Day after SC verdict, TRAI releases paper on 2G spectrum by auction

A day after the Supreme Court, in a landmark verdict, quashed all the 122 licences issued by then Communications Minister A Raja on or after January 10, 2008 and the subsequent allocation of 2G spectrum to the licencees, holding them illegal, the Telecom Regulatory Authority of India (TRAI) today released a pre-consultation paper on “Allocation of Spectrum in 2G Band in 22 Service Areas by Auction”.

 

TRAI has invited comments from all stakeholders by February 15 and said that, in view of the time-bond nature of the exercise, no extension of time would be given.

 

The apex court, in its judgement, directed TRAI to make fresh recommendations for grant of licence and allocation of spectrum in 2G band in 22 Service Areas by auction, as was done for allocation of spectrum in 3G band.

 

A press release from TRAI said that, on the issue of grant of licences, the regular had, in its recommendation on “Spectrum Management and Licensing Framework” dated 11th May 2010,  already recommended that all future licences should be Unified Licences and that spectrum be delinked from the licence.

 

“Draft Guidelines for Unified Licensing Regime” were also placed on TRAI website www.trai.gov.in on 16th January 2012 for comments of the stakeholders, it said.

 

On the issue of “Allocation of spectrum in 2G band in 22 Service Areas by auction”, stakeholders have been requested to send their comments/suggestions on the issues involved. 

 

Comments may be sent, preferably in electronic form to Sudhir Gupta, Pr. Advisor (MS), TRAI, who may be contacted at Tel No. +91-11-23220018, Fax No. +91-11-23212014 or email at pradvmn@trai.gov.in, the release added.

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A two-judge bench comprising Justices G S Singhvi and A K Ganguly, which gave the verdict, said this direction shall become operative after four months.

 

It said the Centre shall consider the recommendations of TRAI and take appropriate decision within the next one month and fresh licences be granted by auction.

 

The court imposed costs of Rs 5 crore on Etisalat DB Telecom Pvt Ltd (Swan Telecom Ltd), Unitech Wireless Group and Tata Teleservices Ltd, who it said had been "benefited at the cost of public exchequer" by a wholly arbitrary and unconstitutional action taken by the Department of Telecom (DoT) for grant of Universal Access Service (UAS) licences and allocation of spectrum in 2G band and who offloaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity".

 

It asked Loop Telecom Pvt Ltd, S-Tel, Allianz Infratech and Sistema Shyam Tele Services Ltd, who too, it said, had benefited by the decision, to pay costs of Rs 50 lakhs each.

 

The court did not impose any cost on the respondents who had submitted their applications in 2004 and 2006 and whose applications were kept pending till 2007.

 

The court held that the State is the legal owner of natural resources, such as spectrum, as a trustee of the people and, although it is empowered to distribute the same, the process of distribution must be guided by the Constitutional principles, including the doctrine of equality and larger public good.

 

The bench found fault with TRAI for recommending allocation of 2G spectrum on the basis of 2001 price by invoking the theory of level playing field, although by its own assessment the existing sytem of spectrum allocation criteria, pricing methodology and the management system suffered from a number of deficiencies which needed to be addressed.

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"...yet it decided to recommend the allocation of spectrm at the price determined in 2001. All this was done in the name of growth, affordability, penetration of wireless services in semi-urban and rural areas, etc. Unfortunately, while doing so, TRAI completely overlooked that one of the main objectives of the National Telecom Policy (NTP) 1999 was that spectrum should be utilised efficiently, economically, rationally and optimally and there should be a transparent process of allocation of frequency spectrum as also the fact that in terms of the decision taken by the Council of Ministers in 2003 to approve the recommendations of the Group of Ministers the DoT and Ministry of Finance were required to discuss and finalise the spectrum pricing formula.

 

"To say the least, the entire approach adopted by TRAI was lopsided and contrary to the decision taken by the Council of Ministers and its recommendations became a handle for the then the Minister of C&IT and the officers of the DoT who virtually gifted away the important national asset at throw away prices by willfully ignoring the concerns raised from various

quarters including the Prime Minister, Ministry of Finance and also some of its own officers. This becomes clear from the fact that soon after obtaining the licences, some of the beneficiaries off-loaded their stakes to others, in the name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits. We have no doubt that if the method of auction had been adopted for grant of licence which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores," it said.

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The court said that, even though the scope of judicial review in such matters was extremely limited, it had no hesitation to record a finding that the recommendations made by TRAI were flawed in many respects and implementation thereof by the DoT resulted in gross violation of NPT 1999 and the decision taken by the Council of Ministers on 31.10.2003.

 

It said that, being an expert body, it was incumbent upon TRAI to make suitable recommendations on pricing of spectrum in 2G band. "We do not find merit in the reasoning of TRAI that the consideration of maintaining a level playing field prevented a realistic reassessment of the entry fee," it said.

 

The court said there was a fundamental flaw in the first-come-first-served policy inasmuch as it involved an element of pure chance or accident.

 

"In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a licence or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim," it observed.

 

"When it comes to alienation of scarce natural resources like spectrum etc., it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. In our view, a duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process," it said.

 

Meanwhile, Sistema JSFC, 21 of whose 22 licences held by Sistema Syam TeleServices Ltd are affected by the Supreme Court's order, said today that it was very disappointed by the decision.

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"The order was issued on the grounds that these licenses were not granted in accordance with required procedures by the Department of Telecommunication. The court has further directed the Telecom Regulatory Authority of India (TRAI), India’s top telecom regulatory body, to make fresh recommendations on the grant of 2G licenses and the re-allocation of spectrum via auction within 4 months by the Department of Telecom (DOT).

 

"Sistema by way of its investments in SSTL has fully demonstrated its commitment to its Indian operations and is very disappointed by the Supreme Court’s decision.  In essence, Sistema and SSTL are being penalized for acting in good faith and in reliance on the  appropriateness of the procedures established by India’s telecommunications authorities.  Sistema therefore looks forward to a clear, transparent, and equitable policy decision on these matters by the Indian government.

 

"To safeguard its interests, Sistema and SSTL will contest this order by pursuing all available legal remedies.  In the meantime, Indian operations will remain business as usual for SSTL, a national telecom operator serving more than 15 million customers, employing over 3500 employees, and with investments of over $ 2.5 billion," the statement added.

 

Another of the affected companies, Emirates Telecommunications Corporation (Etisalat) of the United Arab Emirates (UAE), said that it would work closely with Etisalat DB's management and legal consel to understand the judgement, its ramifications on the operations of EDB, particularly its customers and employees, as well as its right to a review of the Supreme Court’s decision. 

 

"The  Supreme Court decision relates to events that occurred in January 2008, well before December 2008 when Etisalat invested in Swan.  Etisalat has no knowledge of what occurred in the license application process for Swan, far less did it have any involvement.  The license applications were entirely conducted by the promoters and their associates who subsequently marketed the Swan investment opportunity to Etisalat through a well known international investment bank," it said in a statement.

 

"Etisalat has an excellent record of abiding by all of the laws and regulations in the 17 countries across Asia, the Middle East and Africa where it operates and continues to move forward with its growth strategy.  We remain committed to becoming one of the world’s top 10 telecommunications companies," the statement added.

 

NNN

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