Do you recall when the FCC - the Federal Communications Commission began auctioning off wireless frequencies to the private sector? This was the heyday for venture capital firms, investment banks, and large corporations all putting up millions of dollars to secure frequencies for their future wireless cell phone exploits.
Many of the companies had not even set up yet, but they had rounded up investment dollars to participate in the auctions.
Often the frequencies were purchased for $20-$60 per capita in various regions, an extremely high number, meaning the return on investment would not be likely, without a huge marketing effort and market share in the future.
Many of these companies didn't care because once they had the frequency they would turn around and sell it for a higher price to someone like Verizon, Sprint, AT&T, WorldCom, or other giant wireless telecommunication companies.
We all know what happened to that fiasco, and I also believe that this put off 3G wireless and all the current capabilities of the forthcoming 4G wireless for at least half a decade.
The telecommunication industry in the United States got absolutely slaughtered and large companies which wished to go from Internet and computer companies into the wireless sector could not get the frequencies they needed to do so, and the consumer in the end was damaged.
And if you will recall what followed was an incredible disaster in the telecommunication sector.
Many companies went bankrupt, and hundreds of thousands of people lost their jobs.
The federal government used that money to help pay off or pay down rather the national debt.
Yes, they raised a lot of money, by selling air or slivers of the frequency spectrum.
Today, we see the government of India doing the same thing.
In a recent article in the Wall Street Journal by Romit Guha and R.
Jai Krishna titled "3G Auction Is a Windfall for India - Intense Rivalry in Fast-Growing Market Drives up Prices, Raising $14.
6 Billion for Government," shows us that basically the same thing is happening all over again not in the United States this time but in a country which is actually living our tomorrow, half way around the world on the opposite time zone.
There have been several articles in Wharton Business School's online newsletter about this fast-growing sector in India.
After all, there are over 1 billion people in India and cell phone growth right now appears to show no limits with exponential growth behind it, and what appears to be the same going forward for almost as far as the eye can see, but this is of course what bubbles are made out of.
Yes, the government of India will make a ton of money, and yet that money has to be paid back with return on investment from those companies somehow.
This means they will charge the citizens and consumers more for the services to ensure they can make money.
This will drive up the cost of communication in India and put several of their strongest wireless cell phone companies and wireless data companies behind the eight ball when trying to produce shareholder's equity and quarterly profits.
My question is this; is India's move to auction off their frequency spectrum to wireless companies going to backfire on them just like it did in the United States? Is India building a wireless 3G sector bubble? And will it burst like it did in the US? Time will tell, but I worry when I see things like this, and you should too.
Please consider all this.