The Indian government has blundered through several iterations of telecom policy. Finally, we seem to be getting somewhere, with proactive, customer-centric policy formulation. T H Chowdary chronicles the evolution of telecom policy in India and reminds the government and the telcos that their ultimate goal should be to make telecom and information services affordable for every Indian

Until a few years ago, we had, at any given time, more than three million people waiting for a telephone connection. Until 1996 we did not have radio-paging, cellular mobile telephony or electronic mail. The inconvenience, inefficiency and loss of business opportunity that these deprivations occasioned for the Indian economy and people were enormous. They could be suffered, and the penalties internalised, as long as we were a closed economy with permits-licenses-quotas mandatory in almost every walk of business life.

However, since we gave up the socialist—that is, government-centred—economic activity in 1992, India would have lost great opportunities in the emerging trade in services on a global scale, especially the requirements of the United States for IT and software services. This is what prompted the progressive winding down of the monopoly of the Government’s Department of Telecommunications (DoT) and admitting private companies into the telecommunications and Internet infrastructure and services sector.

Rapid evolution
We have already gone through two generations of telecom policy—National Telecom Policy 1994 (NTP 1994), and the new Telecom Policy (NTP 1999). We did not have a regulator and licensor independent of the incumbent operator (the DoT) until 1997. It was only in 1997 that we began to have regulation controlled by a separate statutory body, the Telecom Regulatory Authority of India (TRAI).

Just as the NTP-1994 had to be superceded, so also the TRAI 1997 was soon superceded by a two-tier body—TRAI 2000 and the TDSAT (Telecommuni-cations Disputes Settlement and Adjudication Tribunal) in the year 2000. The telecom policy as well as regulation are both about to be superceded by the Convergence Bill that was introduced in Parliament in the year 2001. Licensing would be taken away from the government, and regulation of telecom as well as of broadcasting and content would be vested in the proposed Communications Commission of India (CCI).

Thus, the third generation of policy and regulation is upon us, all within the short span of eight years. The rapid evolution is due to the dramatic developments rapidly emerging in information and communications technologies (ICTs), such as the repeated reuse of radio spectrum and the limitless bandwidth that is becoming available in optical fibre cables.

Driving down costs
To reap the benefits of the communications revolution worldwide, we need to ensure that all components are made inexpensive so that they are affordable to the largest number of people. To maximise the benefit, it is necessary that everyone is educated and also skilled to use the devices.

How do we make telecom and Internet access and communicating devices inexpensive and affordable? By ending monopolies and facilitating intense competition on a level-playing field, and by completely interconnecting competing networks. That is why government monopoly over telecommunications was removed—beginning first in the UK, USA and Japan, in 1984; then among all the 15 nations of the European Union (EU) and the 28 members of the OECD (Organisation for Economic Cooperation and Development). First, government departments providing telecom services are corporatised and then disinvested i.e. they are made private companies; regulation is also removed from government departments and made independent by statute.

In some countries, even licensing is removed from government control and vested in independent bodies to free the process from political misuse. By now there are over 100 independent regulating and licensing bodies in as many countries in the world and 90 percent of the world telecommunications is provided by competing companies. The results have been phenomenal. Competition has spurred research and development on new technologies. Further, there is an urgency to bring those technologies to market quickly to build up networks and roll out services.

The new technologies, which are primarily based on computers, optical fibre and wireless have been obliterating the distinction between fixed and mobile telephones; and between national long distance and international telephony and telecommunications. Time and distance are no longer limiting factors, because the networks are globe-girdling. They are on a mix of undersea optical fibre (OF) cables spanning oceans, and communications satellites in the skies. The communication pathways, expressed by the term bandwidth, are becoming broader so that there is no congestion of traffic at all.

Communication costs have plummeted. For example, a one-minute telephone conversation across the Atlantic, that cost $2.40 in 1956, came down to 11 cents in 1988, 1 cent in 1996, and now costs less than half a cent! Its price to users ranges between 3-5 cents (Rs 1.50- Rs 2.50).

