Sucheta Dalal :Need to move from unified licences to convergence (3 Nov 2003)
Sucheta Dalal

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Need to move from unified licences to convergence (3 Nov 2003)  

WRITING for this paper a few weeks ago, two advisors to the finance ministry Vijay Kelkar and Ajay Shah mentioned that the foundations of our telecom revolution was laid through a set of decisions back in 1998. These included the decision to privatise VSNL (Videsh Sanchar Nigam Ltd) and to shift power away from DoT (Department of Telecommunications) to TRAI (Telecom Regulatory Authority of India). The ‘policy revolution’, they said, replaced sheltered public sector monopolies with a fiercely competitive industry that included private and foreign players. The result: a crash in prices; a reversal in roles where ‘land lines are now a luxury and mobile phones are cheap and ubiquitous’; and such rapid growth in the mobile phone density that it has made ‘the global telecom industry sit up’. All this is indeed true.

The telecom revolution in India is one of the most remarkable developments of the last five years. But it is also among the messiest in its implementation. But dwelling on the chaos in the telecom sector tends to dim that wonderful ‘feel good’ factor that the two economists were trying to project, so they simply ignore it. The not-so-good aspect of the ‘policy revolution’ in telecom was that it was deeply flawed in many ways. It did not take into account changing technology, ignored bandwidth and spectrum issues, turned a blind eye to financial viability of service providers and still continues to ignore the looming problem of the two erstwhile government monopolies MTNL (Mahanagar Telephone Nigam Ltd) and BSNL (Bharat Sanchar Nigam Ltd). In fact, the telecom industry has seen so much litigation, corruption and policy manipulation, that we probably form the best case study on how not to liberalise and privatise utility businesses.

The decision to move towards a unified license regime took so long that it conveniently permitted Reliance Industries (which was found to have violated the rules) to build a massive subscriber base of 5.2 million subscribers in violation of the rules. The telecom regulator was happy to allow various service providers to fight the battle in court, while it refused to express any opinion on the legality of Reliance’s mobile-WLL service until the very end.

Why did it take so long for the government to figure out that Reliance Infocomm had violated the rules? And how much does the public really know about Reliance Infocomm? All we are told is that it is on the verge of breaking even, despite having spent the most on infrastructure and technology. We also know from its public documents that it is only 45 per cent owned by Reliance Industries. The TRAI has now decided that Reliance Infocomm, will pay a paltry penalty of Rs 485 crore, in addition to the entry fee of just over Rs 1,000 crore for the unified licence. Remember how Reliance had repeatedly and vehemently insisted that all its actions were within the framework of existing regulation and it has merely made the best use of technology?

While Reliance’s critics and competitors are outraged that it was let off so easily, cynics point out that if Reliance actually pays the fine, this will be the first time that it has ever admitted to a wrong doing. Yet, despite these contradictions and controversies, we need to move on and must welcome the unified license regime and the move towards full convergence, even if it lets off lightly a company that broke the law. That’s because, no matter what the issues and their relative merits, the battle between service providers is rarely in the interest of consumers.

The global telecom revolution in an on-going one and if consumers are to benefit from the changes, then it is best that the industry is dominated by a few big players with the freedom to move across technologies and artificially created geographical restrictions and keep pace with new developments. The problem is that a unified license regime is only a step forward; it is nowhere near a complete solution. For instance, details pertaining to spectrum allocation, roll out obligation and performance parameters have still to be sorted out. The telecom ministry is also silent about the fate of MTNL and BSNL — the two former monopolies that remain firmly under its control. Will they be allowed to wither away, deprived of functional autonomy? This would have other implications as well. Full convergence in its true sense will allow a service provider, under a single licence, to provide landlines, mobile phones, 24 hours Internet, STD/ISD, broad band operations and entertainment on television (currently provided by cable operators).

Reliance is the only company to have invested in the technology and infrastructure to take full advantage of convergence and it would be in a position to weed out all competition and emerge as an enormous domestic monopoly. Hardly any of the existing service providers, except maybe BSNL and MTNL have the size or the reach to take on Reliance. But they are both handicapped by their public sector ownership, lack of autonomy and are wracked by charges of corruption and ineptitude. Most of the private players have still to prove that they have the financial muscle to keep pace with Reliance’s growth. What this means to the consumer is that future technology may allow us to use the same telephone instrument, irrespective of technology (CDMA or GSM). If policymakers keep pace with international trends then ‘local number portability’ rules will enhance competition and service quality by allowing us to switch service providers and still retain the same telephone number. But in India, we consumers may only end up moving from public sector monopolies to a private one. What we need is for our ‘feel good’ pundits to provide us with a better road map to the telecom policy revolution, so that we the paying consumers are truly reassured by the spin about a shining India.

-- Sucheta Dalal