23 July, 2009

Thank you for letting me speak on the workings of the Department of Telecom and Information Technology.

Sir, I will restrict my discussion to that of the Telecom sector in India since I have some experience with it.

India has the third largest telephone network in the world, with 273 million connections. The gross revenues for the sector have grown to Rs.1,30,000 crore which account for 3% of the national GDP. This rapid growth in the telecom network has resulted in an overall teledensity of 33.23% at the end of December 2008, and the opening up of the telecom sector has led to large inflows of investment.

But the successes of the Telecom sector do hide the fact that there are major dysfunctionalities that have crept into the sector over the last few years, in particular. Most of us are aware of the controversies and questions raised about issues like Spectrum allocation, mobile licensing, Service provider distinction, Illegal International calls etc. that have been raised in Parliament and outside many, many times over the past years.

Sir, the Ministry must now establish for this year and the coming five years of this Government a fresh, open, credible and transparent approach to its policy making – this is a must. And I would strongly recommend that for the first time, a clear set of outcomes be defined – if necessary, with a New Telecom Policy – that supersedes the NTP’99. 10 years on, there is a strong argument for a new Telecom Policy that reviews the sector and lays out these new targets.

Sir, having made the case for a new Telecom policy, let me suggest the following as outcomes and objectives for the Telecom sector.

First - the issue of Sustained Affordability. Sir, it is a widely known fact that there is considerable price and other forms of cartelization widely prevalent in the Telecom sector. Both the Regulator and Department have failed completely in the task of creating true competition in this sector and this is an important issue that needs to be fixed. Indeed, one Regulator referred to price fixing as ‘co-operative pricing’!.

The fundamental obligation of the Government must be ensure a framework of sustained Consumer benefit. The only way to ensure this is to ensure intense and sustainable competition in the sector by way of various technology options and Service Providers. This must be kept in mind and I am glad that the Minister has agreed to introducing 3G auctions for multiple operators that will increase the competition in this sector. But if he is sincere about competition, then he cannot leave unattended the critical issue of VoIP recommendations of the Regulator that are lying gathering dust in the DoT. Implementing VOIP is the best way to ensure reduction in prices and allowing a totally new category of inexpensive voice services especially for rural and poor sections of society. The reasons for inaction on introducing VOIP seem to be at the behest of some lobby or the other, and public policy making cannot be and should not be directed by lobbies – because it will be difficult for the Minister to justify why the commercial interests of some of the richest companies in the country would come in the way of implementing a policy decision that is universally known to reduce tariffs and especially benefit the rural heartland.

I look forward to the Minister’s response to this.

Second - the issue of Quality. While we do celebrate the significant progress in Teledensity in our country and attribute it as a success of the Policy as we should – the significant gap in this is the issue of Customer quality and quality of network. This is an area where our service providers have neither paid enough attention nor has the Government. For too long, service providers - both private and public - have been allowed to escape from being accountable for service quality and are often not making the additional capacity investments required for this. I have heard the reasoning being given out as spectrum shortages. That is clearly a solution for the problem that is to save the operators from investing the additional capex.

This is a serious issue – and indeed one of the blights on the otherwise bright picture of Telecom success in our country. I would request that the Department of Telecom make this an area of focus and ensure that Operators make the investments and operate at a set down threshold of service and network quality. The Regulator must be mandated to use nationwide consultants to sample service quality on an anonymous basis and prepare quarterly or half-yearly scorecards for every network with severe penalties for those who fail these standards.

Third - the issue of Choice. Sir, as you know currently once a customer gets his telephone number, he is stuck with that operator and has to suffer that service – and can only migrate to another service provider after surrendering his number. This need to surrender his number and move to a new number is a significant exit barrier for the customer and is an incentive for the operator to provide sub-standard service. The decision of this Government to start Number Portability will allow a customer to retain his number, whilst he changes his operator. This is a powerful platform that moves the center of gravity to the consumer from the Operator. I would urge the Department to ensure that the implementation of this is expedited and launched this year itself.

Sir, if the Department and Government is serious about creating a public policy framework that places the citizen and customer at the center of it, these three issues of delivering competition, choice and quality are critical and non-negotiable. Implementing these three will truly place the Consumer at the heart of Government policy making.

