Not something you\’d expect to see here I know. But along with his decision not to join the euro he did make one other good decision. The 3G auction for spectrum….so good in fact that India is following in his footsteps.
And the cost of its India expedition is set to increase still further as the price of rights to third generation (3G) mobile spectrum spirals. The current price for country-wide 3G spectrum stands at $3.6bn on the auction\’s 33rd day, compared to analysts\’ predictions of $2.5bn. However, there are hopes that the price may not rise much higher as the daily increase in bids has slowed from $140m a day to about $80m.
Vodaphone is of course whining:
\”Spectrum should not be seen as something that governments must use to squeeze money out of operators,\” he said. \”Spectrum is the fuel to power future economic development. We need a different mindset – instead of seeing spectrum as an opportunity to squeeze it is an opportunity to invest.
\”Every time you take money out of investment [by discouraging companies from bidding from investing in the country] you are taking money out of future economic growth.\”
That is what is known as talking your own book….or alternatively, as \”bollocks\”. Spectrum is a limited natural resource, as much as land or oil or coal is. there are therefore Ricardian rents available to those who own them. And the correct response to the allocation of such rents is to tax them away: people make a profit by using the scarce resource, certainly, but not from ownership of them.
It\’s not going to make any difference to hte price that companies charge anyway: they\’ll still charge the maximum the market will bear. The auction of the spectrum creates tax revenues and thus other tax rates can be lower for whatever level of services is provided.
Brown was right to do it in the UK and the Indians are right to do it now….perhaps the first adoption of a UK lefty economic policy that has actually benefitted that poor benighted country. Their earlier adoption of the wilder shores of Fabianism and the dotty theories of the Webbs has certainly done them no favours.