The Hindu Business Line : Balancing act

IF you walk into Sanchar Bhawan these days, which houses the communications ministry, you would not be amused at the number of consultants, self-appointed advisors, industry association representatives and consumer groups waiting to see high-ranking officials of the Department of Telecommunications.

With the Government embarking on an extensive consultation process to formulate a New Telecom Policy 2005, no one wants to miss the opportunity to push their agenda forward.

Going by the interest, clearly much is at stake and everyone wants to put their weight behind one of the biggest exercises being undertaken by the ministry of communication ever since the telecom policy of 1999 (NTP 1999) was formulated.

But one would ask: With the telecom sector already growing at an exponential rate and the liberalisation of the sector paying rich dividends, is there really a need for the Government to embark on such a complex exercise?

Yes, say the industry pundits. Explains T.V. Ramachandran, Director-General, Cellular Operators Association of India (COAI), "Although the New Telecom Policy 1999 (NTP'99) recognises the possibility of convergence of markets and technologies, it prescribed a service-specific licensing framework for the telecom sector.

But increasingly, technology is blurring the distinctions between licences and the services that can be offered. The new policy NTP 2005 should be such that it enables technology to drive solutions rather than vice-versa."

Others say that while a review of NTP 1999 is called for, the new policy should go beyond the realm of telecom and encompass vistas such as IT and ITES (IT-enabled services).

"The convergence between telephone services and computer technology is driving the development of technology and services. Hence, first and foremost, considering the intertwined and mutually-dependent roles of Information Technology and Communication Technology, it is only prudent to consider the whole ecosystem as a singular entity," says Deepak Maheshwari, Secretary, Internet Service Providers Association of India (ISPAI).

Despite India witnessing a near 100 per cent growth in the cellular subscriber base over the last year, the country is nowhere near being a superpower in this sector.

Consider these facts: India's ICT index is as low as 75 on a scale of 100, where 1 is the best and 100 the worst. Ninety per cent of the population still does not have telecom connectivity. India is the only country where the cable TV user base is more than the fixed line telephone subscriber base.

The mobile revolution has, so far, concentrated on the top 3,000 towns. Over 6 lakh villages remain connected only through a single village public telephone (VPT). Compared to an urban tele-density of 26.2, the country had achieved a rural tele-density of only 1.74 by March 2005.

"In NTP 1994 and NTP 1999, the focus was on creation of infrastructure, the focus henceforth ought to be on tapping the same through competitive market forces and ensuring extending the services to the underserved areas as well as in enabling people to make use of ICT for enhancing the social capital," says Maheshwari.

What then should the Government be addressing in the NTP 2005 that would catapult the communications sector into its next phase of growth? Lets take a look at what the various industry stakeholders have to say.

Licensing and regulation

The regulator and the policymaker should not only be independent, but also perceived to be so. The prevailing practice where people move across the Government, the incumbent and the regulator, undermines independent thinking and action, says ISPAI.

In order to avoid ambiguity and influence, there should be a singular independent regulator, vested with powers not only for regulation but also for licensing and spectrum management, for example, Ofcom in the UK.

"In the present scenario of intense competition, it is neither required nor desirable to have too much regulation. The regulator should, therefore, adopt a light-touch approach to regulation," says Ramachandran.

Infrastructure sharing

The policy should proactively promote and facilitate sharing of common infrastructure to enable emergence of non-facility-based service providers and boosting competition. "For a developing country like India, duplicating of infrastructure is a waste of scarce resources, which should be avoided," says S.C. Khanna, Secretary-General, Association of Unified Service Providers of India (AUSPI).

Interconnection

Legacy-laden artificial constraints only go on to obfuscate entrepreneurship. To facilitate fair, speedy and efficient `Reference Interconnect Offer' (RIO) by the service provider having significant market power is a regulatory tool and must be provided a definitive and conducive environment.

Since BSNL, the incumbent fixed line operator, has an extensive fixed-line infrastructure, there should be unbundling of copper by BSNL and active sharing of infrastructure by BSNL in a fair manner, says the COAI.

Universal service/access

Support from USO Fund and other government sources should be available to any service provider who comes forward and for any technology and service, including broadband.

Industry players hold the view that the Government must review the amount collected from the USO levy every two years and consider reducing the burden on operators over a period of time. Operators say that there is also a need to initiate specific measures to incentivise and increase rollout of telecom services in rural areas.

Spectrum management

Spectrum pricing should provide economic incentives for efficient usage. However, the ISPAI feels that spectrum is not just about mobile telephony. Radio frequency must be earmarked for other technologies as well such as NFC (Near Field Communication), ZigBee, Ultra Wideband and a plethora of technologies — the most prominent of these being Wimax, which holds enormous potential to extend the access networks, especially for broadband.

Fiscal burden on the sector

The telecom sector currently bears the brunt of various levies and taxes (service tax, excise and customs duties, sales tax, spectrum charges and licence fees, etc) adding up to as high as 35 per cent compared to just 3 per cent for China.

"Unless these are substantially reduced, the tariffs, as well as the cost of the access device, will not come down significantly and usage may be hampered — irrespective of the extension of access networks," says Ramachandran.

Indigenous R&D and manufacturing

More than 75 per cent of the telecom equipment in India is still imported. To enable India to become a key player in the hardware manufacturing space, the Government needs to put in place policies and incentives.

"Status of virtual SEZ for units manufacturing telecom hardware, introduction of tax holiday schemes, longer term Income-Tax benefit to encourage investment in R&D are some measures that the policy needs to address," says C.S. Rao, Chairman, Assocham Committee on Telecom and Convergence.

Encryption and information security

In order to ensure and impart safety to the users of ICT, for commercially and personally sensitive data, a balanced and progressive framework is a pre-requisite.

For boosting confidence in information security, users should be able to decide for themselves the level and the type of encryption, as deemed fit by the users, as long as they have an obligation to facilitate decryption for specific law-enforcement purposes.

Internet telephony

"The policy is so skewed that while an industrialist can call from Mumbai to New York for as low as Rs 1.60 per minute (thanks to Internet telephony, of course) a rickshaw-puller in Delhi needs to pay more than Rs 2.50 per minute to speak to his family in an Indian village — just because the latter is barred from utilising this cost-effective technology. In line with the vision of `OneIndia' unrestricted Internet telephony should be permitted within the country as well," says Maheshwari.

Then there are ongoing issues such as unified licence regime, spectrum allocation for third generation services, reduction of the access deficit charge (ADC) and increasing the Foreign Direct Investment cap.

While the issues raised by the industry seem very innocuous, each of them is a potential minefield that can lead to yet another controversy.

Considering the diverse interests of the various stakeholders who are camping at the officials' doorsteps to push through their viewpoint, the policy makers at Sanchar Bhawan do not have an envious task.

Will the NTP 2005 be able to emerge out of the squabbles within the industry to lead India's telecom revolution over the next decade, or will it be yet another source of controversy? Watch this space for the answer.

tkt@thehindu.co.in

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