decides on the punishment to be meted out to you. The law may not be concerned with what end use the stolen product had been put to.

Now consider the law as it applies to those in India with unauthorised possession of electromagnetic spectrum used for telecommunications.

If the latest (8 October) decision of the Empowered Group of Ministers (EGoM) on telecom headed by Finance Minister P Chidambaram stands, those who have built extremely profitable business empires on the basis of spectrum that they were not supposed to have in the first place, will not suffer any penalty, nor will they have to pay for it. Indeed, they will only have to pay for continuing to use spectrum. Forget taking away the unauthorised spectrum, the government of India would like to gift the extremely expensive natural resource to them.

For some reason, unauthorised spectrum does not quite hit the headlines or attract the attention of ordinary Indians with the same intensity as, for instance, stolen land or pilfered coal. Had the government suggested that people who plundered coal be allowed to get away without paying for it or stated that a developer who had developed and sold land without paying for it should be let off without a penalty, there would probably be a big hue and cry.

For some reason, unauthorised spectrum does not quite hit the headlines or attract the attention of ordinary Indians with the same intensity as, for instance, stolen land or pilfered coal.

Spectrum, because of its relative newness as a scarce natural resource, continues to evade public understanding notwithstanding the reams of paper spent on writing about the 2G scam. The excess spectrum scam has gone on for some 15 years, according to some reports. But no one wants to dig deep and hard.

The authors of this article had written a series of five articles that were published by Firstpost between 29 May and 4 June this year. The story has thereafter become even more interesting. At least two Members of Parliament have been asking Prime Minister Manmohan Singh to tell them from when this unauthorised spectrum has been give to certain companies - primarily Airtel and Vodafone - because even the investigation into unauthorised spectrum allocations is not being allowed to go before the year 2000.

However, as two MPs, Prataprao Jadhav and Mithilesh Kumar, wrote to the PM in August this year, the scam seems to have been started from the mid-1990s when bureaucrats probably did not quite understand the value of spectrum, though the recipients certainly did.Read the letter here

Jadhav alleges that "GSM (or the global system of mobile communications technology) operators have duped the government of thousands of crores of rupees by holding spectrum beyond the contracted limits of their licence" and that this has been "going on for 15 years". The 1994 licence agreement they signed stated that the "cumulative maximum spectrum agreed and allowed was 4.5 Mhz (Megahertz) only, which is in a pair (2.25+2.25) in the frequency bands of 890-902.5 and 935-947.5 (GSM 900 Mhz band)".

"However, what was actually given by the government was 4.4 + 4.4 Mhz, "that makes a cumulative of 8.8 Mhz. It is to my utter shock that by now the two operators of the first metro licences are today enjoying 20 Mhz (10+10) Mhz," wrote Jadhav.

A frustrated Mithilesh Kumar wrote that he has been raising this "grave" issue time and again during zero hour but has received no response from the minister concerned. He refers to the initial violation of the 1994 agreement between the government and the mobile operators that was for cumulative maximum spectrum of 4.5 Mhz. It is not just MPs who have hit a wall of silence; so have some individuals who have applied for information under the Right to Information (RTI) Act.

One file has been lying unanswered with the Public Information Officer, Ministry of Communications, from 6 April. The applicant has followed up his query but nothing has been extracted from the ministry. Efforts by the correspondents to trace the file have been futile and people in the know of things suggest that the file has disappeared. What is clear is that the scam has continued through the NDA and UPA governments, led by the BJP and the Congress.

There was some hope that justice would be done pursuant to the Attorney General Goolam Vahanvati's opinion to the EGoM given on 6 October 2012 which said that mobile operators should be charged for spectrum held in excess of 6.2 Mhz from 2008.

Fair enough, even though the demand should have been to establish how much excess spectrum was held from the outset and what the damages should be. Even the Comptroller & Auditor General said in its November 2010 report that service providers were allotted excess spectrum without any one-time payment and estimated that the value of allocated excess spectrum was Rs 36,993 crore without even having gone into the spectrum giveaways in 1994-95.

All that these MPs and RTI applicants are wanting is for the government to explain how and when Clause 20 of the original 1995 licence agreement under section 20.3, that offered a "cumulative maximum" up to 4.4 Mhz was amended in the licence agreement in September 2001 to "up to 4.4 Mhz + 4.4 Mhz".

What is being asked for - without suggesting anything illegal - is the decision-making process that should have been clear from government records. Is the stubborn resistance to information being sought for suggestive of mischief?

Fresh mischief is in evidence because as early as in May 2010, the Telecom Regulatory Authority of India (Trai) had recommended that operators be charged for the excess spectrum they held. The Telecom Commission endorsed this on 26 December 2011 and a one-time charge for spectrum already allotted beyond 6.2 Mhz in the GSM band from the date of allocation seemed to be a given.

The technical committee appointed by the Ministry of Communications & Information Technology for "Allocation of Excess (GSM/CDMA) spectrum and pricing" recommended in May 2009 that the additional spectrum assigned beyond 6.2 Mhz in a service area should attract an upfront charge equivalent to the 3G price from the date of assignment.

