India's 'Self-Goal' in Telecom

And urgent steps to avert a cascading crisis.

Shyam Ponappa   |   March 5, 2020

The government apparently cannot resolve the problems in telecommunications. Why? Because the authorities are trying to balance the Supreme Court order on Adjusted Gross Revenue  (AGR), with keeping the telecom sector healthy, while safeguarding consumer interest. These irreconcilable differences have arisen because both the United Progressive Alliance and the National Democratic Alliance governments prosecuted unreasonable claims for 15 years, despite adverse rulings! This imagined “impossible trinity” is an entirely self-created conflation.

If only the authorities focused on what they can do for India’s real needs instead of tilting at windmills, we’d fare better. Now, we are close to a collapse in communications that would impede many sectors, compound the problem of non-performing assets (NPAs), demoralise bankers, increase unemployment, and reduce investment, adding to our economic and social problems.

Is resolving the telecom crisis central to the public interest? Yes, because people need good infrastructure to use time, money, material, and mindshare effectively and efficiently, with minimal degradation of their environment, whether for productive purposes or for leisure. Systems that deliver water, sanitation, energy, transport and communications support all these activities. Nothing matches the transformation brought about by communications in India from 2004 to 2011 in our complex socio-economic terrain and demography. Its potential is still vast, limited only by our imagination and capacity for convergent action. Yet, the government’s dysfunctional approach to communications is in stark contrast to the constructive approach to make rail operations viable for private operators.

India’s interests are best served if people get the services they need for productivity and wellbeing with ease, at reasonable prices. This is why it is important for government and people to understand and work towards establishing good infrastructure.

What the Government Can Do

An absolute prerequisite is for all branches of government (legislative, executive, and judicial), the press and media, and society, to recognise that all of us must strive together to conceptualise and achieve good infrastructure. It is not “somebody else’s job”, and certainly not just the Department of Telecommunications’ (DoT’s). The latter cannot do it alone, or even take the lead, because the steps required far exceed its ambit.

Act Quickly

These actions are needed immediately:

• First, annul the AGR demand using whatever legal means are available. For instance, the operators could file an appeal, and the government could settle out of court, renouncing the suit, accepting the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruling of 2015 on AGR.

• Second, issue an appropriate ordinance that rescinds all extended claims. Follow up with the requisite legislation, working across political lines for consensus in the national interest.

• Third, take action to organise and deliver communications services effectively and efficiently to as many people as possible. The following steps will help build and maintain more extensive networks with good services, reasonable prices, and more government revenues.

1. Enable Spectrum Usage on Feasible Terms

1. Wireless regulations

It is infeasible for fibre or cable to reach most people in India, compared with wireless alternatives. Realistically, the extension of connectivity beyond the nearest fibre termination point is through wireless middle-mile connections, and Wi-Fi for most last-mile links. The technology is available, and administrative decisions together with appropriate legislation can enable the use of spectrum immediately in 60GHz, 70-80GHz, and below 700MHz bands to be used by authorised operators for wireless connectivity. The first two bands are useful for high-capacity short and medium distance hops, while the third is for up to 10 km hops. The DoT can follow its own precedent set in October 2018 for 5GHz for Wi-Fi, i.e., use the US Federal Communications Commission regulations as a model.1 The one change needed is an adaptation to our circumstances that restricts their use to authorised operators for the middle-mile instead of open access, because of the spectrum payments made by operators. Policies in the public interest allowing spectrum use without auctions do not contravene Supreme Court orders.

2. Policies: Revenue sharing for spectrum

A second requirement is for all licensed spectrum to be paid for as a share of revenues based on usage as for licence fees, in lieu of auction payments. Legislation to this effect can ensure that spectrum for communications is either paid through revenue sharing for actual use, or is open access for all Wi-Fi bands. The restricted middle-mile use mentioned above can be charged at minimal administrative costs for management through geo-location databases to avoid interference. In the past, revenue-sharing has earned much more than up-front fees in India, and rejuvenated communications.2 There are two additional reasons for revenue sharing. One is the need to manufacture a significant proportion of equipment with Indian IPR or value-added, to not have to rely as much as we do on imports. This is critical for achieving a better balance-of-payments, and for strategic considerations. The second is to enable local talent to design and develop solutions for devices for local as well as global markets, which is denied because it is virtually impossible for them to access spectrum, no matter what the stated policies might claim.

2. Policies and Organisation for Infrastructure Sharing

Further, the government needs to actively facilitate shared infrastructure with policies and legislation. One way is through consortiums for network development and management, charging for usage by authorised operators. At least two consortiums that provide access for a fee, with government’s minority participation in both for security and the public interest, can ensure competition for quality and pricing. Authorised service providers could pay according to usage.

Press reports of a consortium approach to 5G where operators pay as before and the government “contributes” spectrum reflect seriously flawed thinking.3 Such extractive payments with no funds left for network development and service provision only support an illusion that genuine efforts are being made to the ill-informed, who simultaneously rejoice in the idea of free services while acclaiming high government charges (the two are obviously not compatible).

