The issue had been simmering for long, periodically erupting in public brawls. Earlier rounds in the hostilities had been confined to accusations hurled against each other through the media. Aware of the stakes involved, sections of the media chose the path of gross partisanship, weighing in with suggestions of sinister motives in the higher echelons of policy-making. Add to this volatile mix a regulatory authority that is yet to find its feet and is trapped in the cross-currents generated by a policy it is not responsible for, and there is seemingly a recipe for unending chaos in a vital infrastructure sector.
Need for Telecom mobility and interconnectivityMid-January, millions of the country’s telecommunication subscribers were given an idea of the lengths to which the big players in the industry would go to protect their stakes in an increasingly competitive, technologically complex environment. The Supreme Court had, with a few caveats, declined to stay the introduction of the Wireless in Local Loop (WiLL) technology that afforded the facility of limited mobility for the new basic telephone subscribers.
One of the new basic operators, Tata Teleservices, had put in place networks in four circles over the preceding months. But its effort to roll out services had been frustrated by a lack of interconnectivity with the cellular networks. The cellular mobile service providers (CMSPs) had earlier drawn a mild rebuke from the authorities for their obduracy.
Interconnectivity, it was pointed out, was a right that every network had to accord every other on mutually agreed commercial terms. It was no special privilege and the CMSPs were in flagrant violation of norms in denying the facility to basic operators. The CMSPs responded with the charge that mobility in operations, even if limited, encroached upon their territory and was illegitimate under the terms of national policy.
The cellular phone lobby has always been on a losing wicket as far as this argument is concerned. And it is not hard to see why. Keeping in mind the prohibitive costs of expanding telecom coverage using conventional copper cables, the 1994 policy formulation specifically identified optical fibre and WiLL as the preferred technologies. This stipulation was governed as much by technical and financial necessity, as by the demands of a deregulated and competitive environment for services. Subsequently, theNational Telecom Policy of 1999 (NTP-99) spoke of the need to keep pace with the convergence of different transmission media, noting specifically that the distinction between “wireline and wireless” technologies was rapidly being obliterated.
Also Read: New Telecom Bill fails to address internet shutdown, surveillance issuesIn early 2001, the Telecom Commission and the Telecom Regulatory Authority of India (TRAI) agreed that limited mobility through WiLL would not be contrary to policy directions and, would rather, be strongly in the interests of the consumer. The calculus was fairly clear a subscriber link could be established using WiLL technology at a third of the price involved in a conventional wire-line. And if the WiLL technology were to be artificially constrained by the need to be a fixed service, the cost to the consumer would again be enormous. The consumer premises equipment or terminal equipment or plain old telephone instrument in the case of voice communication involved in a fixed service was three times more expensive than the equipment involved in the case of a mobile WiLL service.
CMSP’s unending resistanceIn the face of sustained resistance by the CMSPs, the matter was referred to a Ministerial Group on Telecom and Information Technology (GOT-IT), which only underlined the importance of adapting WLL technology to Indian conditions. Shortly afterwards, the Telecom Disputes Settlement Appellate Tribunal (TDSAT) upheld this finding. The CMSPs then took the matter to the Supreme Court, where it was heard over a period of close to eight months. The final ruling of the apex court, delivered in December 2002 was that there could be no question of constraining the installation of WLL connections or of restricting its mobility function.
There was, however, a minor concession to the CMSPs: the TDSAT was enjoined to look afresh at some of the points made by them and to ensure that they enjoyed a level playing field as the basic service operators. Any disadvantages that the CMSPs might suffer under the regulatory regime should, the Supreme Court directed, be neutralised.
It was imagined that the concurrent effort underway at TRAI, to work out a regime of interconnect charges between the different operators, would be adequate redress for any grievances that the CMSPs may have. But having been thwarted in their effort to secure a complete ban on the limited mobility facility, the CMSPs were in no mood to give in. They, firstly, insisted on reading the Supreme Court verdict as an unequivocal victory, though it was quite the reverse. And then, they refused to heed the TRAI’s effort to work out an equitable interconnect arrangement on the grounds that this was for operators to conclude mutually among themselves.