The Department of Telecom (DoT) had other ideas and did not implement the decision; it referred it to the EGoM instead and the Telecom Secretary R Chandrashekhar said that the EGoM would do nothing till it received the Supreme Court opinion on the Presidential Reference on allocation of natural resources (which came on 27 September). Why a matter of correcting an administrative lapse would have to be treated with such kid gloves is hard to understand. BK Syngal, a former Chairman and Managing Director of VSNL (then Videsh Sanchar Nigam Ltd) has gone on record saying "the DoT should have implemented the Telecom Commission decision as soon as it was approved as it is an executive decision", adding that sending it to the "EGoM or for the court's opinion is only a delaying tactic" (Hindustan Times, 14 October 2012).

On 7 October, a day before the EGoM met, in a letter to EGoM head and Finance Minister Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia (who did not attend the meeting) batted for the old incumbents led by Bharti Airtel and Vodafone.

He contended that mobile phone companies should not be charged for spectrum up to the 6.2-Mhz limit as this was "contracted" spectrum, that the telecom companies had made substantial investments and developed market strategies on the assumption that they would have a particular quantum of spectrum and that imposing a charge on the additional spectrum at this juncture would amount to unilaterally rewriting the contract (see "EGoM Rejects Montek's View on Fee Relief" by Joji Thomas Philip in The Economic Times) .

Ahluwalia suggested that while government had the powers to change contracts, invoking these rights "would be inconsistent" with what private investors expect and that "even banks that fund telecom projects would have second thoughts on providing debt". He sought to trash the DoT's argument that imposing a one-time fee for excess spectrum prospectively would create a level-playing field by claiming that the "...level-playing field argument could not be interpreted expansively to mean that subsequent entrants must always face conditions identical to those entered earlier".

"On the balance of considerations, I feel we should respect the sanctity of contract and stick to the position that if investors were given spectrum, on a particular pricing method and for a particular period, and the bona fides of that allocation is not being questioned, we should not change the rules midstream," Ahluwalia contended.

The EGoM had decided that the CDMA companies would pay a one-time charge for spectrum in the 800 Mhz band beyond the 2.5 Mhz limit. This overrode the suggestions made by both Ahluwalia as well as Vahanvati that CDMA technology users should not pay the one-time fee for spectrum held above the 2.5 Mhz limit. The EGoM's decision also implied that dual-technology mobile operators such as Reliance Communications, Tata Teleservices and Aircel must also pay the auction-determined price for additional airwaves beyond the 4.4 Mhz limit and participate in the sale process to bag this spectrum.

But Attorney General Vahanvati had argued that all telecom companies be given the contracted amount of 6.2 Mhz for their GSM operations without payment of any additional fee.

On 12 October, the Association of United Telecom Service Providers of India (AUSPI) wrote to PM Manmohan Singh to reject the recommendation of the EGoM on imposing a one-time spectrum fee of Rs 27,000 crore on existing mobile service providers as it was not "legally tenable". (AUSPI represents dual-technology mobile companies such as Tata Teleservices and Reliance Communications -RCom).

AUSPI Secretary General Ashok Sud wrote: "I would ... urge that if the present licence terms are indeed so open-ended, they should be revised to make the circumstances for intervention much clearer. These licence terms should be applicable for all future contracts and existing licence holders should be given the option to switch to the new terms if they wish..."

The letter said the contracted spectrum for GSM was 6.2 Mhz and for CDMA it was 5 Mhz. The operators had already paid the spectrum fee, as the licence came bundled with spectrum up to the contracted limit. "Charging for any spectrum below the contracted limit now...is illegal and in complete breach and violation of its contractual obligations and provisions of the Contract Act," the association added.

Forget taking away the unauthorised spectrum, the government of India would like to gift the extremely expensive natural resource to them. AFP

According to AUSPI, the enforcement of prospective charging is likely to create more inequalities and discrimination among the existing players, as the residual period of valid licences vary from two years to 10 years between GSM players and late entrants like Tata Teleservices and Reliance Communications would pay more.

"We, therefore, request you that keeping in mind the benefit of the consumers, the EGoM recommendations of mid-term unilateral change to the contracts of our member-service providers by imposing a one-time charge for spectrum beyond 4.4/2.4 Mhz of GSM/CDMA spectrum and up to 6.2/5 Mhz that is contracted spectrum may immediately be shelved," the letter added.

AUSPI's contention is that if the existing law is to be amended by the government, such changes can only be made by invoking national security, public interest and proper provisioning of telecom services. "Such one-time charging is not justified as none of these three extraordinary situations arose now," it claimed.

The Cabinet is expected to take a decision on this issue soon and, hence, the hectic lobbying.

For some reason, all talk of making the playing field level in the Indian telecommunications business seem to be about assisting the original players without worrying about fair-cost allocation. As it is, the first entrants got the most efficient 900 Mhz spectrum while the later entrants got spectrum in the less cost effective 1,800 Mhz band. There was fresh inequity when the new operators had to show between 21 lakh and 53 lakh subscribers post-2008, to get the same quantum of spectrum for which the original operators had to show only 5 lakh subscribers in 2002 to get 8.0 Mhz of GSM spectrum.

One way to remedy this inequity is to refarm spectrum that has for long been on the cards. Even that seems to be in doubt now.

As far as spectrum is concerned, it is not the law that has the long arm; those in possession of unauthorised spectrum do. Indeed, this arm seems to be like that of the multi-armed mother Durga, sheltering the original big two (Bharti Airtel and Vodafone) from any penal action, and deflecting investigation into the 1994-95 scam and now helping them slip out of the need to pay for the excess spectrum that they have possessed for a long while. Finally, it may even get them out of the much-awaited refarming regime that the government is ostensibly committed to.