 | Issue: | India 1998 |
| Article no.: | 4 | |
| Topic: | The Business of Telecommunications should be Communications, not Litigation | |
| Author: | Richard French | |
| Title: | President | |
| Organisation: | Tata Communications Limited, Hyderabad, India | |
| PDF size: | 36KB |
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Article abstract
The liberalisation of Indian telecommunications beginning in 1992 has attracted bidders from most of the world’s major telecommunications companies and Indian business houses. It cannot, however, be said that all is well. The DoT has been in disagreement with the TRAI over a long period of time. A ray of hope has recently been provided .by the Prime Minister’s attempt to break the deadlock. It is hoped, on behalf of the Indian consumer, that the government is able to reform the policy framework to instil new confidence in lenders and operators.
Full Article
India is attractive to foreign investors for many reasons. It is a democracy, with a relatively functional judicial system and a recognisable framework of commercial and corporate law. It has a huge internal market of 940 million citizens, of whom some 50 million possess, at least in theory, something resembling the purchasing power of the Western middle class. In the spirit of democracy, India has a free press and a tradition of small entrepreneurship, as well as a number of large privately owned industrial groups. India is truly rich in human resources, though employers must have the stamina to identify the talent they really want. For all these reasons, the liberalisation of Indian telecommunications beginning in 1992 has attracted bidders from most of the world’s major telecommunications companies and Indian business houses. What is the current position of these companies and where is India, six years later? Connectivity Some 950,000 customers have been connected to cellular telephony. The strongest markets by far have been Delhi and Mumbai, with roughly 40% of the customers. Basic telephony services have just been launched in Madya Pradesh and Mumbai (Maharasthra), and are being developed for launching early next year in two or three other states. Paging is available in most of the country’s cities and in many towns. Internet provision has recently been liberalised and Global Mobile Satellite services have been licensed. Meanwhile, the former monopoly provider, the Department of Telecommunications (DoT), has been adding connections at an accelerating pace. As a result, teledensity is rapidly approaching 2%. This figure, while unimpressive by Asian standards, nevertheless represents a formidable accomplishment considering the constraints under which the DoT labours. Fundamental Problems It cannot, however, be said that all is well in Indian telecommunications. There are two fundamental problems: Ÿ The first is that the private operators and the DoT overestimated the disposable income, of the Indian middle class. The result is that the private licensees have saddled themselves with licence fees which appear to be mismatched to the revenue potential of the market. Ÿ Secondly, India invited private operators, without creating an institutional framework which can provide an objective and diligent administration of the implementation of operators entry into the Indian market. Some are of the opinion that the DoT has failed to utilise the experience they possess as a former monopoly operator. The DoT has been in disagreement with the Telecom Regulatory Authority of India (TRAI), on a number of occasions over a long period of time. Some feel that the DoT’s priority lies with the financial health of the incumbent telecom operator. Owing to the complexity of the situation, lenders have been reluctant to assume any risk. in the Indian telecommunications sector. Without financing, the objective of liberalisation, expressed in the National Telecom Policy in 1994, cannot be achieved. Ray of Hope The ray of hope in this picture is a statement by the Prime Minister of India on October 24 to a major Indian Chamber of commerce. He said, “Telecommunications is a critical infrastructure for every area of the economy. There are a number of knotty problems in this sector, which are a difficult legacy that we are carrying from the past. However difficult, we have the political will to untie all the knots in a transparent and consultative manner. “A new Telecom Policy will be formulated within the. next three months to provide a state-of-the-art nationwide telecommunications network, speed up rural telephone services, and to meet the challenges of the convergence of telecom, IT; media, and consumer electronics.” The Prime Minister went on to say that within fifteen days the outstanding issues dividing the TRAI from the DoT would be resolved in such a way as to ‘strengthen’ the regulatory role of the TRAI. He also said, “I have mandated the National Task Force on Information Technology to prepare a report suggesting a resolution of the outstanding issues in the telecommunications sector, including the licence fee structure for basic and cellular telephone operators. The Task Force will submit its recommendations before November 30, and the Government will take appropriate action before the end of the year.” Political Will It will indeed require political will to resolve the problems of Indian telecommunications. Recent history suggests that the IT Task Force can win battles against the entrenched bureaucracy in Delhi but only with support from senior ministers. It will be fascinating, as well as a matter of great importance for the liberalisation initiative and its progeny, to follow the IT Task Force’s conclusions. Should the Prime Minister’s attempt to break the deadlock fail, and the government move to recover the licence fees it is currently owed, the likely outcome will be extensive litigation between the private licensees and the government. The path of litigation will become inevitable if the government proves unable to reform the policy framework. This would from many people’s point of view put an immediate stop to any prospect of major progress in financing and rolling out country-wide basic services, for example. Conclusion Let us hope on behalf of the Indian consumer that the government is able to reform the policy framework to instil new confidence in lenders and operators. The business of telecommunications should be communications, not litigation.