On January 9, acting on a specific complaint, TRAI directed the cellular industry to provide the interconnect facility to Tata. The cellular industry responded with a severely worded letter from the Cellular Operators Association of India (COAI) to TRAI, in which the latter was accused of every possible misfeasance. And with little regard for the virtues of discretion, COAI chose to publish the letter as a paid advertisement in many of the country’s leading newspapers.
TRAI responded with some asperity. It took note of the cellular industry’s practice of blocking calls originating in the networks of private basic service operators (BSOs). To circumvent the lack of a formal interconnect agreement with the cellular industry, private BSOs then started transferring their calls through the networks of the public sector telecom companies, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). But these were being identified and selectively stopped. “The call completion rate (CCR) for such calls is zero,” said TRAI, which is completely contrary to “quality of service” regulations. “Such an act is arbitrary, anti-consumer and... may well lead to chaos in the industry,” warned TRAI.
Also Read: Centre eyes privatisation push through Electricity (Amendment) BillThe grievances for which the CMSPs demanded redress, TRAI pointed out, were already under active consideration. This was a matter of public knowledge and it was grossly unfair on the part of the cellular industry to seek to influence the regulatory deliberations through a campaign in the media.
TRAI, for its part, would stick to its commitment to have the revised schedule of tariffs and interconnection charges ready by the end of January.
Governmental intervention: the Union’s arbitrationTRAI gave short shrift to the cellular industry’s other claims of the disadvantages it was compelled to suffer because of its policy. Meanwhile, the prophecy of chaos in the industry that it had made was being borne out by reality. Embarking on a policy of meeting force with force, BSNL and MTNL decided to cut off access to their networks for selected cellular operators. It was an audacious move by the public sector enterprises (PSEs), which would have been inconceivable without a nod from higher political masters. But faced with the strictures of TRAI and the retaliatory muscle of BSNL and MTNL, the cellular operators chose discretion as the better part of valour. Interconnectivity was soon restored and the network returned to some semblance of normality by January 20. Arriving back from an overseas tour that day, Union Minister for Information TechnologyPramod Mahajanimmediately went into a crisis management mode.
After a meeting with major cellular operators, Mahajan announced that he would be “willing” to “arbitrate” in the dispute and ensure a fair and equitable outcome. Meanwhile, all networks would conform to the need of maintaining interconnectivity with all others.
Several experts and analysts confessed to being less than impressed by the Ministerial intervention, which seemed to undermine the autonomy of the regulatory authority. The government was expected to enforce the regulatory decision even if it disagreed with it, they pointed out. In seeming to reward the cellular operators for their obstreperousness, Mahajan had potentially opened the door to regulatory chaos.
TRAI was true to its word, coming out with a detailed set of proposals on tariff revisions and interconnection user charges (IUC) by January 25. The purpose of this amendment to the Telecom Tariff Order (TTO) of 1999 was, in the words of TRAI chairman M.S. Verma, to ensure continuous availability and affordability of services and to plan for a multi-operator multi-service environment. Although “future-proofing” a policy dispensation was always a risk-laden process, the 24th amendment to the TTO was designed to be adaptable to a regime of telecom convergence. At the same time, said Verma, the TRAI was guided by the need to guard against the “race to the bottom” a prospect inherent in any intensely competitive scenario.
Revising and restructuring tariffsWith these multiple objectives, TRAI announced the complete transition to a “calling party pays” (CPP) regime. The gripe of the cellular operators, that their users are held liable for two charges respectively for airtime and network access will now no longer wash. At the same time, TRAI has specified a detailed schedule of IUC for all categories of operators, holding the BSOs liable for the first time, to pay access charges to cellular networks.
Although TRAI was concerned with cushioning the impact on the country’s 40 million basic service subscribers, there was a point beyond which it claimed that the subsidies inherent in rentals and local call costs could not be distributed across other forms of traffic. The “below cost” tariffs, in other words, had to be revised upwards to cover costs of access to some extent. And furthermore, to the extent that costs were not covered by tariffs, an access deficit charge (ADC) had to be provided.The ADC, in turn, was specific to BSOs, since the tariff formulae applicable to WiLL and cellular were designed to cover costs. The main avenue chosen for covering the ADC was to raise the rentals on fixed lines substantially, reduce the number of free calls allowed and reduce the call duration from three minutes to two. There was no other option available since the conventional route of subsidising local calls through high long-distance charges had been effectively closed by the increased competition. But, in a signal that it was not yet prepared to turn its back on all social objectives, TRAI decided to retain the rentals at existing levels for rural users and senior citizens.
