Cashlessness Needs Connectivity

... And connectivity needs political and administrative convergence.

Shyam Ponappa    |   January 5, 2017

This new year brings with it uncertainties amidst the push for cashlessness. Without going into the demerits or otherwise, some clarity on a road map to go forward from where we are might help with realistic planning to manage our way out of this situation.

Cashless transactions need ubiquitous connectivity, which we don’t have.  Without it, the goal is simply unfeasible. Better to recognise this now, rather than act out elaborate charades, resulting in avoidable economic hardship and social ructions.  Connectivity needs effective, efficient communication links at a reasonable cost. These call for realistic objectives and solid implementation, not bluster and unrealistic goals or plans, such as fibre-optic networks everywhere, payment systems on a hastily assembled database riddled with imposters, or insufficient security and privacy.

What’s required?

 

The need is for internet connectivity using fibre backbones, extending to users through aggregation networks that are mostly wireless. The chances of establishing these networks increase if political parties and government agencies take concerted action on how to do so. This is necessary for two reasons. One is that our present network development and spectrum policies do not facilitate achieving universal broadband, especially in areas with lower commercial potential than prosperous urban clusters. The second is the legacy of network development with entrenched rivalries and perceived ways of managing spectrum, and the aftermath of the spectrum scam.  These constrain society’s collective ability to configure solutions for connectivity, as opposed to the biased or limited perceptions of stakeholder groups such as the government, the judiciary, the citizenry, and industry (comprising service providers and equipment suppliers). Government agencies also have divergent agenda, e.g., the Telecom Regulatory Authority of India (Trai) is responsible for recommending spectrum use, the Department of Telecommunications/Ministry of Communications has licensing authority and runs the state-owned operators, the Ministry of Information and Broadcasting holds certain spectrum bands, the Ministry of Defence and government agencies hold other bands, and the Ministry of Electronics and Information Technology is responsible (without the authority) for providing broadband. Hence, the need for a convergent approach, as effected partially for electricity supply, from coal mining through transportation to distribution (although other sectors – hydel, hydrocarbons and nuclear – are yet to be similarly linked).

What needs doing
 

Radical changes such as pooling and sharing network infrastructure have to be considered for widespread connectivity. Such changes can’t happen with confrontation and mistrust, but only with trust and cooperation. This may seem naïve, but the ruling party leadership sets the tone for cooperation, as does the administrative leadership. Their pitch has to be sufficiently persuasive to induce diverse stakeholders – other political leaders, the judiciary, the citizenry who want industry to pay their pound of flesh while getting good services that are priced very low, and the operators, who have huge investments in networks and spectrum rights – to consider sharing equipment, and to work out worthwhile terms for everyone. 

Currently, contending political parties pursuing selfish objectives as antagonists settle at the lowest achievable equilibrium. To understand why, consider two parties, A and B, with objectives along the horizontal X axis for A and the vertical Y axis for B in the chart. 

When parties pursue conflicting interests confrontationally, they end up at N or Nash Equilibrium, where neither can improve their position without the other’s concurrence.  Assume A has the objective of maximising a majoritarian agenda, while B seeks to maximise dynastic control of its leadership positions. This holds for any objectives that are unrelated (orthogonal). If their objectives are along the same dimension — say, control of the Centre or of the same states, there can be no accommodation: one wins what the other loses. This has happened so far, as parties are periodically voted in and then out by a disenchanted electorate. But if they accommodate, their equilibrium could move up to S, the “Best Feasible Equilibrium” point, where the acceptable limits of their respective objectives meet. (For more details, see: “Tata’s Corus Buy: A Game Theory Analysis”, organizing-india.blogspot.in, November 2, 2006, and "India’s Access To Nuclear Fuel & Technology", April 3, ) 

2008.)

Imagine waking up to find that instead of the usual confrontation and vitriol, a different and gracious protocol awaits you. One of harmonious interaction marked by accommodation and courtesy, despite nature being red in tooth and claw. Utopian?  Perhaps. But not if the powers that be realise that the way out of the cashless crisis is to seek benefits for everyone, instead of self-destructing by chasing chimera such as pure cashlessness or other unrealistic goals.  Instead, they could give people what they need but don’t have: ubiquitous communications  infrastructure that facilitates all activities (not just cashless transactions), and a more secure, well-ordered environment for pursuing their livelihoods and well-being. Policy decisions to share network infrastructure would be the start of this journey.

We can then break out of the impasse created by legacy communications policies and posturing, e.g., which party was responsible for what scam, the popular obsession with high auction prices for spectrum while wanting cheaper services, and operators committed to cornering spectrum.

Once the leadership collaborates, they’ll find that communications services delivery will be much improved by sharing capacity and coordination. This would enable other stakeholders – private sector operators, the citizenry, the judiciary – to accept that everyone gains from cooperative access to and delivery of communications services, provided adequate profits are generated and shared equitably. This will help in accepting a more rational, pay-for-use policy on the lines of highways, metro rail, or oil pipeline usage, and recognise the financial infeasibility of having auctions as well as funds for investments in networks for countrywide broadband access.

Government and stakeholders can then work together to develop solutions that are fair and practical. For instance, one or more consortium/s of operators with the government as a co-investor in each (on the lines of Singapore’s OpenNet) can co-own the network and coordinate for most effective and efficient service delivery.  Earnings from spectrum usage can be collected by the government once the networks are commercially viable, as for developing any other infrastructure. Such collections are likely to exceed the auction fees foregone, as with revenue sharing from licence fees.

