Articles
Telecoms: Delight, Distress, Decline And Demise
Dt: 17/8/21
Telecoms: Delight, Distress, Decline And Demise
Dr T H Chowdary*
“ Take my stake and save Vodafone-Idea”
The letter of June 7, 2021 of Sri Kumara Mangalam Birla a Indian promotor of Vodafone-Idea telephone company to the Cabinet Secretary is pathetic. Subsequently on Aug 2, he resigned as Chairman & Managing Director of the company too. What else can he or anyone else do in the present plight of the company on the brink of default of massive amounts to government due by March 2022, with cash balance of only a few hundred crores; no bank or any financial institution willing to lend and millions of subscribers shifting to rivals mainly R-Jio. In the early 1990s, Prime Minister Sri P V Narasimha Rao opened up the provision of all varieties of telecom & information services to private sector companies ending the monopoly of the Department of Telecoms (DOT) and also the century-long telephone famine made acute by Nehruvian socialism which dictated occupation of the commanding heights of economy and services and industry by the State to the exclusion of peoples private companies . The consequences are to put briefly, the poorest of the poor in the country are able to have a smart telephone and access to all the world’s information. The mere plain old telephone service (POTS) which was costing an amount equal to the per capita income in 1994 is now available at about 100th fraction of the present per capita income. At one time there were 12 telephone companies fiercely competing with one another resulting in the telephone becoming affordable by whosoever wanted. But now all this is about to change. Thanks to the DOT- devised disabilities being imposed on the telephone companies and the giant R-Jio with immense resources and a grand vision entering the field.
2. I hold that the DOT deprived of its monopoly and dethroned from its commanding heights has been vengefully putting disabilities on the P-Telcos . I will cite but a few such debilitating measures.
· The primary reason which so far has not been highlighted is the immoral claim of ownership of radio spectrum (so essential for mobile telecommunications) by government and auctioning it as though it is its property to realise the highest revenues. Radio spectrum the Telcos use is not created by government or by God. It is created by the operating companies. It can be used again and again and is therefore an un-exhausting resource the companies create. The only legitimate function of government is to regulate its use by slicing it into different bands and allotting them to different companies so that the use of the same spectrum, in the same service area by more than one company does not lead to disorder . The regulator can realise the cost of regulation- allocation of the spectrum and monitoring its use.
· The second obnoxious licence condition is that after selling the spectrum, its usage is also charged. It is like the owner of a flat selling it to some person and taking money from him and yet charging for its use by the buyer. The high amount realized through auction and the usage charges collected from the companies are immoral. They are the highest anywhere in the world.
· The third and the most obnoxious imposition is the mis-interpreted sharing of the P-Telcos revenues from the adjusted gross revenues (AGR) .
· Prime Minister Atal Behari Vajpayi relieved the distressed and sinking P-Telcos by migrating them from upfront payment of license fees to revenue- sharing, through the National Telecom Policy 1999 . The P-Telcos signed the migration agreement agreeing to give a share of the P-Telos’s revenues to the DOT/government . The P-Telcos and non-Telco bandwidth providers like RAIL -Tel and the GAIL have two types of businesses. One requiring licence from the DOT and the other not requiring a license for eg: sale of telephones or other telephone & IT devices. The migration agreement signed did not unfortunately make a distinction between these two varieties of service and incomes of the companies. For eg: the main business of RAIL Tel and GAIL was not telephone service. The GAIL put Optical Fiber cable along with the gas pipes underground . The bandwidth coming from those was used for their own communications as well as for lease to telecom companies. The RAIL Tel too laid optical fiber cables for its own voice ,data and signalling communications astride the railways, in its own property. GAIL and Rail Tel took a licence to sell their extra bandwidth to Telcos. The P-Telcos and the RAIL Tel and the GAIL all signed the new license without clearly understanding or recognizing what might happened if the DOT insists that according to the agreement it is not only the revenues of licensed services but all revenues from whatever source the company gets, are to be shared with the DOT as AGR share. The DOT’s demand was not upheld either by the Telecom Regulatory Authority of India (TRAI) or the Telecom Disputes Settlement and Appellate Authority (TDSAT). But DOT, the monopoly- deprived party went to the Supreme Court and the Supreme Court interpreted the agreement literally and ruled that the revenues in whatever manner accrued to a company, should be shared. This is what has spelt the doom of the P-Telcos. And the final decision of the Supreme Court came after 10 years with the result that the P-Telos not only had to shell down the share computed by DOT but also the interest for all the 10 years.
3. Another stunning development is the late entry of the most resourceful company in the country namely Reliance Industries into telecom & IT services through R -Jio. Its stunning “no charge” introductory services and aggressive marketing has been resulting in the demise of all most all telephone companies excepting R-Jio, Vodafone -Idea and Bharat Airtel with the BSNL/ MTNL, the state-owned companies hemorrhaging with mounting losses but kept alive by the DOT, just like Air India by the GOI.
4. The government would not be justified in taking over Vodafone -Idea or giving any concessions in the payment the company has to make . If the government is not prepared to re-interpret the AGR, let whosoever cannot pay, die. The death will be because of the govt’s greed, with the DOT as the hangman India will be left with the duopoly; R-Jio and Bharati AirTel . But Bharti Airtel will also be not able to compete with R-Jio very soon. With BSNL/MTNL on the “oxygen” of government money India will have a near private monopoly rathe than a government monopoly in telecom & IT services. This is most undesirable.
5. It is therefore necessary to rethink the regime for telecoms . A distinction shod be made between infrastructure and services that it facilitates.
The desirable long term solution is to restructure the industry. The infrastructure comprising of cell towers, terrestrial microwave radio links and underground optical fiber cables should be deemed to be competing infrastructures on which different companies can provide various services. This is like the state -owned national highways and airports using which different companies competitively provide different kinds of services. Rail tracks and signaling equipments are beginning to be used by private passenger train service providing companies.
6. The emerging giant R-Jio with an inexhaustible financial resource from RIL may be separated into two companies, one for the infrastructure and other for services. This restructuring requires extensive consultation and deep thinking so that a proper solution for the long term health of the telephone companies and for affordable service for the poorest of the poor continue to be available as at present. That the current situation is inexorably leading to higher prices and near -monopoly is undesirable and harmful to the nation. Just as the NTP-1999 saved the companies and services, so should there be a new fundamental re-organisation and restructuring of the telecom companies and services. (1,311 words)
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