Instead of tilting at windmills that do not serve people’s needs while beggaring their prospects, commitment to our collective interests requires implementing what can be done with competence and integrity.

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Shyam (no space) Ponappa at gmail dot com
1. https://dot.gov.in/sites/default/files/2018_10_29%20DCC.pdf
2. http://organizing-india.blogspot.in/2016/04/ breakthroughs- needed-for-digital-india.html
3. https://www.business-standard.com/article/economy-policy/govt-considering-spv-with-5g-sweetener-as-solution-to-telecom-crisis-120012300302_1.html

Comments & Responses-2020-03-06

ASIT

Facilitate - that's anathema. Technology has moved too fast and will continue to outpace the convolutions of the bureaucracy. First, they need find who wrote the Rule related to AGR, who signed off on it - it must all be on the record - and let the country know who thought Revenue was all that was important, nothing else. Rescind the definition retrospectively, we love doing that , why not here where it significantly impacts the aam admi ? That may be tantamount to admitting guilt in some form in bad rule writing, but then as the world loves to say, we can all move on - where to, no one knows.

Response re Facilitation:

Two instances where our governments have done well are in IT enabled services pre-2000, and in the automotive sector: “the Automotive Mission Plan (AMP) 2006-2016 was a programme across government agencies, industry participants, and academics, to make India a global hub for the automotive industry. It was successful despite the slumps of 2008 and 2013-14, and employment increased from 10 million to 32 million by 2016. The next phase is under way through AMP 2016-2026(http://www.siamindia.­com/cpage.aspx), aiming to more than double exports to 35-40 per cent of output, and increase employment by 65 million. Momentum has declined in the last year[this was written in Augsut 2019, therefore now two years, and facilitation has faltered], however, because of a number of adverse factors. These include confusion and uncertainty regarding policies on diesel and electric vehicles, trade tensions, slowing gross domestic product (GDP) growth here and abroad, higher costs from mitigation strategies and taxes, and funding constraints arising from problems in the financial sector.”

From: https://organizing-india.blogspot.com/2019/08/the-automotive-slump-industrial-policy.html

NARENDRA M.APTE

1. This is an interesting view on the current scenario in the telecom services sector. 2. I am a very small customer of telecom services, one among the millions. I say that so long as quality of service provided to me is good and so long as service is provided at a reasonable price, I have no reason to favour this or that provider of telecom services. 3. Question is this: should I be really concerned about financial health of telecom companies? 4. It is desirable that there are proper discussions between the telecom companies and the Department of Telecommunications (DoT) as regards final liability of telecomm companies towards AGR dues. These discussions should be held with a simple objective- to end the uncertainty about AGR dues. 5. One wonders what kind of relief our Central government can grant to three telecom companies, particularly to Vodafone Idea, the merged venture of Vodafone and Idea Cellular. In case the govt. grants such relief, who would be the beneficiary? Would we, as telecom services customers, benefit in the long run? Once an amicable solution is found to current problems of telecom companies, DoT should advise the telecom companies to pay the dues as per the solution. If this does not happen, then customer like will face many a problem and there may be unintended ramifications.

Response to #2-4: Should citizens be concerned about the state / health of industry sectors (and telecom in particular)? 

Answer: If the product or service is in the category of Fast Moving Consumer Goods, competition among many providers is generally sufficient to ensure quality and price, provided the market can support a reasonable/realistic price that allows maintaining certain levels of standards.  What’s a reasonable/realistic price?  One that yields a reasonable profit.  What are adequate levels of standards?  Safe, healthy, hygienic and aesthetically pleasing, for instance, for inexpensive biscuits or food items, or soap, in terms of ingredients, cleanliness, attractive presentation or packaging, and waste management.  For infrastructure services, scale of organisation, production and delivery determine the market structure.  Sectors such as electricity, water, telecom, railways, airlines, and fossil fuels are network industries driven by scale.  The structure tends to have no more than a few large players, and these industries usually require regulation to prevent monopolistic exploitation, or are managed as regulated utilities.  For such products and services, the state of the industry determines the availability, quality and price.  This is why it behoves citizens to take an informed view that supports sustainable models for the long term, in order to have stable supply of services or products of good quality at reasonable prices.  Otherwise, they are likely to get shoddy, overpriced, or unreliable services, or as in rural broadband for many people, it may not be available at all.

[e.g., see https://www.sciencedirect.com/topics/social-sciences/network-industry]

#5:

We in India often expect governments or enterprises to provide for our needs without having to think about them.  Whereas as citizens in a democracy, self-government implies the obligation – the flip side of citizens’ rights – to contribute to the maintenance of standards and governance in our communities, including through exercising consumer choice and advocacy.  The objective of any problem resolution should be the sustained common good or public interest, although we have typically not applied such clarity and forethought in our approach.  But having had a democratic franchise thrust upon us without having learned the duties of citizens, we haven’t got there yet.