The draft of a new National Telecom Policy (NTP) 2011 was recently released by the Communications Minister, Mr Kapil Sibal. The policy that mobile subscribers should not be charged a roaming fee but that it should be free is meant to highlight the oneness of India. A person is to have the same number, whether he is in his home State or any other State; national number portability has been set as a grand aim.

That the issue of spectrum will be delinked from telecom licences and sold transparently through an e-auction is, however, a questionable move. According to the draft policy, conditions for companies to exit from service provision will be eased, making mergers and acquisitions easier. All these are laudable ideas but they have serious implications.

TARIFFS AND FREE ROAMING

When there is unfettered market competition, with nearly a dozen mobile telephony operators in every State, why should the government offer a zero price for inter-State roaming? When the mobile service was first launched in 1995, the Department of Telecom (DoT) fixed Rs 16 per minute to be paid by the caller. The called person also had to pay. This was a prohibitive price. No wonder growth was at a snail's pace. People preferred radio paging, where the called person knew he had to call a particular number and often used the nearest phone booth to return the call.

The real growth in cell phone subscriptions occurred only after telephone companies were migrated from upfront licence fee payments to revenue sharing in 1999, followed by the entry of the BSNL into cellular mobile services and the discontinuance of tariff setting by the government. Tariffs were left to the companies to set.

Competition brought down prices to astonishingly low levels. The one-minute mobile call priced at Rs 16 came down to 30-40 paise. The government's non-involvement in setting prices for competitively provided services worked in favour of the users.

Free roaming is very good for subscribers, but it is going to be bad for the service providers. Roaming involves some processing in the network and it has a cost. Once this is abolished the revenues for telcos from this source will fall. They will, therefore, resort to increasing the basic price for mobile telephony. As it is, many companies are providing service at prices below cost. Their profits are dwindling. They are desperately trying to find new traffic through new services over the telephone networks, such as value-added services, access to the Internet, and so on.

TRADING IN SPECTRUM

A licence without spectrum is meaningless. All telecom services now are being provided through connection over wireless between subscribers and the networks. Would a company getting a service licence have to buy spectrum from somebody else who buys spectrum through an e-auction? If, when spectrum is auctioned, there is no condition that only licence-holders must bid, are we creating a situation for trading in spectrum? Would somebody make a wholesale purchase of spectrum and sell it in a secondary market to various licensees? This could be the consequence of delinking spectrum from service licences.

In the US and the UK the allocation of spectrum is only to licensees. It is done not by the government but by the telecom regulator. In the US it is the Federal Communications Commission (FCC); in the UK it is OFCOM. It would be best that in India too, spectrum is sold not by the department headed by a political minister but the regulator, TRAI.

In India, telecom has become a lucrative option for rent-seekers, as the sale of telecom licences and spectrum rests with political entities. Hence, the scandals involving colossal amounts of money and widespread corruption. It is therefore desirable that the NTP-2011 recommends handing over the allocation/sale of spectrum from the Ministry to the TRAI.

TOO MANY PLAYERS

There are far too many companies in deadly competition with each other. They are interested in market share, not improving the quality of service. In no country are there more than four or five competing companies providing telecom service in a given area.

We should roll back the number of service providers. Regulation must be designed to make mergers and acquisitions attractive and not restrictive, so that no one company has a dominating position in the market.

That a licensed company would be able to provide services across the country is another grand idea. The state-owned BSNL is already doing this. The private telcos should be brought on a par with BSNL in this regard.

INDIGENOUS ABILITY

One of the most important issues that have not been addressed is the R&D required for production of telecom & IT equipment designed in India, to be produced in India, for deployment in our networks. Before liberalisation, there was some effort in this direction at the Telecom Research Centre and the ITI. The C-DoT was a mission-oriented organisation that designed, developed and productionised digital switches deployed in the rural and urban areas for nationwide and international dialling.

Almost all telephone companies in India, including BSNL & MTNL, use imported equipment, some of which is assembled in India. Korea and China, which were lagging India till the late 1970s in regard to R&D and indigenous production, have taken giant strides by nurturing indigenous companies, initially with collaboration from foreign companies and simultaneously undertaking indigenous development.

China has nurtured two giants ZTE & Huawei, that have developed their own intellectual property and are making equipment sold all over the world, often beating such established giants as Siemens, Nortel, Nokia, CIT -Alcatel, NEC in bidding processes.

Despite requests year after year, successive Communications Ministers in India have paid little heed to promoting R&D. In the initial years of liberalisation, an R&D cess was imposed on the licensed telecom companies.

The amount collected was largely misused by governments for populist vote-catching schemes. That mindset still continues. In the Universal Service Fund (USF), upwards of Rs 20,000 crore have accumulated, the use of which is not clear.

Little has been done to extend broadband Internet to all schools and colleges and other educational institutions. The new telecom policy must set up a mission-oriented R&D enterprise, fully funded from the revenue shares that the government is collecting from the licensed telcos. Any NTP that does not address this issue of promoting indigenous capability will be committing a national crime.

Yet another important aspect is the empowerment of users. The TRAI does undertake consultations with users and other stakeholders periodically. But for settlement of users' grievances, it is necessary for it to set up offices in every State capital. It should encourage formation of appropriately constituted telecom users' associations. These should be funded by TRAI/DoT.

It is hoped that the Minister will invite, study and seriously consider suggestions made by the stakeholders concerned before finalising the NTP-2011.

(The author is former CMD, Videsh Sanchar Nigam Limited.)

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