Crisis and opportunities in telecom

The recent Supreme Court judgment cancelling 122 Unified Access Service Licences (UASL) has created a major turmoil in the telecom sector. What happens to the 5 per cent or so customers affected by these cancellations is perhaps the least of the problems, since solutions around number portability can easily be found.

The issues relating to what happens to the investments (particularly those in FDI), where infrastructure has been rolled out, the impact on future tariff scenarios, etc, are more intricate to handle but certainly solutions will be found.

Rather than looking at these problems only, we should see the opportunity this judgement has given the government to reform the sector, learning from the lessons of the past. The clearest message that comes across from the judgement is that nothing except complete transparency in policy formulation and implementation is acceptable.

Finger on technology

Telecom policy formulation is intricate because in doing so a track has to be kept of the extremely high rate of technological developments in this sector, unmatched by any other sector, and the implications of these changes.

Despite the announcement of a Broadband Policy in 2004 and auction of limited BWA (Broadband Wireless Access) spectrum in 2010, the government priorities so far have been voice-traffic related, and that too centred around 2G technology. Devices such as the smartphone and iPad have totally transformed the traffic patterns.

If we go by a recent forecast given by Cisco, the annual global mobile data traffic will increase 18-fold from 2011 to 130 exabytes (1 exabyte = 1 Giga Giga bytes) by 2016, equal to 33 billion DVDs.

This growth is projected to be three times that of global fixed data traffic over this period. Almost all this growth will be driven by more powerful devices such as the smartphones and tablets, using faster 4G and Wi-Fi technologies to access more applications.

Quite clearly, the message is that one has to move away from the emphasis on 2G based and pre-determined (by Government) choice of technologies to technology neutrality and service neutrality in various policy formulations, particularly as applied to the scarce natural resource of spectrum.

Transparency message

Added to that is the clear message in the Supreme Court judgement — that transparency in implementation cannot be compromised. Of course, added further to that is the industry requirement of stable regulatory and licensing policy.

What does this imply? It implies that to ensure transparency in policy formulation, let the market decide what technology best meets the customer requirements i.e. either let spectrum bands be declared technology-neutral or at least let re-farming of so called 2G bands to 3G take place urgently.

Further, let a lot more spectrum (e.g. in 700 MHz) be discovered for commercial use to meet the anticipated demand and realise that market, and not the government, should determine how many players offering what services should exist, with the regulator ensuring absence of anti-competitive practices. This will require easier M&A norms.

So far as ensuring transparency in implementation of policy is concerned, the court directive ordering auction of spectrum will, of course, go a long way. However, it is well known that auctions have to be designed optimally to meet the objectives of the auction.

Offer too little spectrum to a hungry market or create technology blocks or set unreasonable base price and the auction prices will shoot up artificially, harming the goose that lays the golden egg. Similarly, auction in spectrum blocks that does not ensure optimal spectrum utilisation is, again, self-defeating.

BWA licensing

However, policy formulations such as spectrum auction and re-farming alone do not complete the picture on transparency. Equally, if not more, important is transparent implementation of policies. Some doubts have been raised indicating lack of transparency even now if we go by some of the recent reports on BWA licensing.

The BWA spectrum auction happened in October 2010 and none of the winners in the auction has as yet started BWA/4G services, notwithstanding the urgency for these services as indicated by the data quoted above.

The state-owned players have evidently surrendered their allocated spectrum while one of the major players is repeatedly shifting the date of launch for which no reason is known or announced.

However, in the case of another major player — a multi-national which is understood to be ready for a rollout of infrastructure through partners — it has reportedly been forced to approach TDSAT since it has not being given spectrum due to some technical snag regarding time frames.

In fact, one could understand the government trying to ensure meeting all legal requirements, but as per these reports, the company is repeatedly being thwarted in its attempts to get spectrum through raising of debatable objections in the form of raising old dues demands (including considered settled dues) from a partner concern, each time the Court comes close to issuing an order.

Such actions do raise concerns about continuing lack of transparency in policy implementation. In fact, once the BWA auction was over (and by all accounts it was a fair auction for which credit must go to the government), all winners should have been treated as partners in the objective of rapid growth of broadband in the country and issues, if any, should have been sorted out through across-the-table discussions.

Fortunately, the recent Supreme Court order has demonstrated that through persistence and public will, it is possible to ensure transparency in policy implementation.

(The author is a former member of TRAI and ex-chairman, BSNL.)