The telecom industry and their financial backers are worried that the raids by the Central Bureau of Investigation on the Department of Telecommunications, as well as on several telecom operators, would adversely affect the auctions scheduled for 14 January 2010 for third generation (3G) telecom services. The auctions for 3G and WIMAX (Worldwide Interoperability for Microwave Access) have been postponed several times. Interest in the 3G auctions will probably not be affected seriously since it is the existing 2G GSM and CDMA operators (Bharti Airtel, Vodafone, Idea Cellular, Tata Teleservices, Reliance Communication) who are the serious players, and there is not much scope for a foreign standalone 3G operator. However, the WIMAX auction would be adversely affected since it is multinationals like Intel, Google, Motorola, Huawei, etc. who would be the

key bidders.

Several political parties, especially the Bharatiya Janata Party, have called for the resignation of the Union Minister for Communications and Information Technology, Andimuthu Raja. Several telecom operators, including BSNL, have been accused of inflating the number of subscribers they have, in order to acquire scarce spectrum. Moreover, several telecom operators have been accused of passing off local loop revenues as long distance revenues, as well as off passing off value added services as internet operations, in order to save hundreds of crores in licence fees.

The main controversy arises due to the allocation of 2G telecom licences in January 2008, accompanied by 4.4 megahertz of start-up spectrum, on a First Come First Serve (FCFS) basis, at the same price of Rs 1,651 crores which prevailed in 2001. Raja argued that his decision to allot licences on the FCFS basis rather than holding auctions was based on the new National Telecom Policy of 1999. While it is true that telecom licences were awarded on the FCFS basis prior to 2003, a decision of the Union Cabinet of October 31 2003, when it introduced Unified Access Service Licences, had stated that all future licences should be auctioned. The Vajpayee cabinet had accepted TRAI’s recommendations on UASL. In Section 7.39 of its recommendations on UASL, TRAI had recommended: “As the existing players have to improve efficiency and utilisation of spectrum and if the government ensures availability of additional spectrum, then in the existing licensing regime, they may introduce additional players through a multi-stage bidding process as was followed for the fourth cellular operator.” This was accepted in toto by the Vajpayee Cabinet.

... contd.