Draft New Telecom Policy: Good For Distance, Distant From Good

Draft telecom policy is more Vision 2020 – strong on long term ideas and the sector’s future, weak on any deliveries on short to mid-term, and silent on DoT restructuring, strengthening or if independent operators can give investments a boost

The draft NTP 2011 has been received with great expectations. The nation needs good news after being besieged under the 2G spectrum scam and arrests of former telecom ministers, along with senior bureaucrats and prominent industrialists. It is in the shadow of this negative sentiment that the draft had the opportunity to reignite confidence amongst consumers and investors. Let’s see if it has.

To begin with, the draft reads like a Vision 2020 statement. It has excellent long term objectives and intents – on broadband, spectrum availability and pricing, and regulatory and legislative reforms. The five areas identified in the mission are uplifting as are the 36 sections placed under ‘Objectives’. Without question, if implemented well, they can transform India into a knowledge-based society in the true sense.

The challenge is with the sections on strategies. For starters, the one on broadband, rural telephony and USO is mostly about broadband. While low broadband penetration is a serious issue, there is little mention of any innovative idea to soon give a phone to the nearly half a billion rural Indians who still await one. The section sees an obsession with laying optical fibre; it misses the fact that India hasn’t seen public investment in telecom infrastructure for nearly 15 years, except in small pockets by BSNL. Further, it takes on the enormous task of linking diverse welfare projects such as NREGA etc to deliver what it calls an ‘always connected society’, bestowed with the ‘right to broadband’.

The section on R&D, manufacturing, and standardizing is worrisome. It forces a quota down the throat of the operators to buy at least 80% of their requirements over the next few years from domestic sources. It fails to say whether MNCs operating in India will qualify. Worse, it borders on WTO violations by using language such as ‘to provide preferential market access for domestically manufactured products for which IPRs reside in India. The section forces the promotion of manufacturing only by handcuffing operators, rather than plan for excellent low cost domestic manufacturing. There is no blueprint to build the Indian equivalents of Chinese Telecom majors like Huawei, ZTE etc.

The section on licensing reforms, convergence, and value added services has portions that can be readied for immediate delivery. It will, however, need a multiple set of references to the TRAI, which will need to reconcile the existing circle-wise, service-wise licensing regime across nearly 300 UASL operators and another 200 odd other licensees to reach the planned objectives. Delinking licensing from spectrum stands out, but didn’t have to wait till now. This could have been implemented earlier through an executive decision and prevented the 2G scam. It falls under the category of ‘better late than never’.

The plan for an exit policy is welcome, but should not turn into another scam. The defaulting companies today are the result of DoT’s policy to ensure windfall gains for private companies from spectrum trading at a premium at the cost of the exchequer. These defaulters need to go, but not before they, and others who played this dangerous game, pay a price that will serve as a lesson.

The section on spectrum is the most disappointing. It is shallow about pricing norms and allocation principles, perhaps to be in line with Minister’s stance of not maximizing revenue from a national resource. Making IMT spectrum available after 6 years and then after 9 years is a case of too little too late. For, by then, India would have a peak subscriber base of one billion. This apart, spectrum availability and its pricing now depends upon the outcome of the legal actions, including cases being pursued in the CBI court and the Hon’ble Supreme Court. The draft Spectrum Act weakly commits itself to market related processes but seems terribly worried about a transition to a transparent auction process.

The section on cloud services, telecom enterprise, data, and new technologies is perhaps the second-most promising one. It paves the way for Indian networks, service providers and consumers to move to the next generation of technologies, which will bring efficiency, lower costs and will change communication from the current ‘one to one’ to ‘many to many’.

Sadly, the role of the regulator and legislation only finds two paragraphs – right at the end. In my view, strengthening an independent TRAI with accountability on one hand, better oversight and funding to get serious regulatory work done – from the resources of the telecom industry itself – on the other, should have found a far more prominent mention in the policy.  This should have been the most important focus given the disgraceful, complicit and pathetically compromised performance of the recent set of regulators.

There is little in the draft to boost investments in the next 18 months; no direction as to when and how much spectrum will be available before 2017 and whether any thought had been given to the M&A regime that will need to accompany the exit policy. Minister Kapil Sibal Sibal is a no doubt a bright lawyer, but this policy betrays his lack of understanding of the real hot buttons in this sector – and as in the case of his RTE effort at the HRD ministry, his policy making here is also long on vision and short on real solutions to trigger excellence and investments.

Thankfully, the draft NTP’2011 is only a draft. It reflects good intentions, but does not understand complex issues and how to implement policies with the finesse that India’s citizens deserve. Hopefully, by the time the final document is ready, stronger and more believable implementation ideas will emerge.

This appeared as an article in Economic Times on Thursday, October, 21^st, 2011