The 2G Resale: A Few Roadblocks

After the successful auction of 3G licenses, the 2G spectrum auction has become the top priority for the department of telecommunications (DoT). The government seems to be implementing the same method of e-auctioning as adopted for 3G. Although the method brought out an appreciable price for 3G, there were some anomalies that need to be reviewed. An improvement in the deficiencies will benefit the exchequer and also improve telecom penetration. Now when the schedule is tight, the DoT may consider the following while finalizing the auctioneer for the 2G spectrum resale.

1 Pre-qualification Conducted Offline

Constraint: Applications for pre-qualification of bidders were not sent online. Moreover, they were sent by post to DoT, Sanchar Bhawan, 20 Ashoka Road, New Delhi.
Suggestion: As per CVC's and DIT's guidelines for e-tendering/e-procurement, the auctioneer should be able to electronically facilitate the pre-qualification round from the same portal. The same practice should be adopted in 2G e-auctioning also. "The pre-qualification part of the proposed 2G auction sale should also be handled through the e-tendering methodology, as even e-tendering is now being made mandatory by the government for all tenders above `10 lakhs in value," says Jitendra Kohli, a pioneer and expert in the area of e-procurement and e-auction.

2 Confidential Info Given to Third Party

Constraint: "..all confidential information contained within the Electronic Auction System will be accessible only to staff at DotEcon for the purposes of ensuring the smooth..." - As given in Notice Inviting Applications dt. February 25, 2010 by the department of telecommunications (DoT). The confidential information was handed over to DotEcon (a London-based consultant) who was an advisor to execute the 3G e-auction. The prerequisite can be irksome as the information can be easily exchanged without any monitoring.
Suggestion: Government officials should be effectively trained for conducting online auctions so as to not to remain dependent on advisors and not give out any information to the third/private party.

3 Security Not Prioritized

Constraint: In the latest RFP issued by DoT, security has been given the least weightage. 'E-security aspects in design and conduct of the auction' remain to be only 10% of the total parameters in the bid.
Suggestion: Other than focusing on reserve price, the Trai and Telecom Commission should also give a right of way to the security concerns, as the auctioning process involves third party as a consultant and huge money flows in by the bidders.

4 Third Party Audit Not Conducted

Constraint: According to a report in The Hindu dated April 14, 2010, "CVC had suggested that the DoT should conduct a third-party audit on the auction process to ensure transparency in compliance with the Commission's guidelines for e-commerce platforms. However, the DoT has taken a view that such an audit was not mandatory."
Suggestion: E-auction, as in case of spectrum sale, also involves lakhs of crores and is in the same generic category as e-tendering and e-procurement; it is therefore logical that e-auction systems should also be similarly certified and audited.

5 Multi-round Process: Best Price Not Extracted

Constraint: In the '3G Spectrum Auction' process, price enhancement in any given round was dependent only on acceptance by bidders of the Auctioneer's 'Reserved-Price'. In effect, this may not extract the best price from the bidders.
Suggestion: The methodology should have an element of 'Competitive Bidding' added in each round of the e-auction process. This will eliminate, or drastically reduce, the large number of auction rounds and will extract the best market driven price.