Wednesday, December 08, 2010
Auctions , Governance & Transparancy : The devil is in the detail
http://mytoday.com/u/1518
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'Governance and transparancy : the devil in the details : auctions are by no means a panacea for achieving efficiency.
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For a nation that has no tradition of auctioning scarce public resources to private-sector organizations, the recent outcry over the 2G spectrum scandal is both intriguing and encouraging.
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If the slivers of airwaves providing 3G mobile services -- to a young and mobile population in an economy that's growing at close to double-digit rates -- can ring up more than US$22 billion for the country's exchequer, one wonders about the fair economic value for all other air, water and land resources that belonged to you-the-nation, but was allocated to you-name-it company for a you-name-it purpose using -- to put it kindly -- less than transparent and economically efficient mechanisms!
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In the case of mobile spectrum, the resource allocation mechanism needs to be efficient in two ways. First, it should be able to identify the operators that are the most likely to roll out mobile services successfully to as a much of the population as possible in the shortest possible time, with great enough profitability to ensure the service's sustainability -- after all, there's little value in bankrupting operators while maximizing spectrum prices.
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If mobile spectrum licenses on a first-come, first-served basis are allocated to, say, construction companies that have no prior expertise in rolling out such services and they then hoard spectrum, the nation fails to roll out its critical information infrastructure to large sections of the population. This is a huge social loss !
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For example, a farmer might not be able to get a critical weather forecast before fertilizing a field, which might subsequently be washed away by unseasonal rain, or taxi drivers might not be able to pick up a few extra fares if their dispatchers are operating inefficiently.
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one step forward to enforce the welfare-enhancing rollout could be by mandating a use-it-or-lose-it rule -- that is, insist that all allocated spectrum is used and monitor usage based on a simple, observable measure. Meanwhile, a secondary market could be facilitated for reallocation, giving operators with capital access to spectrum, and perhaps recovering some of the money the government left on the table.
---------------------------------------------------------------------------------------------
The potential for efficient mechanisms in India seems immense, even if they seem complicated from afar.
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-------------------------------------------
'Governance and transparancy : the devil in the details : auctions are by no means a panacea for achieving efficiency.
---------------------------------------------------------------------------------------
For a nation that has no tradition of auctioning scarce public resources to private-sector organizations, the recent outcry over the 2G spectrum scandal is both intriguing and encouraging.
--------------------------------------------
If the slivers of airwaves providing 3G mobile services -- to a young and mobile population in an economy that's growing at close to double-digit rates -- can ring up more than US$22 billion for the country's exchequer, one wonders about the fair economic value for all other air, water and land resources that belonged to you-the-nation, but was allocated to you-name-it company for a you-name-it purpose using -- to put it kindly -- less than transparent and economically efficient mechanisms!
----------------------------------------
In the case of mobile spectrum, the resource allocation mechanism needs to be efficient in two ways. First, it should be able to identify the operators that are the most likely to roll out mobile services successfully to as a much of the population as possible in the shortest possible time, with great enough profitability to ensure the service's sustainability -- after all, there's little value in bankrupting operators while maximizing spectrum prices.
----------------------------------------------------------------------
If mobile spectrum licenses on a first-come, first-served basis are allocated to, say, construction companies that have no prior expertise in rolling out such services and they then hoard spectrum, the nation fails to roll out its critical information infrastructure to large sections of the population. This is a huge social loss !
--------------------------------------------------------------------------------------------
For example, a farmer might not be able to get a critical weather forecast before fertilizing a field, which might subsequently be washed away by unseasonal rain, or taxi drivers might not be able to pick up a few extra fares if their dispatchers are operating inefficiently.
------------------------------------------------------------------------------------
one step forward to enforce the welfare-enhancing rollout could be by mandating a use-it-or-lose-it rule -- that is, insist that all allocated spectrum is used and monitor usage based on a simple, observable measure. Meanwhile, a secondary market could be facilitated for reallocation, giving operators with capital access to spectrum, and perhaps recovering some of the money the government left on the table.
---------------------------------------------------------------------------------------------
The potential for efficient mechanisms in India seems immense, even if they seem complicated from afar.
---------------------------------------------------------------------------
