The 2G auction fiasco was a foretold story. The Government Spokesperson has rightfully poked the CAG and has also placed the failure squarely on the table of the Regulator – The Telecom Regulatory Authority of India (TRAI). But what went wrong?
The media Frenzy
The CAG’s note on 2G spectrum allotment put the loss to the exchequer at $35 billion creating a furore – vitiating the political climate in the country and causing a great deal of frenzy amongst a media that was hungry for TRP ratings.
An unfortunate story of one of the operators being forced to sell to a Malaysian Player by actions of omission and commission by the then Telecom Minister got mixed into the works and a number of individuals, including some respectable people, were taken into custody pending investigation.
The media, the Arab Summer of discontent having caught their fancy, started lapping this all up and started creating frenzy. Anti-graft protestors and NGOs now aspire to run the country, thanks to all the media hype!
A defensive approach
Given all these threats, the Government was not in a position to take a decision in the interest of the industry. It was easier for them to set up the task for failure and then play the pathetic game of “I told you so!” rather than take the risk of taking a decision one way or the other.
They went into a shell and, when they did act, let the process slip to a level where they could turn on righteous indignation – Eric Berne would be glad to include this in his next edition of “Games People Play”.
The role of Regulator
The role of the Regulator is that of ensuring that the industry operates within parameters that would be considered “fair” to all stakeholders. The process of operation of Regulators across the world is one of consultation with all parties and, in our country, even an ordinary citizen has a right to make a representation. The combined inputs from consultations, the law of the land and the Government’s stated policies determine the decisions made and enforced by the Regulator.
The political environment, activism and media frenzy in the country had reached a level where the Regulator must have felt like what is shown in the photo below while setting the reserve price for the 2G spectrum which was auctioned as per Supreme Court directive.
It was easy for them to set an unreasonable price expectation and let the process fail!
Lobbying by Industry
With leaked phone taps of conversation by lobbyists, Chief Executives held in detention and shrill sloganeering, lobbying by industry has been painted as a bad picture.
People in the industry live their businesses day in and out. No external party could claim to have the insights that they have about current state of affairs in their industry. It is hence, important to allow lobbying to gain this insight.
In the current environment, was this possible?
Economics at work
I am not an expert in economics – definitely not as much as the learned people who have pushed the cause of auctioning 2G spectrum. But the following questions beg attention:
- Spectrum is limited, so too are the companies that are bidding. I am sure that the laws of supply and demand would be different under these circumstances.
- 2G is a fundamental service – one which the common man uses the most. How is it in national interest to make the cost of these services go up – was a case ever built up about profiteering by telcos who charge in paisas after investing in billions of ruppes?
- Was there a scenario analysis conducted about the possibility of the auction not meeting the reserve prices and no-bid by anyone?
In my view, the entire fiasco is because of all the above reasons. The media, accountants, NGOs and lawyers assumed the mantle of business leaders, created conspiracy theories and ran the Government and the Regulator into a rut where self-preservation became more important for decision makers.
The Arab Summer is good for Arabs; why should India try to copy it?
Postscript: Three of the operators are required to pay lesser than what they had originally paid-up. This is because of a decision by the Finance Ministry to allow an option to pay in instalments. This would require the Government to refund. The conspiracy theorists can start off questioning the Finance Ministry’s decision too. Making the payment options easier is a way to ensure that people bid bold prices (subject to their own business cases) which was an expectation. So, in my view, it will be unjustified to pick this point.