A wiser India
India is becoming increasingly wiser as its talented IT and telecom professionals and businessmen get onto the global bandwagon of the Internet and trade, especially in services. Although we have been blundering in the process of de-monopolisation and independent regulation and competition, we are nevertheless progressing.

Initially, licensing was implemented as an instrument to generate revenues not for the expansion and improvement of telecom, but for adding to the coffers of the permanently deficit-ridden Government of India. Licenses were given to the highest bidder with the bid amounts swelling up costs to companies and prices to users. Also, a single state of the country constituted a unit, thus limiting the market and depriving companies of economies of scale. Licenses were given for different services on the basis of territory as well as technology, thus detracting from the economies of scope.

Because the licensing policy was so geographically restrictive and also drastically different for limited mobility offerings, city-wide mobile services and fully mobile cellular services, the result was an artificial separation of logically similar markets. The ultimate outcome was interminable disputes between private telcos, which were licensed at different times, for different territories under different financial burdens.

Even as these disputes and the burdens were crippling the newly emerging private telephone companies, came the Internet Policy in 1998, which is world-class and totally user-oriented with licensees having no burdens like entrance fees, license fees, revenue sharing, interconnection charges, spectrum fees, etc. This landmark policy exposed the subscriber-unfriendly telecom licensing policy.

Despite political opposition, the government was wise enough to amend and revise licenses (just like the telecom and regulatory policies) from a set of harsh and crippling conditions to a new set that is less onerous, although it still involves some costs unrelated to provision of service. Because of inadequate comprehension and lack of vision, this country had embarked upon licenses first for statewide-only services; then we started licensing the national long distance (NLD) inter-state services; and then international telecom. Competition is now extended to every segment of telecom but unfortunately the area of operation for any company is still artificially segmented. The technologies are the same, the users are same, the networks could also be the same, but yet they are separate because of legacy licences. This is untenable and wrong because users are deprived of the full benefits of competition, choice, price, technologies and new application services as they are developed.

Customer-centric policy
The most important policy element should be enhancement of customer choice and satisfaction. In this regard, the ongoing discussions, debates and disputes between the access providers—the local telephone service companies (basic and cellular), the national long distance and, the international telecom companies—is surrealistic. The customer should be able to choose who should be his Internet service provider, domestic long distance provider and international service provider.

Technology permits the telcos to offer the customer a wide choice. Now, technology is also available in the form of a chip that can be incorporated in every telephone instrument. Intelligence is built into this chip to enable call by call selection of both the national long distance and international service company, by the caller. At any time, information on the company offering the lowest rate for the destination called is on the chip in the telephone instrument and the call is routed to that long distance or international company. The billing information is also passed on to whomsoever is the billing authority. All this is intelligence that is software-based and offered at competitive rates. Telephone companies like BSNL, MTNL and private telcos are now engaged in negotiations with NLDs and international carriers for offering “their” traffic.

Consolidation essential
The scores of private telcos that have been licensed at the state level and for piecemeal services cannot possibly remain in debt throes forever; in their current state, they will choke and die sooner rather than later. The vertically and horizontally integrated Bharat Sanchar Nigam Limited (BSNL) will steamroll them, as it becomes a multi-service company countrywide, especially if BSNL vitalises its management with young and enterprising professionals and businessmen.

It is therefore in the interest of the telcos that they consolidate into two or three countrywide, multi-service companies, to even think of competing with the likes of BSNL. Such merged companies should also provide a range of local services, limited mobility, and full mobility inter-state and international services. Of course, they should also provide Internet access, e-commerce and every conceivable information service. It is only when such fierce national-level competition begins that prices will fall further. Then, perhaps, instead of the 12 million phones we are adding annually, we might well come closer to China’s 80 million phones a year target.

The policy-makers, private telcos and legislators must all have one aim in common at all times: To make telecom and information services cheaper, so that every Indian between the ages of seven to 80 can have a telephone—approaching a teledensity of 85 percent, a figure that Israel, the Nordic countries, Austria and Italy are attaining.

Dr Chowdary is information technology advisor to the government of Andhra Pradesh. He was formerly chairman and managing director of VSNL. He can be reached at thc@satyam.com. This article is published in association with Inomy.com