Also Read: Deregulation: Licence to Loot RajThe key elements of the new tariff regime are the detailed IUCs specified. Between two fixed-line operators, for instance, the average tariff of Rs.0.50 a minute would be equally shared. A fixed line operator would likewise pay Rs.40 paise out of his average tariff of Rs.1.20 a minute with the cellular network he is connected to, and likewise with a WiLL operator. And though TRAI has not specified retail tariffs for cellular and WiLL operators in the belief that competition will act as a restraint, each would be liable to pay 40 paise to the other for a minute’s interconnection between their networks.
In this manner, TRAI has met a key demand of the CMSPs, while necessitating a return to the drawing board for the WLL operators such as Tata and Reliance Infocomm, which had announced detailed tariff schedules in anticipation of their services rolling out in the near future. TRAI’s estimate that competition will drive down cellular and WiLL tariffs may be accurate. The pattern of behaviour of the CMSPs in the past indicates that they need a rather strong competitive goad to retract from a strategy of charging sky-high tariffs. Having for long evaded regulatory scrutiny, cellular operators managed, from the time they launched their services, to keep airtime charges as high as Rs.16.80 a minute. This was brought down to Rs.6 and subsequently Rs.4 by the TTO-1999. But all this while, the cellular operators managed, through adept lobbying, to keep out the PSEs from the sector. When MTNL managed to launch its service after much avoidable delay, the CMSPs brought their tariff down abruptly to Rs.2.80. And when BSNL came into the picture, there was a further downward revision of airtime charges, to Rs.2.40. The commencement of the limited mobility WiLL service is now expected to moderate the airtime charge further.
All this while, the cellular lobby fought hard to keep WiLL out entirely as a technological option. A strategy of pushing for a revision of interconnect charges may have fetched them greater public sympathy. But this strategic common sense only dawned when all legal options for keeping out WiLL failed. With TRAI’s latest order, they would seem to have less reason to complain than the fixed line or WiLL operators.
Road ahead for India’s telecom industryWith all regulatory changes and the anticipated launch of WiLL services, the telecom scenario could be transformed beyond recognition in the space of a year. The likelihood is especially great because Tata and Reliance have both been showing considerable gusto in pushing their services. There could be questions about how far the market will support the massive investments made. Reliance Infocomm has by far the most expansive infrastructure in place and being a subsidiary twice removed of Reliance Industries, its financing pattern has remained rather opaque. Reliance Chairman Mukesh Ambani has suggested that the figure involved could be in the region of Rs.25,000 crores, though how much of that has been committed yet is unclear.
Globally, the telecom sector represents a spectacular bubble burst that has dwarfed the more visible “dot com” bust in its financial implications. The picture here is of massive investments being made during the peak of the 1990s infotech euphoria, burdening companies with a mass of debt and financial institutions with a worthless portfolio of assets. Since India has to an extent mimicked the West in the “dot com” boom and bust, a similar outcome for the telecom sector cannot be ruled out.
Also crucial will be the transition from the technologies currently in use to the “third generation”, or 3G. India adopted the globally dominant GSM standard for mobile communications, while the BSOs have, for reasons of compatibility with the WiLL system, adopted the code division multiple access (CDMA) standards. Both these have inherent potentialities for transition to the 3G standards, though with different degrees of ease. CDMA is considered to have the easier job on hand in terms of transition, though its smaller global user base could impose some extra costs. The transition from GSM to the hybrid standard of W-CDMA (or wide-band CDMA) has been underway in Europe, though the vast licence fees that were paid by companies for spectrum use have burdened them with unsustainable levels of debt, throwing the entire process into jeopardy. How far the Indian telecommunication enterprises have programmed for the transition, affording users the advantages of interoperability between different systems, remains to be seen. But a period of intense competition, mergers and acquisitions and the possible extinction of the lesser players is clearly foretold. And unless the transition is managed in a technically sound manner, the telecommunication sector could continue to see periodic eruptions of discord between operators using mutually incompatible standards.
