The allegations of corruption against him notwithstanding, as telecom minister, Sukh Ram’s biggest achievement was opening up the sector to private participation in 1994, when he came up with the New Telecom Policy (NTP).
In 1999, when the sector was close to collapse, Sushma Swaraj announced NTP 1999, which restructured the financial liability of companies and brought in more competition, not just in the mobile business, which moved from duopoly to competition, but also in the long-distance business, both at the national as well as the international level.
Even Arun Shourie could lay claim (I think falsely) to having resolved the tangle of Reliance Infocomm’s controversial services in 2003 by forcing the cellular industry to back down and imposing a penalty on the company.
Naturally, then, when a new government and a new minister come in, and want to leave their mark on the industry, what better way than to have an NTP 2005? More so in a period when no one looks up to the ministry with the same deference since the powers of regulation have moved to the telecom regulator, Trai, and when no meaningful move can be made without Trai’s explicit recommendation.
Problem is, if you look at the sector’s problems today, there is none that can be solved through a new NTP, and there is no solution that cannot be implemented through the existing Trai set-up.
The main problem areas today are the poor teledensity in rural areas despite the government collecting over Rs 20,000 crore from us over the last three years in the form of a USO fund and an ADC cess; the lack of competition in the fixed-line telephone business; the excessively high tariffs in the international long-distance business; and the lack of new investment (sales like those of BPL have taken place to existing players).
If lack of funds is the issue for poor phone availability in rural areas, Trai can always hike the USO or ADC revenue-share percentage got from telecom firms; it doesn’t need a new policy. But the issue here is not the poor availability of funds, it is the poor design of the schemes, their misuse and poor administration.
A new policy, it could be argued, could put rural phone obligations on mobile players, but surely a Trai which recommended (and a government that accepted) the removal of the obligations to set up over a lakh village public phones while regularising the Reliance/Tata phones can hardly be expected to impose them again?
As for new investors, unless the government clears up the spectrum mess created, it is true, by Trai and the previous government (see Rational Expectations, June 6, 2005), no new investment is possible in the mobile space—which also makes you wonder if Rajiv Chandrasekhar got a good price for BPL since the lack of fresh spectrum means the only way companies can increase their subscriber base is by acquiring existing companies.
As for the fixed-line business, as long as BSNL is allowed to keep charging customers below-cost rentals/tariffs, and get subsidised through the ADC fund, there is no way new players will come in.
A similar situation obtains in the international long-distance business, where Trai refuses to regulate tariffs despite the huge profits being made. The reason for this is simple: since Trai does not allow customers a choice in choosing who their carrier will be on a call from Delhi to New York, for instance, there is limited competition—if Trai implemented a carrier access code, as is done in various overseas markets, I could call my cousin in the US from my Hutch mobile but have the call carried overseas by Bharti or VSNL.
Since this is not allowed, only those firms that have their own captive consumer base (like Bharti or Infocomm) set up long-distance businesses—the only standalone international long-distance carrier, Data Access, had to shut shop because of this.
This also ensures that the re-selling business—where companies buy bulk long-distance minutes from carriers like Infocomm and then sell it aggressively to customers at the retail level—has not taken off.
The only restriction that the two NTPs put pertain to service-specific licences—that is, a mobile player could not offer fixed-line services and vice versa, for instance.
But when Shourie approved Infocomm, this too was abolished—Trai then moved to allow all services on any licence (such as long-distance telephony even if you had just a mobile licence, for instance), but the telecom ministry is yet to implement this.
Instead of rushing in to make new policy, what the telecom ministry needs to do is to ensure Trai does its job, to ask it why it hasn’t moved on reducing international long-distance tariffs, to get it to give recommendations on carrier access codes, on number portability, on increasing rural tele-density, and so on. Making policies, of course, it is true, is more glamorous and doesn’t require a rigorous monitoring of events.