According to a recent news report, the just-retired head of state-owned Bharat Sanchar Nigam Ltd (BSNL), the current secretary of the department of telecommunications (DoT) and chairman of the Telecom Commission are being considered for the post of member, Telecom Disputes Settlement and Appellate Tribunal (TDSAT), the sector’s statutory body for resolving disputes among operators and with the government. The current situation in the telecom sector, especially in allocation of licences and spectrum to mobile operators, suggests that this undermines the role of specialized expertise and independence in decision-making at a juncture when it is vital.
It could be rash to blame the current crisis on the incestuous relationship between policymaking, regulation and dispute resolution. But it would be naïve to dismiss it. At its inception, of the top leadership of the Telecom Regulatory Authority of India (Trai) members and advisers, only one each came from DoT. TDSAT had none.
Today, virtually all of Trai’s active leadership is ex-DoT. Initially, it was pure technical staff, while now the tendency is to induct bureaucrats. Many have come to Trai from BSNL and later returned to operational and regulatory duties with obvious conflicts of interest. The Trai Act explicitly allows outsiders to be recruited, but none have been. Many of the current Trai staff, including the chairman, contributed significantly to decisions—some even signed the references(!)—that today lie with the body for review and reform.
Little surprise then that Trai has increasingly engaged more with bureaucratic priorities than with economic regulation, its primary mandate. Its recent documents reproduce international experience on important issues such as mobile telecommunications, spectrum and the Internet, but its recommendations reflect little of that experience.
Trai may agree that spectrum is poorly used by operators, as its low price encourages abuse, and that the approach in most countries is to auction it, but retains the administrative approach, which has caused the mess. Granted that rules for current licensees may be difficult to change midway, how do you justify new players getting spectrum on old terms?
Similarly, the most successful approach internationally may be to have free entry and exit in the Internet market, prevent domination by larger players, and encourage small players to sell or resell services such as Internet telephony and broadband. But, for Trai, the small players pose risks and must be controlled with higher licence fees. Technology neutrality may be its favourite tune, but rules that allot GSM players twice the spectrum their CDMA competitors receive can continue. Trai believes 3G is a separate market from 2G, not its extension, but recommends that only existing players should be eligible for spectrum to provide the services. These are hardly decisions economic regulators can justify.
To Trai’s credit, when DoT asked it to recommend whether the number of mobile players should be capped, it argued for increasing, not reducing, competition. Also for unbundling spectrum from mobile licences. But although the legislation empowers Trai to act on its own, it failed to recommend a credible market-based process for new spectrum users. It said instead that a committee “headed by an eminent scientist/technologist from a national-level scientific institute like Indian Institute of Science, Bangalore” frame new criteria.
The current rules allocate spectrum to applicants in the order in which their requests are received. Trai did not suggest an alternative, market-based approach. For many, Trai’s recommendations, taken together, mean that cheap licences and the spectrum bundled with them would be available today at prices set in 2001, when the market was less than a quarter its size. Nearly 50 players applied. The Trai chairperson protests that he wanted or suggested none of this, but little else can explain the mad rush.
The DoT statement last Friday about entry of new players and allocation and pricing of spectrum adds to the mess as only bureaucrats can. How many new players can expect spectrum, at what price and when is still vague. Existing players must wait longer and pay more, but the calculation is opaque. A future auction is “mentioned”, but who will bid for what is obscure. A decision on Trai’s recommendations on 3G, pending for over a year, can transform spectrum availability for new and old players, but the new document cares little. Accusations of favouritism are flying wild. A functioning sector is headed towards chaos.
Experts and successful regulators worldwide have answered almost all the questions facing India’s telecom sector—transparent selection of new entrants, allocation and pricing of spectrum, technology selection—repeatedly, consistently and conclusively. Yes, rights of players with contracts with the governments are an issue. India has successfully addressed such issues earlier: e.g., the significant changes in e-licensing norms in 1999 and 2003. A similar settlement followed by a move to new rules that work elsewhere is all we need. But if we do not urgently review how regulators and related decision makers are selected and work, similar problems will haunt us for a long time.
(Mahesh Uppal is a regulatory affairs consultant. Comment at email@example.com)