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The Telecom Embroglio

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A. Raja has not yet exceeded the worst fears of the public, but he has certainly fulfilled the fondest hopes of the media. He is Big News — so big that he has swept R. Raju off the pages. And he did it with a simple trick: he issued telecommunications licences to first-comers in 2008 at licence fees that were charged to licensees selected in 2001.

He claims that there is nothing wrong with that: if a fee was right in 2001, how can it become wrong in 2009? And the first-comers had been standing in a queue for years — they were getting so old and frail that he was afraid they would collapse. Even the government thinks something is wrong with his defence, for its own Central Bureau of Investigation raided the office of the Department of Telecommunications on 22 October.

It is still possible that he  is innocent. Just in case he is guilty, Raja has claimed senior accomplices. He says he only followed the recommendations of the Telecom Regulatory Authority of India. If TRAI ever made any such recommendations, Nripendra Misra immediately negated them by saying that the price of the licences should have been determined by market forces. Having lost that prop, Raja then said that he had taken the decisions in consultation with the Prime Minister; the Prime Minister gave him vapid support by saying that allegations of wrong-doing in spectrum allocation were incorrect.

While all this is good theatre, it is going nowhere. There is rampant corruption in our political system, and there are no mechanisms for detecting it expeditiously and punishing the guilty. So whether some people made hundreds of crores or thousands, we can only write it off as the high cost of our democracy. We should ask ourselves what repairs are necessary and desirable.

One thing the finance minister should do in the coming budget is to close down the office of the Universal Service Obligation Fund Commissioner and transfer the Rs 16,000 crore he is sitting on back to the telecom operators from whom he collected them. The village public telephones that it was intended to finance are no longer necessary. Almost the whole country is within reach of cellphones; where they have not reached, a shopkeeper or rickshaw wallah with a cellphone is better and cheaper than a village public telephone. If there are any villages left unreached, the DoT should conduct a reverse auction. It should ask operators to bid the lowest subsidy for which they would be prepared to cover the villages. The money should come from the DoT's ample coffers.

There is nothing wrong with bringing in newcomers; Raja's fault was that he restricted his choice to the so-called first-comers, and that he underpriced spectrum so that they made enormous windfall profits. That left the older operators, whose networks have grown enormous, short of spectrum; as a result, the quality of service is going down. Raja should give out some more spectrum to them in proportion to the number of their customers, at the same price as he charged the newcomers. That is not the ideal solution, but it will repair an injustice.

The other thing he should allow is free sale of spectrum amongst operators. The more successful operators are short of spectrum. On the other hand, the least successful operators are serving businesses who send mass advertisements on SMS; as a result, people's cellphones are cluttered with unwanted SMSs. TRAI has been trying to stop this menace for three years, but with little effect. It created a registry of telemarketers in 2007. If they made an unwanted call once, they would be fined Rs 500; a second time, they would be fined Rs 1,000; the third time, they would be closed down. The trouble is, people do not complain, and telemarketers do not register. And the suspicion is that failing telecom operators are selling mass SMS campaigns to whichever telemarketer is prepared to pay.

The entry of new operators has intensified competition and led operators to create new business. That business is bringing down the quality of service of all operators. It is leading to network overcrowding, dropped calls, unwanted calls and SMSs, and who knows how much overcharging.

The way out is to reduce the number of operators. That is obviously beyond the powers of Raja. But what the government can do is to permit a market in operators. Let some operators buy off others. Obviously, there should be a limit to such sales — let us say, it should be allowed as long as the number of operators in a circle is not less than four. An even better thing to do would be to abolish circles, that antiquated remnant of the age of a single state-owned operator.

The author is Consultant Editor of Businessworld.

ashok dot desai at gmail dot com

(This story was published in Businessworld Issue Dated 30-11-2009)