3g Spectrum Auction in India
SPECIAL ARTICLE
3G Spectrum Auctions in India: A Critical Appraisal
Alok Kumar
That auction should be a preferred route to allocate scarce resources such as spectrum is conditional upon getting the auction design right. We analyse the auction design employed in the spectrum allocation for third generation and broadband wireless access services, assessing its success on the parameters of revenue realisation, efficiency, post-auction market structure, and impact on consumers. While the auction has been successful in mobilising revenue for the government, and has created little adverse impact for the consumers by maintaining the level of competitiveness in the mobile services market, these gains seem to have been offset by the loss in efficiency as well as a higher complexity of bidding strategies. In making the Lowest Accepted Bid a preferred pricing rule, the government accorded primacy to revenue realisation over maximising allocational efficiencies. Thus we propose alternative design elements which would have served the stated objective of enhancing allocational efficiencies better.
1 Introduction n May 2010, the government concluded its auctions to award licences for the spectrum enabling roll-out of the third generation (3G) and broadband wireless access (BWA) services in the 22 telecom circles across the country. The use of auctions to enhance the allocative efficiency of a scarce resource such as telecom spectrum is indisputable. However, the desired efficiencies cannot be realised unless the auction design and spectrum management policies are both optimal. The Indian market for mobile telecom services is one of the fastest growing in the world. Prior to the conduct of the 3G and BWA auctions, the national subscriber base for mobile telephone services was reported to be 584 million (TRAI 2010) and had been growing at an astounding rate of over 17 million new subscribers every month. Simultaneously, the telecom policy has engendered strong competition
3G Spectrum Auctions in India: A Critical Appraisal
Alok Kumar
That auction should be a preferred route to allocate scarce resources such as spectrum is conditional upon getting the auction design right. We analyse the auction design employed in the spectrum allocation for third generation and broadband wireless access services, assessing its success on the parameters of revenue realisation, efficiency, post-auction market structure, and impact on consumers. While the auction has been successful in mobilising revenue for the government, and has created little adverse impact for the consumers by maintaining the level of competitiveness in the mobile services market, these gains seem to have been offset by the loss in efficiency as well as a higher complexity of bidding strategies. In making the Lowest Accepted Bid a preferred pricing rule, the government accorded primacy to revenue realisation over maximising allocational efficiencies. Thus we propose alternative design elements which would have served the stated objective of enhancing allocational efficiencies better.
1 Introduction n May 2010, the government concluded its auctions to award licences for the spectrum enabling roll-out of the third generation (3G) and broadband wireless access (BWA) services in the 22 telecom circles across the country. The use of auctions to enhance the allocative efficiency of a scarce resource such as telecom spectrum is indisputable. However, the desired efficiencies cannot be realised unless the auction design and spectrum management policies are both optimal. The Indian market for mobile telecom services is one of the fastest growing in the world. Prior to the conduct of the 3G and BWA auctions, the national subscriber base for mobile telephone services was reported to be 584 million (TRAI 2010) and had been growing at an astounding rate of over 17 million new subscribers every month. Simultaneously, the telecom policy has engendered strong competition