DoT may auction BWA spectrum after getting back BSNL airwaves

BSNL had registered a loss of over Rs6,000 crore for 2010-11, mainly due to high staff cost and payments made for acquiring 3G and BWA spectrum. Saddled with losses, BSNL had recently written a letter to the DoT offering to return of BWA spectrum in all 22 circles

New Delhi” The telecom ministry is likely to auction one slot of broadband wireless access (BWA) licence spectrum on pan-India basis after getting back airwaves from the state-run PSU BSNL (Bharat Sanchar Nigam), reports PTI.

The Department of Telecom (DoT) has given an in-principle approval to the proposal of BSNL to surrender its BWA licence in nine circles, out of the total 22 service areas for which the telecom operator had paid over Rs8,500 crore last year, reports PTI.

“After taking BWA spectrum from the BSNL, the government will have airwaves on pan-India basis as the department is already having the spectrum in several circles.

So, the government will auction it and whatever the amount they will get, BSNL is likely to get back around 80% to 90% of what it had paid last year, about Rs6,700 crore," sources in the know said.

At present in BWA, 20 Mhz of spectrum is available but not on pan-India basis. The telecom ministry is already in talks with the finance ministry to undertake auction of the airwaves.

According to reports, sale of one block of BWA spectrum could fetch about Rs13,000 crore, a move that would help the government in meeting the fiscal deficit target Rs40,000 crore.

The finance ministry had written twice to the DoT to immediately auction wireless broadband spectrum in order raise funds. Last year, auction of third generation (3G) and BWA spectrum had earned a whopping Rs1.06 lakh crore to the government.

The BWA auction was for two slots of 20 MHz each of pan-India spectrum. The government had raised Rs67,719 crore from 3G spectrum auction while it got Rs39,000 crore through BWA auction.

BSNL had registered a loss of over Rs6,000 crore for 2010-11, mainly due to high staff cost and payments made for acquiring 3G and BWA spectrum.

BSNL was allotted non-standardised band of BWA spectrum for 21 circles. The PSU offers telecom services in all areas of the country, barring Delhi and Mumbai.

Saddled with losses, BSNL had recently written a letter to the DoT offering to return of BWA spectrum in all 22 circles.

The letter had stated BSNL was allotted non-standardised band of BWA and could not be put in use and hence the company wanted to return the spectrum.

Earlier, BSNL had floated a tender to allow franchisees to run services on revenue share basis, which came under DoT scanner due to irregularities found in allotting BSNL’s WiMAX franchisee.

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Reform Stimulus

Reforming laws and policies could be an enormous stimulus for any economy, but changing them is almost impossible. Every law creates systems of economic winners and losers. So without real reform, a global recovery is nowhere in sight

The world is moving slowly into another recession. Europe is going through a sovereign debt inspired credit crunch. India’s industrial production dropped 5.1% in October from a year earlier. The Guangzhou government’s land sales program has seized up decreasing the province revenues by 70%. The United States has a massive deficit and political grid lock.

To resolve these issues the world has resorted to all sorts of economic solutions. In China they tried fiscal stimulus through massive bank loans, but only ended up with inflation and a housing bubble. The US tried quantitative easing, but only helped to create a commodities bubble while devastating savers and pensioners. The EU now is trying fiscal discipline, which will surely result in a recession. They have tried everything except the one thing that actually would work and cost nothing. They can’t resort to this simple solution because of politics. Printing money does not have a political downside. Real reform does.

Business cycles will always be with us, but economies are more resilient if their legal systems, their legal infrastructures, are economically efficient. In short their systems must make business easier. For example if you look at the World Bank’s Doing Business rankings, the economies that have survived and even prospered during this recession are the same economies that rank very high in the index. They include Singapore, Korea, Hong Kong, Norway, Sweden, Denmark and Canada. The US has a good ranking and has definitely had its problems, but nowhere near the issues of other many other countries. Two other countries near the top also help prove the thesis, Ireland and Estonia. Both countries recently were considered economic basket cases. Yet both countries have been able to go through painful ‘internal devaluations’ and are growing. In fact Estonia’s growth in the first quarter of the year was a blistering 8.5%, the highest in the European Union.    

Despite their devastating effects countries all over the world continue with disastrous policies. Subsidies are one of the worst. Nigeria is one of the world’s largest oil producers. Not surprisingly with its vast mineral wealth it subsidizes petroleum, which was meant to help the poor. Yet the cost of the subsidy is so great that it almost exceeds the oil export revenues. It also has created enormous inefficiencies and corruption. In the US a subsidy for ethanol has made it this year the cheapest motor fuel, but at the expense of higher food prices.

Laws in many countries that are supposed to protect labour have resulted in coddling some workers and insuring that others cannot get jobs. The labour market in Spain has become a two-tiered system. Older workers with jobs are protected from layoffs and have good benefits. Meanwhile, it is so difficult to hire and fire workers that the unemployment rate among younger workers tops 40%.

