The outcome of the WiLL controversy will show how far larger social interests find a place in the current phase of deregulation.
A GOVERNMENT that ignores a crusade launched by industrial icons like Ratan Tata and Kumarmangalam Birla in league with new generation entrepreneurs like Sashi Ruia and Sunil Mittal, would need considerable depths of courage and conviction. After a month of high-pitched campaigning that often went beyond commonly accepted rules of rational argument, a group of businessmen functioning under the aegis of the Cellular Operators' Association of India (COAI), wrote to the government on April 29, demanding that the decision to permit basic telephone operators to offer a limited degree of mobility through the Wireless in Local Loop (WiLL) technology be reversed. The signatories included Rajan Nanda of the Escorts group and Rajiv Chandrasekharan of the BPL Group, among others.
Economic deregulation has forever been a fertile breeding ground for controversy. Periodic eruptions of acrimony are especially likely when the sector is one where profits are reasonably assured and the pace of technological change is rapid. Since the government monopoly in telecommunications was effectively ended by the 1994 policy formulation, a number of commercial groups with potentially conflicting interests have come to flourish in the sector. Some of them have become well entrenched enough to seek to dictate the course of policy. The most recent instance was in mid-1999 when the caretaker Vajpayee government rewrote the rules of entry for telecom operators, permitting them to migrate from a regime of fixed licence fees to a revenue sharing arrangement. Although notionally all telecom licensees benefited from the decision, there was no mistaking the hand of the cellular operators, especially in the metropolitan regions, that had been the principal influence behind the decision.
The paralysis of policy over 'limited mobility' services on WiLL testifies to the enduring power of the new cellular phone operators lobby. The decision to permit basic phone operators to provide this facility was made in March, principally at the initiative of Union Minister for Communications Ram Vilas Paswan. An earlier reference to the Telecom Regulatory Authority of India (TRAI) on the consistency between 'limited mobility' and the New Telecom Policy of 1999 (NTP-99) had been answered in the affirmative. This decision was hastened by the fact that as far as basic phone services are concerned, WiLL is no mere technical luxury. Rather, it is being recognised increasingly as an imperative of providing reasonable connectivity to remote areas. A local loop in conventional basic telephone services is a pair of copper cables that connects the subscriber to the exchange. In the older telecom network designs, the local loop used to be as long as 8 to 9 km in length. With the high and rising costs of copper factored in, the 'local loop' was known to account for over 80 per cent of the cost of providing a telephone connection. In the case of areas with low demand density, the costs were prohibitive, imposing a major obstacle to the growth of rural telephony. That apart, reliability was often poor with cable faults being frequent.
In the early 1980s, technological innovations were introduced that enabled the shortening of the local loop to about 3 km. The multiplex facility enabled a multiplicity of messages to be transmitted over the same cable, permitting several subscribers to share a common transmission medium between a remote line unit (RLU) or remote switching unit (RSU) and the main telephone exchange. The local loop between subscriber and RLU (or RSU) could then be shortened considerably, making a massive saving in cost. The contribution to the local loop to the total cost of providing a phone connection now fell to just over 50 per cent of the earlier level. Yet there was no escape from the basic requirement of having a distinct line for each subscriber, though now of a dramatically shorter length.
Further breakthroughs were made in the mid-1990s when universally accepted codes and protocols came to be enforced, governing the transmission of signals from subscribers to exchanges. This meant that if the appropriate kind of signal processing equipment was available at both ends, any kind of transmission medium could be used - coaxial cable, electric power line, optical fibre, conventional copper wire pairs, or even the radio frequency spectrum. For obvious reasons, the wireless option using the radio frequency spectrum (or wireless in local loop, WiLL) became a technological possibility which promised to bridge some of the glaring lacunae in the telecom network, notably in rural areas.
Apart from this element of choice, there was one of technological and economic necessity. Deregulation in basic phone services meant that a subscriber would have a hypothetical choice of operators. But in allowing him or her to exercise this choice, the social costs of maintaining separate pairs of copper wires running into his or her premises would have been prohibitive. If the wireless option was available, the radio frequency spectrum could be shared between competitive operators, offering the subscriber a genuine choice. This seemed a much more feasible manner of structuring a competitive phone service than to have rival operators sharing a common pair of copper wires.
Recognising this element of technical necessity, the 1994 telecom policy formulation specifically identified optical fibre and WiLL as the preferred technologies for expanding the basic services network. There were no restrictions imposed on the range of services that a basic telephone operator could provide nor on the kind of terminal equipment that the subscriber could use. As the technological options expanded, it was found that WiLL could support a limited degree of subscriber mobility. This is very different from the cellular service. In fact, it is very much like the now-ubiquitous cordless telephone with a greatly expanded range. Seeking to curtail the limited mobility option would be in the estimation of most observers as futile a step as the Department of Telecommuni-cation's (DoT) effort in the 1980s to check the operation of cordless phones on the grounds that it threatened to undermine the integrity of the radio frequency spectrum.
