Memoranda for Submission to the Chief Ministers of the Two Telugu States.


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)