[Answered] What are the limitations of auctions as a method of spectrum allocation? How does the draft Indian Telecommunication Bill, 2022, try to bring reforms to this area?

Introduction: Contextual introduction.
Body: Write some limitations of auctions as a method of spectrum allocation.  Also explain how the draft Indian Telecommunication Bill, 2022, does tries to bring reforms to this area?
Conclusion: Write a way forward.

A spectrum auction is a process whereby a government uses an auction system to sell the rights to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources. India has a billion plus mobile subscribers, 800 million internet users and the second-largest telecommunications network in the world.

Limitations of auctions as a method of spectrum allocation:

  • High Reserve Price: The government before conducting auctions, reserves a price for a spectrum. A higher reserve price, so spectrum attracts only fewer buyers.
  • Obsolete Auction Format:The government has not updated the spectrum auction format for a long time. Due to which a persistent fall in the number of bidders is witnessed.
  • Regulatory Framework: The poor framework has resulted in the forceful exit of various players from the telecom sector. This automatically impacts the potential of spectrum auction as more bidders mean better prices.
  • High Upfront Fees: High fees place a greater financial burden on telecoms which impairs their functioning.
  • The cost of spectrum is same in urban as well as in remote areas. Since operators predominantly cater to urban markets, the spectrum in remote areas remains under- or un-utilised due to a lack of investment in allied infrastructure.
  • These auctions tried to maximize government revenues instead of maximising development by bringing in greater benefits to citizens.

The Draft Telecommunication Bill, 2022 seeks to replace the colonial era legislation that regulated the sector, the Indian Telegraph Act, 1885. It tries to bring reforms to this area in following manner:

  • Clarity on Spectrum Assignment: The Bill reaffirms the government’s authority to assign spectrum, with or without auction, and declares common good and access to telecom services as the objective for spectrum assignment.
  • It supplement auctions by “administrative allocation, and any other manner as may be prescribed” as stated in the bill in the short-term and eventually do away with auctions altogether.
  • It paves the way for sharing, trading, leasing, surrender of spectrum assigned, and a process to return unutilised spectrum.
  • It also proposes to ensure taking back of spectrum if the telecom provider goes through bankruptcy or insolvency.

Spectrum is a perishable scarce resource and loses its value if left unused. It must be recognised that spectrum needs to be combined with other infrastructure to enable service delivery.

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