Limited mobility became a reality when Mahanagar Telephone Nigam Limited (MTNL) introduced a service in Delhi and Mumbai in 1998. The entry of the government-owned MTNL into the market was delayed for over a year by some disingenuous interventions by the TRAI, which under its erstwhile chairman S.S. Sodhi was seen to be excessively solicitious of the cellular lobby's interests. The obvious limitations of MTNL's service in relation to full-fledged cellular mobile telephony ensured that it did not become wildly popular.
The initiative to provide the limited mobility option to private phone service operators began within the government in October 2000. Despite gaining their licences almost concurrently with the cellular service operators, basic phone operators had not really made much of an impact. Initial infrastructural costs were large in relation to cellular telephony and there were multiple uncertainties of demand, especially since the established service provider - once the DoT, now known in the service avatar as Bharat Sanchar Nigam Ltd (BSNL) - had considerably improved its level of demand fulfilment. What changed the parameters for decision-making considerably was the entry into the fray of the powerful Reliance Industries Ltd (RIL). Most licences issued for basic phone services had lapsed over time, in the main because the competitive bidding process had been vitiated by financially rather wild offers from a clutch of companies with no known competence in the field. RIL had the licence to the Gujarat Circle, where it has introduced a number of connections, though principally for the benefit of its own industrial units. More important, it was seriously exploring the option of buying out a number of licences and beginning basic services in at least 18 States.
Late in March, a number of letters of intent were issued to the licensees for basic telephone services, permitting them to introduce mobile communications over a limited range using the WiLL technology. There was an immediate uproar from the cellular telephone operators who have constituted themselves into a business lobby with substantial influence and clout. The allegation was that this decision was contrary to NTP-99, which clearly distinguished between mobile and fixed phone services. Under the notion of 'limited mobility' the cellular phone lobby was a new entity that had no legal existence under the terms of the policy statement.
Rapidly, the imperatives of optimal technological choice for the larger social good were becoming submerged in the bitter turf war between rival industrial families. When in early-April a cabal of some of the country's most influential businessmen petitioned him for a review of the WiLL policy, Prime Minister Atal Behari Vajpayee evidently had no option but to comply. The matter was referred to the Group of Ministers on Telecom and Information Technology (GoT-IT), which came up with the Solomonic verdict of splitting the difference between the cellular and basic phone operators. It recommended that the basic phone operators pay a larger share of their revenue from long distance calls as access charges to the public sector BSNL. It also proposed that the range of limited mobility be drastically curtailed to 10 km from the earlier 50 km.
This failed to satisfy either side, and the COAI has taken the matter to the Telecom Dispute Settlement and Appellate Tribunal (TDSAT), a body created last year in a conscious effort to take the adjudicatory function out of the scope of TRAI's powers. The cellular lobby's rather simple-minded argument is that NTP-99 provides no room for a 'limited mobility' service. This is evidently a rather fundamentalist reading that seeks to elevate a policy text to the status of holy writ, impervious to the possibilities offered by technological change.
BSNL has meanwhile intimated that it will go ahead with its own plans for limited mobility. The service is already on offer in parts of Haryana. Ironically, Tata Teleservices also is offering this option in Hyderabad, though it obviously values its cellular licences more than the future promise that WiLL offers. Then again, the compulsion that one of India's oldest industrial families feels to curb the growing power of the Ambanis and their RIL, is an undoubted factor.
Nobody can quite discount the COAI's formidable lobbying powers. The Association of Basic Telecom Operators (ABTO) alleges that the cellular lobby managed all through Sodhi's tenure as TRAI chairman to change the ground rules in its favour. They managed to hike the monthly rental charged despite explicit clauses restraining them in the licence agreement. Tariffs have also been well above the cost of providing the service. In depositions before Sodhi, different cellular operators quoted widely divergent figures for the cost incurred in setting up their service. Ironically, all these claims were accepted uncritically by the regulatory authority and its recommendations fashioned accordingly.
The question that the COAI has referred to the dispute settlement body seems trivial. Whether or not NTP-99 specifically mentions it, 'limited mobility' is very much a reality. Indeed, a credible case can be made that NTP-99 allows for this service implicitly, in the sections where it refers to the rapid convergence of communications media, with the distinction between both 'wireless and wireline' tending increasingly to be obliterated. The outcome of the WiLL controversy will be a test case of how far the authorities overseeing the current phase of deregulation have larger social interests at heart and how far they are swayed by the simulated anger and outrage of narrow commercial lobbies.