For whom the bell tolls

Kumar Mangalam Birla, one of India’s most credible and respected industrial chiefs, is reported to have clearly stated that rather than throw more good money after bad, Vodafone-Idea would shut shop if there is no government relief. This has sent shock waves not only across various sectors in India but also in the international community of investors. How is it that a sector that has been the flag-bearer of privatisation and liberalisation, has been brought so abjectly to its knees?

 

Despite possibly being one of the most highly regulated sectors, Indian telecom — essentially, digital mobile communications — has been one of the most remarkable growth stories in the world. Much practical benefit has been realised by the common man, thanks to mobile phones; bigger benefits could flow to consumers in India, where the vision of a trillion-dollar digital economy is touted as being the driver to become a $5-trillion economy. One would have hoped that a sector that played a key role in the realisation of the digital dream would not have been given the harsh treatment that has been meted out under the so-called “AGR-based licence fee (LF) and spectrum usage charge (SUC)” regime. These have dealt a body blow to the sector and could veritably kill the goose that has been laying golden eggs.

 

With a total of 1.2 billion connections, India has the second largest mobile network in the world, but there are only 600 million broadband connections in a population of 1.35 billion. Thus our ICT potential is enormous. Telecom is the backbone of India’s pride — the IT sector, and the economic engine of many other industry verticals. In short, opportunities abound, and an equitable, consistent, forward-looking policy would be a powerful magnet for the investments needed to bridge the digital gap and usher in "broadband for all".

 

The recent Supreme Court ruling on AGR for the telecom industry was the proverbial last straw on the camel’s back in the dispute going back nearly 15 years. However, the negative effects cannot and, should not, be attributed to it. If at all, the apex court should be thanked for its help in bringing to light some serious fundamental issues. The subject is basically a complex techno-economic one which needs to be examined by a suitable expert authority. It was for such purposes that the government had created, by statute, the expert regulatory institutions of TRAI and TDSAT and it is noteworthy that both these have repeatedly found merit in many aspects of the industry submissions on AGR.

 

The case should never have gone to the Supreme Court unless there were legal infirmities in the other processes of TRAI and TDSAT. Many years ago, DoT could have accepted the recommendations of the government’s own expert bodies and not appealed against them to the Supreme Court. It may be noted that in the so-called WLL matter in the Supreme Court in 2002 (judgement dated 17.12.2002, Civil Appeals 3092, 3123 and 3124) had clearly observed, quoting abundant case law, that expert bodies (like TRAI and TDSAT) have generally “a working knowledge of law, engineering, finance, commerce economics and management” and were therefore “better equipped to appreciate the technical and factual questions involved”. Thus, the matter could have been closed over a decade ago on the basis of the recommendations and findings of the statute-created expert bodies.

 

Unfortunately, with the passage of time, the already-complex matter has got complicated further.

 

The regime of high percentage revenue share (=AGR) licence fees and spectrum usage charges goes back to August 1999 and February 2002 respectively, shortly after the NTP99 and was appropriate since spectrum was then packaged with the licence. However, the revenue elements that go into AGR were never settled fairly and correctly by the government and the industry also faltered by not engaging forcefully enough at the initial stages. They were probably so relieved at securing migration to the 20-year revenue-sharing NTP99 regime that they did not delve deeply or think long term on AGR.

 

Be that as it may, since 2010, spectrum has been separated from licence and allocated through an open and transparent auction at the winning prices. There remains no justification whatsoever for continuing with AGR-based SUC. Moreover, a licence without spectrum has hardly any value and hence no basis for a high AGR-based licence fee. Hence, any attempt to resolve the situation through a mere 2-3 per cent reduction in LF will surely not address the requirement of a sustainable solution.

 

What is now required is not another “band aid” but a major surgery where the serious customer aspects related to the quality of service (much is lacking on this front) and the national goals of “broadband for all” and Digital India, are also addressed.

 

Today, we are at a make or break juncture in telecom. Introducing the right corrections would leverage the huge potential in India and make us the top global regime in digital communications which could contribute well over a trillion US dollars to the targeted $5 trillion economy. If not, it would adversely impact not just ICT, but you, me and the common man, and many industry verticals that depend heavily on a robust telecommunication sector. The current situation closely resembles that of 1998 and 1999 when the new mobile telecom sector was at the point of total collapse and a new telecom policy, NTP99, was expeditiously formulated and the sector completely transformed into a healthy one.

 

Sad, but it seems like the bell is tolling mournfully for many more than telecom and, as the poet John Donne wrote, “ ..Therefore, never send to know for whom the bell tolls; it tolls for thee.”

 

No new policy is required but major policy decisions at the highest levels are probably necessary. The time to act is now and it is earnestly hoped that the bell stops tolling and begins ringing the tunes of the renaissance of Indian telecom.

 

Mukarji is former chief corporate affairs officer of Idea Cellular; Ramachandran is president of Broadband India Forum. Views are personal

 



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