Why cancel 3G roaming pacts

The government is wrong to adopt narrow technical norms to cancel the 3G intra-circle roaming pacts among Airtel, Vodafone and Idea. When 3G spectrum was auctioned last year, no company could win the rights to operate in every circle. So, all agreed that they would share some of the others’ radio waves in circles where they didn’t own a slice of spectrum. The government was asked and it approved of this arrangement at the time. Today, under a different minister, it would be wrong for the government to revoke spectrum sharing, even if on the advice of the law ministry and regulator Trai. The term intra-circle roaming is misleading. Roaming happens when a customer registered in one circle travels in another, possibly with the same operator; in this case, what happens is that a player, say Airtel, with no 3G spectrum in a particular circle makes use of, say, Vodafone’s spectrum to acquire customers in that circle. The government’s argument in this case is that since in that circle, Airtel did not pay for any 3G spectrum, it should not be allowed to acquire customers in that circle. It says that these arrangements are causing a revenue loss to the government, because in that circle, Airtel paid no money to acquire spectrum.

This argument is specious, because the government’s own auction rules limited the number of players in each circle to two. State-owned BSNL was given 3G spectrum for free earlier, and it was the first player to start intracircle roaming. By limiting the number of players in each circle, the government created a scarcity and raised the price: the government raised nearly $13 billion from the 3G auction alone. The revenue loss it refers to now would easily be offset by the scarcity premium it has earned earlier. The revocation move will also aggravate the wasteful use of spectrum, a scarce natural resource. If one player has spare capacity to rent in one circle, it should be allowed to do so, thereby maximising usage. Can the government afford to return the $13 billion if 3G players surrender the spectrum they bought earlier? It’s a pity that fear of ill-informed criticism forces the government to embrace suboptimal, anti-consumer policy.