Fourth - is the issue of serving more Rural Indians - Successive governments have accepted that in a sector that has performed remarkably well, rural India has been an area of serious challenge. Even today, while three out of every four urban Indians have access to a phone – mostly a mobile phone – in rural India, the number drops to slightly over one out of every ten. This digital divide has a serious multiplier effect in holding back socioeconomic growth, especially as nearly 67% of India still resides in the rural heartland. Lack of connectivity and affordable options are both major deterrents for rural India to catch up with the progress that you see in urban, and in some cases, semi-urban cities. India has a unique opportunity to dramatically grow and connect a large majority of rural Indians and do so rapidly. I would urge a focused strategy of incentives and SOPs to accelerate investments into rural markets, combined with a more aggressive use of the Universal Service Obligation Fund, with a target for rural teledensity. The current pace of rural teledensity growth is neither acceptable nor desirable.

Fifth - the issue of institutional and regulatory performance - as someone who has intimately lived the highs and lows of the Telecom sector from the day it was first opened to private capital, I must say that one of the big disappointments around the sector is continued ambiguity on what should be a relatively straight forward process of licensing and allocation of spectrum. To avoid any further controversies and allegations of bias, it is important that all future allocations of spectrum and licenses of spectrum, for existing and new licensees, are only through auctions, and these controversies are put to rest. Anything else will be unacceptable. I have written to the Minister earlier on this issue and he has assured me that this will be the case. I look forward to his confirmation during this debate.

When the TRAI act was enacted in 1997 and amended in 1998 by Parliament, it was done to assure an era of transparency and accountability. Sadly, the performance of the TRAI has been patchy and highly inconsistent, and dare I say, sometimes very questionable. I believe it is time for a complete review of the TRAI Act and associated government policies. Last Session, the Act was amended in a rush in Parliament without any debate.

There are some interpretative lacunae and lack of sufficient enforcement powers in the act. These need addressing and there must be an increased culture of holding regulators and departments to account for their decisions. 

While the TRAI Act needs to be amended, there is a greater need for TRAI to also enhance its accountability. Right now, there is no structure through which the TRAI can be held accountable in a manner that is prudent to the Parliament.
TRAI reports in to the Parliament through MOC&IT but is usually in conflict with the MOC&IT either because its recommendations are rejected, modified or plain, simple delayed. A TRAI that is subservient to the Ministry and staffed by former DoT Secretaries will lose and compromise its independent objectivity. 
So a clear debate with regards to TRAI’s accountability and reporting structure either through a Parliamentary Committee or some other form of governance through the Cabinet needs to be established in addition to the amendment under consideration.
Functioning of TRAI:

Two challenges that have come to the fore in recent times with regards to recommendations made by TRAI are as follows:

The government seems to cherry pick sections of the TRAI recommendations or interpret them differently or part implement them – depending upon its convenience and comfort. In doing this it refuses to recognize the inter linkages between a comprehensive set of recommendations and may accept recommendations in part, which do not meet the policy objectives or transparency test that is necessary for the functioning of the telecom sector and policy making. For example, it accepts TRAI recommendations for distribution of spectrum but refuses to accept the process through which market value needs to be determined. This has been the problem which led to a major confusion in the last spectrum allocation process which led to 120 LoIs in January 2008. Checks and balances need to be built in the system where in TRAI recommendations are either accepted or rejected in totality or if modified in part, then that with the consent of TRAI rather than cherry picking.
There is no time limit with regards to how long the government can wait or delay implementing a set of recommendations by TRAI. When the government finds it appropriate, it implements recommendations within weeks. In other cases, recommendations have been pending for 2 – 3 years. It is necessary that the MOC&IT and DoT self regulate themselves or eclipse themselves under some sort of legislative amendment wherein they need to respond within a given period of time, say 60 days, to a TRAI recommendation by either accepting, rejecting, or modifying it. This will ensure that policy making is timely, that decisions are not caught up in bureaucratic delays and most importantly, the relevance to the TRAI recommendations, which by itself is a time consuming process of consultation, open house discussions, etc, is not further delayed, which in turn causes harm to consumer interests, national infrastructure, and delays the much needed investment in the country.

Before I conclude, I would like to make one point about the TEC. 

TEC needs to seriously upgrade its technical capabilities to ensure that they are in keeping with the latest state-of-the-art technological developments in the telecom business.
Sir, telecom is a great example of successful infrastructure development in India, driven predominantly by private capital. We must build on this success. These policy outcomes, coupled with the significant headroom for growth will make India the most vibrant and exciting Telecom opportunity in the world for Consumers and Investors. I look forward to hearing from the Government and the Minister on these proposals of mine.

Thank you, Sir. Jai Hind.