Column: Wind up the Telecom Commission

Written by Mahesh Uppal | Updated: Oct 7 2013, 08:24am hrs
The October 3 decision of the Telecom Commission (Commission, hereafter) to seek a review of last months recommendations of the Telecom Regulatory Authority of India (Trai) raises important concerns. The nature and working of the Commission poses questions about its relevance and authority to scrutinise regulatory decisions.

Trais recent recommendations relate to spectrum, a vital and scarce resource for wireless communications, and the mainstay for voice and data services in the telecom sector accounting for over 90% of sectors users, revenues and levies to the government. Failure of two successive auctions has exacerbated scarcity, deprived operators of its use and government of its share of revenue and left it unable to comply with the Supreme Courts order to auction all spectrum vacated by the122 mobile licences that it cancelled in February 2012. The Commission wants the regulatory body to provide new reserve prices for 900 MHz and 800 MHz and review its recommendation on spectrum trading and flat spectrum usage charges (SUCs) for any wireless service.

The Commissions proposals, irrespective of their merit or relevance, raise questions about the role of the body itself. It was set up in 1989 as a part of efforts to reform a seriously under-performing department of communications which at that time played the combined roles of policymaker, regulator, operator and service provider. There was less than one phone line per person and virtually no connectivity in rural areas, thanks to very high costs (over $1,000 per line) and systemic inefficiencies. Unusual for the time and perhaps because the then Prime Minister Rajiv Gandhi, through his advisor Sam Pitroda, prioritised this, the Telecom Commission was set up as a high-powered decision-making body to prevent delays due to cumbersome coordination between ministries. So, while senior technical and financial staff of the DoT are its executive members, secretaries of relevant (to telecom policy) departments including information technology, finance and the planning commission were also made members.

It is easy to see that following the separation of telecom operations under government-owned Bharat Sanchar Nigam Ltd (BSNL), its original mandate has largely disappeared. Indeed, a former senior functionary of both Trai and the Commission believes that participation of other ministries in the latter compromises all of them.

The Trai Act, 1997, identifies areas where Trai can act autonomously (e.g. tariffs) and subjects where its role is recommendatory (e.g. licensing and spectrum). The legal body to receive the recommendations is the the ministry (DoT), not the Commission.

A stated function of the Commission is policy implementation. Therein lies the rub. Traditionally this is precisely the basis of distinction between the roles of the government and the regulatorthe former makes policy and the latter ensures its implementation. The matters referred to Trai are thus hard-core regulatory issues, far-removed from matters of policy lined up for the Telecom Commission which must inevitably deal with larger goals and approaches. Examples being the division of spectrum between defence and telcos, or the exchequers target for revenues from levies on the sector, or prioritising Indias broadband growth in view of its fast-increasing economic and social importance, or telecom manufacturing where India's heavy reliance on imports might soon reach the level od dependence the country has on petro-imports. It may concern itself on matters relating to location of internet resources following recent Snowden disclosures!

The Commission instead concerns itself more with matters of detail like specific bands of spectrum, usage charges, spectrum trading, reserve prices, and methodologies for computing them. In the past it has contested, altered, delayed or kept in abeyance several decisions of the regulator. These include details relating to unified licensing, mobile virtual networks (MVNOs). The Commission is a de facto second regulator of the telecom sector, and a rather poor and unaccountable one at that with no corresponding levels of transparency that the Trai is statutorily bound by.

This regulatory role played by the Commission installs it in judgement over the work of a statutory regulatory body, viz. Trai. There is little evidence that it has or can reasonably be expected to possess a higher level of expertise or credibility to deal with complex regulatory issues than the Trai which has a large specialist staff and consultative process to obtain inputs from all stakeholders. The Commissions meetings, held typically over a couple of hours, are simply no match.

This is not to suggest that Trais functioning or decisions are flawless. Far from it. Indeed, I would argue that in matters relating to licensing and consumer protection, it has been a consistent underachiever. Much of the blame relating to spectrum controversies must, arguably, go to the Trai. Therefore, allowing the Commission to secondguess Trais decisions is retrograde. The problem can only be remedied by building capacity within Trai, reducing its dependence on government staff and funds, and strengthening its consultation process to include more diverse inputs.

Internationally, regulators have a greater role in policy matters. However, even if they must be excluded, as is it is frequently advocated in India, it is important to recognise that the policy brief for regulators must be clear and broad-based to provide the flexibility they inevitably need for their task. For instance, there is every reason to convey to the regulator in advance that Trai's priorities also include protecting governments overall revenues from the sector. Compare this with the Commissions concerns that proposals to move to flat rate spectrum usage charge may not be revenue neutral

There is no excuse for post facto determination of what constitutes policy except perhaps in cases of emergency or matters of national security. Indeed, one must question, whether even the cabinetleave aside the Telecom Commissioncan be expected to do a more competent job of determining the spectrum to be auctioned or setting spectrum reserve prices than the Trai.

There is no denying a need for sound design and formulation of telecom policydistinct from regulation. Most countries that have set up independent regulators like Trai have retained a core policymaking unit to deal with strategic issues beyond economic regulation. India needs a similar unit for visionary and strategic policymaking for the telecom sector.

There is no evidence that Telecom Commission can perform this role or even the regulatory role it has appropriated. It is an imposter. It should be wound up.

The author is a telecom consultant