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Prabir Purkayastha
THE brand new National Telecom Policy 2011 (NTP 2011) proposed with a lot of
fan fare has the same objective as earlier such policies – NTP 1994 and NTP
1999 – how to create new scams or justify existing ones. Sibal,
while paying lip service to various other policy objectives such as teledensity, self-reliance, etc., makes clear that this
policy is primarily to help “.. ensuring continued viability of (private) service
providers in a competitive environment.” Too many licenses have been given
with not enough spectrum and not enough money for
putting in infrastructure. Now the challenge is how to allow the existing
license holders to either sell their licenses or provide services without
building the necessary infrastructure.
If NTP 1999 was to help the telecom companies to escape from the committed
license fees running into thousands of crores of
rupees to a revenue sharing regime, NTP 2011
game-plan appears to be designed to help the existing licensees to escape
from their roll-out obligations for building a network and allow them to sell
their licenses acquired at 1/10th the market price.
In Raja's scam, apart from his infamous first-come first-served policy, there
were two other steps that he took. One was to change the mergers and
acquisitions guidelines, allowing the parties to sell equity to others, the second was forcing BSNL to provide their
infrastructure to these new operators for providing services through intra
circle roaming. As a consequence, these new licensees could start getting
subscribers and providing services without rolling out their network. That is
why by making only marginal investments, they could still claim that they had
started services, making their market value much higher. Without this, Unitech and Swan may not have been able to sell their
shares to Telenor and Etisalat
at 10 times what they had paid for the license fees.
FORCING BSNL INTO LOSSES
Raja's scam ridden Department of Telecom (DoT)
regime had amended the licenses of the operators in June 2008 and permitted
“intra circle” roaming. What it meant was that an operator could provide
services in its service area even though it had not rolled out its network.
Earlier, roaming was always for areas where the operator did not have a
license and therefore his subscriber was forced to “roam” on a network
provided by others. Along with these modifications, Raja also forced BSNL to
provide such roaming facilities to companies who had received licenses in
January 2008 so that they could start providing services, virtually without
any further capital investments.
TRAI had objected to DoT's amendment of the
licenses on various counts. The chairman of TRAI had written in July, 2008
pointing out that as per the TRAI Act, such an amendment to the license could
have been issued only after seeking recommendations from TRAI. He had also pointed
out that:
(i) Such intra-circle roaming should not be
considered as a substitute for roll-out obligations specified in the license
(ii) It distorts various spectrum issues including quality of service,
imbalance in spectrum utilisation
(iii) Has implications for additional spectrum entitlements
(v) It has security issues with subscribers not being easy to track as
they could shift in and out of two networks continuously
One of the reasons that BSNL from being a company having huge reserves to one
that today is making losses is that it has been used by the government to
allow its competitors to piggy-back on BSNL.
In 3G services, some of the telecom majors – Vodafone, Airtel
and IDEA -- have now extended intra-circle
roaming to provide services in areas where they do not even have
licenses. Step by step we have reached a regime where companies are now
providing services without infrastructure or even licenses.
LEGALISING VIOLATIONS
If we look at the current bunch of license holders, particularly the ones who
are party to Raja's 2G scam, TRAI is on record that their licenses should be
cancelled as they have all reneged on the roll-out obligations. DoT has been dragging its feet over this. Some notices
have been issued and noises are being made. But the intent is clear – how to
allow such parties to sell their licenses rather than cancelling
them.
The Draft NTP 2011 is the policy framework designed to make all such
violations legal. In any case, this has been UPA policy in telecom. When
companies such as Vodafone violated the 49 per cent FDI cap, the then finance
minister P Chidambaram increased the cap to 74 per cent, arguing that since
the cap is being violated, there is no point in having the cap. Now Kapil Sibal seems to be
following in his foot-steps.
The key pronouncement in Draft NTP 2011 is the separation of physical
infrastructure from services. What it means is that the network – cables,
towers, cells etc. – can belong to one party while the other party provides
services – a kind of providing the roads while other drive
the cars.
Theoretically, separation of physical infrastructure from services is
feasible. However, it brings a host of new issues – both technological as
well as legal. The problem here is that if it is considered feasible to
separate services from infrastructure, should we not then consider building a
common infrastructure very much in the way that highways are? Without a
common physical infrastructure, what would be the purpose of this separation?
The Draft NTP 2011 appears to view that the existing infrastructure can be
separated – Vodafone's physical infrastructural will become one company while
its services become another one. If fragmentation of the market is the
problem and consolidation is the goal, then it appears such a separation will
only fragment the market even further.
As it happens with all UPA policy, the explanation of the policy is not what
is stated in the policy document. The target appears to be the huge cable
network that BSNL owns. If this can be separated from BSNL, then it can
become the common infrastructure of a number of private companies who can
provide services without building any infrastructure. We are back to where we
started from – the entire thrust of the policy is how to help existing license
holders provide services without investing money. No capital expenditure, no
roll-out of network, mint money by acquiring subscribers without pain and
then sell licenses. This is what Sibal's policy
claims as “exit” policy for companies.
Draft NTP 2011 has some lip service about indigenous manufacture. In concrete
terms, all that it promises is that if everything is equal, then domestic
manufacture will have a preference. Unfortunately, the issue in domestic
manufacture is not about final prices of equipment but about the current
excise and customs regime, basic infrastructure for manufacture and a host of
other issues. If we want to promote manufacture, the only way to do so is to
look at the gamut of issues and not make a token gesture of a kind that has
no value.
CONSPIRACY TO DESTROY BSNL
Currently, the excise and customs regime is one where importing handsets and
equipment enjoys duty preference. We have an inverted duty structure where
raw materials and intermediate goods have a higher duty than finished goods.
What it means is that it is cheaper to manufacture in China and sell in India. For equipment
manufacturing, China
had a clear policy. It forced the major equipment companies to transfer
technology to Chinese companies in lieu of major orders – it utilised its market power to acquire technology. Compare
this to what we have done – in spite of having the second biggest telecom
market in the world, we have wound up even the manufacturing that we had
earlier. C-DOT and ITI no longer are players for either equipment or
technology.
Without indigenous technology, the current telecom regime is making buying
telecom equipment impossible for BSNL and MTNL. DoT
insists that all suppliers of equipment must also give source code which no
international supplier is willing to give. The only exception
are Chinese equipment suppliers. And here is the catch – the home
ministry is now insisting that for security reasons BSNL should not buy
Chinese equipment. If we take both the ministries together and look at the
domestic manufacturing scenario, it makes sense if we only see the ministries
working as a tag team to destroy BSNL. Are we to believe that the ministers
are all naïve about the telecom sector, specially
when the two concerned ministers have been deeply involved in telecom
litigation in the past on behalf of the major telecom players? Or is there
some other interest in sabotaging BSNL and MTNL by denying them expansion?
The telecom policies in this country have more to do with telecom scams than
a clear enunciation of the country’s requirements. The 1994 National Telecom
Policy lead to Sukhram and his case by case policy,
and discovery of suitcases with crores of rupees in
his bedroom. The 1999 policy was wholesale escape for companies who had
secured licenses from paying license fees. The current NTP 2011 policy is to
help companies who have secured licenses at throw away prices to sell them at
huge profits. A scam today is the policy tomorrow: this appears to be the
brief of successive ministers in the telecom sector.
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