Don't let Economics override Technology

Middle path may be good for spiritual sake (heard of Raja-rishi model?), but when it comes to regulatory policies, it is not just frivolous but dangerous too. One such policy now is the government decision to have a combo of entry fee-revenue share model for 3G spectrum allocation. The rationale seems to be having an entry fee small enough for encouraging competition but high enough to avoid small inefficient players throwing their hats.

The underlying premise for entry fee is this- spectrum is scarce resource, so the government should give a strong dis-incentive for inefficient usage. So far so good, but something seems amiss- economics seems to have overridden technology.

Technology is fast making spectrum a scarce to an increasingly abundant resource. You may think that radio signals kind of bump into each other, so the electromagnetic spectrum has limits. Actually, it’s not the transmission that poses problems (though signals get weakened with distance), but the receivers aren’t sophisticated enough to differentiate one signal from other.  This problem is getting fixed.

Wide band spectrum and spread spectrum (used in CDMA) is just one way of circumventing it- instead of confining the signal to a narrow band, spread the signal over broadband so that it mimics a guassian random signal, and have sophisticated error correcting receivers to decode them.

One of the emerging technologies is mesh networks. In this, the signal is passed through a network of receivers which receives the signal and passes them to adjacent receiver, giving the counter-intuitive result that the channel capacity increases with the number of receivers.

One more technology involves having cognitive ‘smart ‘radios having super-computing chips to receive the signals, which dramatically increases the signal capacity, as it decodes spectrally-close signals.

These and more are evolving, which will make the existing technologies obsolete. An entry fee may bring small fortune for the government, but decreases the Indian companies’ ability to adopt newer technologies when they arise. Revenue share model, where companies pay as they use would have been more appropriate.

Long live the middle path!