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Dialling trouble in telecom

By Sunil Jain
Last updated on: May 04, 2009 13:52 IST
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Now that we're in the middle of the elections, and the government has just a few weeks of life left, all manner of curious decisions are being taken - decisions which, propriety demands, should be left to the next government.

In the telecom sector, for instance, Telecom Dispute Settlement & Appellate Tribunal member J S Sarma's candidature has been approved of, by communications minister A Raja, as the head of the Telecom Regulatory Authority of India.

Decisions are also being pushed on free allotment of additional spectrum to telecom firms, on extending the licence period for 'dual technology' firms like Reliance Communications/Tata Teleservices etc, and on revising merger and acquisition norms.

Given how each of these cases is so controversial, even apart from the issue of propriety, it is unacceptable that a government on its last legs should be taking such decisions.

Take Dr Sarma's candidature. First, it is curious that a person who has been sitting in judgement on Trai should now be asked to head it. Some of these judgements have been so full of holes and so blatantly pro-government, the Trai will want to contest them - how is that possible when the man who delivered them is to head Trai?

The M&A-norms case is equally curious. In 2007, when the government decided it would give away telecom licences at the prices paid for similar licences in an auction way back in 2001, critics argued the government had lost over $10bn due to this.

This was based on the values got by some of the beneficiary firms who chose to sell part of their equity to foreign telecom firms. At that time, communications minister A Raja and his bunch of bureaucrats defended their actions by coming out with M&A norms which, they claimed, would bar companies from such activities till they rolled out their networks fully.

That there were enough loopholes was borne out by Unitech getting into a deal with Telenor and Swan with Etisalat, but even this farce is now being given up.

The same bunch of people who argued existing telecom firms had enough spectrum and that new firms had to be brought in to prevent cartelisation in prices, are getting ready to argue the exact opposite a year later.

A committee is likely to recommend that M&A norms be revised since there are a lot more players in the sector than is viable -- that, while the new entrants have got too little spectrum to be able to roll out a decent-sized network, changing the M&A norms will allow the larger telcos to meet their spectrum needs.

But the lack of spectrum was precisely the argument that was made against bringing in new players.

So what's changed in one year that couldn't have been anticipated earlier?

Or take the drama on pricing of spectrum beyond the 4.4MHz that is given out initially with the licence - after this initial amount, the current policy is that fresh spectrum will be allocated based on the number of subscribers a firm has.

The committee on this is of the view the subscriber-link should be given up, that all spectrum beyond the initial start-up one be auctioned. It is likely the government will accept this. Firms like Bharti-Airtel and Vodafone who have got 'extra' spectrum, will be asked to pay a market-discovered price for the 'extra' spectrum.

Since the TDSAT has said the existing players like Bharti-Airtel don't have any automatic right to more than 6.2 MHz of spectrum, should new licencees like Reliance/Tata/Swan etc be charged market prices for spectrum beyond the initial 4.4MHz they've got? Or should they get up to 6.2MHz free, and then pay the market price for spectrum beyond this?

At one level, the answer's obvious -- if Bharti-Airtel got up to 6.2MHz, so should Reliance/Tata/ Swan etc.

But the idea is to clean up the spectrum-allocation process, not to perpetuate the earlier mess.

Also, the subscriber-link criterion in place today applies to any spectrum beyond 4.4 MHz. Since the matter is controversial, you'd think a decision on it should be taken carefully.

But the solicitor general has opined on the matter and a decision on this is to be taken soon.

Another question agitating the ministry is whether firms like Reliance/Tata which got their UASL licence in 2003 should get an extension. Newcomers like Unitech, Loop and Swan have got a 20-year licence; Reliance/Tata, however, finds their licence expires in 2023 - that is, in another 14 years. Logically, you'd think they should get an extension since they were allowed to offer GSM services only in 2007.

But, and here's the problem, the government gave Reliance/Tata permission to offer GSM services precisely by arguing, speciously, that this was always allowed under their existing UASL licence. Indeed, this is also the argument made by Dr Sarma and his colleagues at the TDSAT when they justified this.

So, if it was part of the existing licence, how can it be extended? The GSM permission, by the way, says 'the effective date of existing UAS licence(s) and other terms & conditions shall remain unchanged'.

What's the government doing on this? You're right, there's a proposal the matter be sent to the Solicitor General for his opinion! Given the soup the government has got into with its law officers giving opinions that weren't quite kosher in the Quattrocchi case, you'd think it would have learnt its lesson.

Though given how, as part of the government-formation process, the ministry was made the DMK's property, perhaps  it's too much to expect Dr Manmohan Singh to put a lid on this.

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