In a local loop?

By Last week the government | 03 Nov 2003


Mumbai: Teledensity, which stands for the number of telephone connections for a population of 1,000, is a parameter that reveals how developed a country is. India's teledensity as on 2002 was 4.88. In comparison, the Asian teledensity was 4.5 times and the world teledensity was 7.5 times the Indian teledensity.

A sorry state of affairs made more sorry by the fact that today, India is being looked upon by the world as a favoured destination for services like IT, call centres and business process outsourcing for which a world-class telecom infrastructure needs to be in place. Without that, India will not be able to leverage its basic competitive advantage — that is, thousands and thousands of intelligent, technically skilled people.

While recognising this fact, the Indian government came up with a Telecommunications Policy in 1994, which sought to create an enabling framework for the development of the telecom industry. This policy, which envisaged higher teledensity and telepenetration (telephony in rural and remote areas) at reasonable rates and also telephone on demand, really got nowhere and one of the main reasons for that was that private participation was not forthcoming as expected.

A revised policy was framed in 1999 and this time, apart from the social and development objectives, the policy sought to create a modern and efficient telecommunications infrastructure taking into account the convergence of IT, media, telecom and consumer electronics and thereby propel India into becoming an IT superpower.

Good intentions, but as they say, the path to hell is paved with good intentions and this is the path which the revised policy took:
1. The government decided to issue licences to private telecom operators.
2. Telecom areas were demarcated on geographical basis and were termed as circles.
3. These circles were either states or a combination of states.
4. In larger states there were more than one circle — that is, a combination of districts was demarcated as circles for which separate licences were to be issued.
5. Only the operators who were issued licences could operate in their respective circles — that is, limited competition.
6. Separate licences were to be issued for different services — that is, one licence for cell phone operation and another licence for radio.
7. A large number of licences.
8. Huge licensing fees.

While this path may have not led to hell as yet, it has certainly led to purgatory. Several private operators with foreign collaboration and limited foreign direct investment (FDI) entered, notwithstanding the huge and unrealistic fees. How these operators were to recover their cost did not matter at that time, as it was a case of leap now, look later.

As expected, in the last four years, the Indian telecom industry resembled more of a wrestling pit than a 21st cutting-edge story. During this period, the Indian media was littered with stories of squabbles and court cases between the operators and between the operators and the government.

During this period the Indian consumer also saw the Telecom Regularity Authority of India (TRAI) come up with confusing orders and tariffs, which only served to complicate the scenario further. TRAI could have been likened to Nero who fiddled while Rome was burning.

Then came technology and Reliance. Technology, like time and tide, waits for no man. When the telecom licences were dished out, the operator who received a licence for cell phones had the technology only for cell phones while the operator who had a radio licence had the technology only for radio. Today, an operator has the technology for every other form of service.

Hence, in TRAI's words, " before a service licensee could fully realise his investment his activity was threatened or made redundant due to technological development in another area, enabling the other licensee to overlap with the first one. This lead to disputes and often to litigation, and based on a license agreement, an implicit contract, claims were made on the government for providing compensation."

Reliance also, like time and tide, waits for no man. They entered the telecom scene last year with a licence only for limited mobility service under WLL. However, thanks to technology Reliance's limited mobility, in TRAI's words, "has been converted into almost an all-India roaming. This was done by registering the subscribers almost all over the country by using call-forwarding and multiple registration."

Then came Arun Shourie (as minister for telecommunications) and his right-hand man Pradeep Baijal (as chairman of TRAI). The good thing they did was that they did nothing — for the first six months. They preferred to study the telecom mess before coming up with a solution.

Last week, based on the recommendations of TRAI, the government decided to impose a Unified Licensing Policy (ULP) for the telecom sector. ULP will eliminate the messy and endless litigation in telecom, improve economies of scale, pave way for more efficient billing, better spectrum management and leave lesser and stronger players in the fray, for the ultimate benefit of the consumer.

However, to ensure smooth and non-contentious implementation of ULP, the government must also seriously address the issues of compensation to cellular service providers, raising the limits on FDI, intra-circle mergers and acquisitions, inter-circle connectivity and lower revenue sharing with the government.

More importantly, these matters must be resolved within the six-month time frame set up by the government. This is of utmost importance as there is a divine law ordaining that anything languishing in purgatory for too long ends up in hell.

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