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                                                               Shyam Ponappa at gmail dot com

Catching Up On Broadband

The govt can invest some of the Rs 1,00,000 crore from the spectrum auctions to help India catch up on broadband

Shyam Ponappa /  July 1, 2010

When it comes to broadband, India is “notably lagging its peers”, to quote Booz & Co, an international consulting firm.* Its report recounts our pathetic coverage — less than half the anticipated 20 million — and recommends that both industry and government must act in concert. Spelling out the roles for both, it concludes that we need a national policy to improve fixed-line infrastructure more rapidly than the current market-based approach does, as well as satellite-based communications.

The report recommends this because advanced economies have broadband on widespread fixed-line networks, and many are pursuing strategies to further empower their citizens through state action, as before. The effects are many, but let’s start with examining costs.  Figure 1 shows the relative cost of broadband in a sample of countries.

Figure 1: Broadband Cost PPP US $

India seems favourably placed with its low purchasing power parity (PPP) cost. However, relative to costs in India, this is about 6 per cent of average monthly gross national income (GNI) per capita, ranked 78th, as shown in Figure 2.  In comparison, the first 23 countries — Macao, Israel, Hong Kong, the US, Singapore, etc., Greece and Spain included — have costs below or close to 1 per cent; the next 16 have costs below 2 per cent. As the 39 countries have PPP costs of only 0.25 per cent to twice India’s cost, India’s cost as a percentage of its GNI is six times theirs, i.e. Indian users have to pay relatively more. Increasing GNI, while desirable, is harder, more complex, and will take much longer. By contrast, costs can be reduced quickly by sharing network resources and limiting government collections to a reasonable percentage of revenues, instead of auctions and arbitrary levies.

Figure 2: Fixed Broadband Cost As % GNI Per Capita 

Source: http://www.itu.int/ITU-D/ict/publications/idi/2010/Material/MIS_2010_without%20annex%204-e.pdf

Broadband leaders

Wired Asian countries like Japan, Hong Kong and South Korea already offer broadband on the next generation of high-speed networks. Singapore’s approach especially should be of interest to India, with policies supporting a blend of public subsidies and private investment, while separating three activities: infrastructure, network operations (wholesale), and user services (retail)**

Two years ago, Singapore set out to create an environment with more open access to downstream operators by separating the building of infrastructure from the running of the network. It drew on the experience of local community networks in countries like Britain, France, the Netherlands and Sweden. Three Singapore companies partnered with Axia Netmedia, a Canadian broadband company, to form a consortium called OpenNet, the infrastructure operator. OpenNet uses one partner’s existing network (SingTel’s) as a base. With a government grant of 750 million Singapore dollars, OpenNet is building an extensive fibre-to-the-home (FTTH) grid to be completed by 2012. The second partner is a subsidiary of Singapore Power, SP Telecommunications, which leverages Singapore Power’s experience in developing infrastructure. The third, Singapore Press Holdings, is a leading media services company.

The network operator, a subsidiary of StarHub (a cable and phone operator), is Nucleus Connect. Residential services at 100 mbps have been announced, to be provided by over 10 retail service operators. While some analysts opine that increased competition may not lead to appreciable cost reduction, Singapore is already ranked fifth-lowest in cost as a percentage of average monthly GNI per capita.

Can India do some catching up?

a) Can India do something similar? Don’t we need to? How?

The answer to the first question is: only if the government decides on a concerted drive.

To the second: yes, to be competitive.

To the third: with a comprehensive, integrated systems approach. It is insufficient if only one or a few ministries and agencies are involved, because the development and execution of solutions require cutting across turf boundaries. The conventional approach of the ongoing Trai consultation followed by recommendations addressed by the DoT is simply inadequate, because their charter is too limited. Many issues concerning commercial and user decisions, particularly of government agencies and the Department of Defence, and radical changes in approach need active participation from these players as well as the private sector for resolution. Examples are Booz & Co’s recommendations of a better fixed-wire network, and satellite communications in the Ka band, or the possibility of exploiting the cable and satellite TV network of around 110 million households. The entire communications network, or at least the backbone, needs to be shared for efficiency, unlike the existing limited tower-sharing. Also, state governments need to be closely involved in issues like Rights of Way and user needs.

b) Governments at the Centre and all states need to facilitate the productivity of their citizens, instead of hamstringing them with taxes, levies, auctions and dysfunctional policies. This is more easily said than done, with our predatory history, fractious coalitions at the Centre and states, and freewheeling, combative state governments. Governments at all levels have to coordinate this problem-solving initiative for all stakeholders, adapting the experience of leading broadband countries, instead of predatory behaviour seeking personal gains. The consultative process needs to agree on goals, and then figure out practical ways to achieve them.

c) With inspired leadership and a constructive approach, half of the over Rs 1,00,000 crore from the 3G and BWA auctions could support a broadband gambit drawing on concepts like Singapore’s public-private partnership, instead of being just a damaging revenue-collection exercise. Again, easier said than done, but with result-oriented, strong leadership to elicit enlightened employee engagement, even MTNL and BSNL could be partners in a core network in a role like SingTel’s. A public-private network-builder can draw on the combined strengths of its participants to provide a platform for a number of private operators. Separating the infrastructure building and operations from wholesale network services and end-user services could make this feasible and practicable.

shyamponappa@gmail.com

* “Bringing mass broadband to India: Roles for government and industry”, Booz & Co, June 7, 2010: http://www.booz.com/media/uploads/Bringing_Mass_Boadband_To_India.pdf

** “Singapore gets wired for speed”, Sonia Kolesnikov-Jessop, NYT: http://www.nytimes.com/2010/06/15/technology/15iht-rtechbroad.html?ref=internet