Brazil has a labour code taken from Mussolini’s Italy. It is just about as devastating. Getting rid of a worker without “just cause” can result in a fine of 4% of the total amount the worker has ever earned. The employee’s incompetence or the bankruptcy of the company are not considered just cause. Like Brazil, India’s infamous inflexible labour codes have made it impossible to take advantage of its inexpensive labour.

Revenue for the state usually in the form of taxes is a necessity, but how it is collected makes a big difference. In China since all land belongs to the state, so with a few experimental exceptions, there aren’t any real estate taxes. This makes the governments dependent on sales of land (actually sale of long term leases of up to 70 years) to developers for up to 40% of their revenue. Local governments also use the land as collateral for loans from state-owned banks. This system worked well as long as the money kept flowing and the prices kept rising. When Beijing restricted real estate sales and tightened lending, the real estate bubble started to collapse with potentially devastating consequences.

Subsidies, inflexible labour markets, and poorly designed tax codes are just the tip of an enormous iceberg. To these problems you could add protectionist policies, failure to protect property rights especially intellectual property rights, slow or corrupt judiciary and transparent markets.

All of these problems have to do with laws. Laws can be changed at no cost. Reforming these laws and policies could be an enormous stimulus for any economy, but changing them is almost impossible. Every law creates systems of economic winners and losers. As Mancur Olson free rider thesis predicted, those who benefit are willing to fight tooth and nail to protect what they consider their property interests even if it means economic suffering for all of their fellow citizens. So without real reform, a global recovery is nowhere in sight.

(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected]).

 

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North Korean leader Kim Jong Il dies

Kim Jong Il inherited power after his father, revered North Korean founder Kim Il Sung, died in 1994. He had been groomed for 20 years to lead the communist nation founded by his guerrilla fighter-turned-politician father and built according to the principle of “juche” or self-reliance

Seoul: Kim Jong Il, North Korea’s mercurial and enigmatic leader whose iron rule and nuclear ambitions dominated world security fears for more than a decade, has died. He was 69, reports PTI.

Mr Kim’s death 17 years after he inherited power from his father was announced today by the state television from the North Korean capital, Pyongyang.

The country’s “Dear Leader” reputed to have had a taste for cigars, cognac and gourmet cuisine was believed to have had diabetes and heart disease.

North Korea has been grooming Kim’s third son to take over power from his father in the impoverished nation that celebrates the ruling family with an intense cult of personality.

South Korea put its military on “high alert” and president Lee Myung-bak convened a national security council meeting after the news of Kim’s death.

In a “special broadcast” today, state media said Mr Kim died of a heart ailment on a train due to a “great mental and physical strain” on Saturday during a “high intensity field inspection.”

Mr Kim is believed to have suffered a stroke in 2008 but he had appeared relatively vigorous in photos and video from recent trips to China and Russia and in numerous trips around the country carefully documented by state media.

Kim Jong Il inherited power after his father, revered North Korean founder Kim Il Sung, died in 1994. He had been groomed for 20 years to lead the communist nation founded by his guerrilla fighter-turned-politician father and built according to the principle of “juche” or self-reliance.

In September 2010, Kim Jong Il unveiled his third son, the twenty-something Kim Jong Un, as his successor, putting him in high-ranking posts.

Even with a successor, there had been some fear among North Korean observers of a behind-the-scenes power struggle or nuclear instability upon the elder Kim’s death.

Few firm facts are available when it comes to North Korea, one of the most isolated countries in the world, and not much is clear about the man known as the “Dear Leader”.

North Korean legend has it that Mr Kim was born on Mount Paekdu, one of Korea’s most cherished sites, in 1942, a birth heralded in the heavens by a pair of rainbows and a brilliant new star. Soviet records, however, indicate he was born in Siberia, in 1941.

Kim Jong Il, a graduate of Pyongyang’s Kim Il Sung University, was 33 when his father anointed him his eventual successor. Kim Jong Il took over after his father died in 1994, eventually taking the posts of chairman of the National Defence Commission, commander of the Korean People’s Army and head of the ruling Worker’s Party while his father remained as North Korea’s “eternal president”.

He faithfully carried out his father's policy of “military first”, devoting much of the country’s scarce resources to its troops even as his people suffered from a prolonged famine and built the world's fifth-largest military.

Mr Kim also sought to build up the country’s nuclear arms arsenal, which culminated in North Korea’s first nuclear test explosion, an underground blast conducted in October 2006.

Mr Kim was an enigmatic leader. But defectors from North Korea describe him as an eloquent and tireless orator.

Mr Kim cut a distinctive, if oft ridiculed, figure. Short and pudgy at 5-foot-3, he wore platform shoes and sported a permed bouffant.

Kim’s marital status wasn't clear but he is believed to have married once and had at least three other companions. He had at least three sons with two women, as well as a daughter by a third.

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