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2G spectrum allocation in need of more reforms
If spectrum trading is capable of eliminating loopholes existing in the system, planners should revisit this area and do everything to introduce it in the best interest of the nation.

SO DISAPPOINTING was the recently-held 2G auction process that Planning Commission head Montek Singh Ahluwalia went on record saying that it was a mistake to fix a high reserved price for the 2G spectrum during the auction as it kept leading telecom companies away from the bidding process.

Comptroller & Auditor General had raised issues on the allocation of 2G spectrum, stating that the government could have mopped up huge amounts of money if they had done it properly, referring to the absence of bidding.

Mr Ahluwalia said that the government needs to take a relook at the reserve price when it goes for the next auction for the unsold spectrum during the current financial year.

One of the main objectives of doing such exercise was to ensure that all the stakeholders get a feel of win-win situation like scenario. Therefore, if anything is missing anywhere, it should be pointed out before hand. While laying down policies, enough care should be taken to ensure that loopholes existing are plugged to the maximum.

Now Mr Ahluwalia has again hinted correctly that government has to relook at the reserve price but again the question is on what basis? He has also hinted that spectrum trading would have taken care of this anomaly to a large extent but India may or may not prepared for this. The question is why Let's try to understand the meaning of spectrum trading.

Spectrum trading permits the purchaser to change the use to which the spectrum was initially put while maintaining the right to use. Spectrum trading, viewed by many as the key step to be taken in the reform of spectrum management regulatory price, is capable of unlocking the potential of new technologies and eliminating artificial scarcities of spectrum which find expression in flated prices for spectrum-using services.

In the traditional administrative approach to assignment and authorization system, spectrum is first allocated specified uses and then assigned to particular firms or public organisations that carry out the authorized use according to specific obligations as laid down in a licence or permit.

Efficiency of spectrum would go manifiold with spectrum trading; in principle spectrum trading introduction should enhance efficiency because it ensures that users face the opportunity cost of using spectrum not just at the time of assignment but throughout the lifetime of their right to use. Put differently, whenever there is an alternative use or user for existing spectrum that offers a greater return than the existing one, the present occupant will have a financial incentive either to change its use or to sell spectrum. This, in turn, creates incentives for all parties involved in the use of spectrum - not just sellers but also buyers and equipment manufacturers - to continually monitor opportunities for better use of spectrum.

Therefore, if spectrum trading is capable of eliminating many of the loopholes existing in the system, planners should revisit this area and do everything to introduce it in the best interest of the nation. 2G spectrum (for that matter any other spectrum) should be done with more reforms in the future.

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