Will NTP 2011 give us a unified licence

Written by Rishi Raj | Updated: Jan 4 2011, 06:09am hrs
Telecom minister Kapil Sibals new year message was how he was going to come up with a New Telecom Policy in the next 100 days. How necessary is this, will this be the bailout option for the Raja licensees and is it fair to compare it with NTP 1999 We answer these questions and more in a simple Q&A format.

Why do we need a New Telecom Policy 2011

The sector is bogged down in all manner of controversies, primarily relating to the 163 licences (122 to new players and 41 to the dual technology firms) given by then minister A Raja, so the idea is to come up with a workable solution.

Much like what happened in 1999

The comparison is incorrect, although there are lots of things an NTP 2011 can do. NTP 1999 was required for many reasons. The main one was that the industry was dyingthe telcos were all going bankrupt, thanks to the high and fixed licence fees they had committed to paying, and they had filed enough cases against the department of telecom to ensure the industry remained locked in judicial disputes for the next 20 years at least. NTP 1999 was a grand bargain, with each side giving up something and each side getting something. In contrast, the industry is doing well today, so it isnt make-or-break the way it was in 1999.

The original telecom policy of 1994 promised restricted competitiononly two private sector players were to be allowed per circle in mobile telephony. NTP 1999 removed this cap and so opened up the sector in a big way. There was also the issue of the telecom regulator, Trai. At that time, Trai ruled on telecom issues and was also the appeals court for this. NTP 1999 saw Trai being dissolved and being replaced with a more modern structure with a separate Trai and a separate appeals process.

Will NTP 2011 be the same as UASL 2003

If it is, the exchequer will largely recoup the loss the CAG has talked about!

Hows that

The Universal Access Service Licence (UASL) is what Arun Shourie came out with in 2003, to allow firms like Reliance Infocomm to legally offer the unlimited mobility they were giving subscribers on their limited mobility (or Wireless in Local Loop) licences. But while legalising this, Shourie charged Reliance the licence fee paid by cellular mobile phone firms during an auction in 2001. But giving Reliance a licence didnt legitimise what it had done in the past, so Shourie said we should assume Reliance had got the licence way back in 2001 (that way nothing would be illegal!) and that it had not paid the feesso Reliance ended up paying Rs 495 crore by way of penal interest on its delayed payment!

If all of Rajas 163 licensees were to pay on this basis, the government would be richer by many tens of thousand crore.

By Rs 1,76,000 crore

The CAG has done a major disservice to itself by putting in a figure of Rs 1,76,000 crore as one of the estimates of the Raja scam. Based on the sales of Swan and Etisalat that took place within months of the original allocation, the CAG mentions a loss of Rs 57,666 crore and Rs 69,626 crore, respectively. This is a big enough loss by any yardstick. Yet, it also chose to calculate the loss based on the 3G auction that took place in 2010. If we use the auction figures for a 4G auction in 2013, we could similarly argue the 3G auctions caused a loss!

Will NTP 2011 affect the 85 licensees the CAG talks of

It may, but it need not. The CAG has indicted these companies for giving false information, so logically their licences should be cancelled on those grounds. The CAG has suggested collusion between them and Rajas ministry. If the CAG is right, as does seem the case right now, these companies would not qualify for licences even under A Rajas distorted first-come first-served licence norms. So logically NTP 2011 should not be used to bail them out, but its difficult to say that Sibal will not do this.

What about the 69 firms Trai said should have their licences scrapped because of their failure to roll out their networks

It may, but shouldnt. These 69 are in any case covered in CAGs list. But the same caveat applies to themSibal may use NTP 2011 to bail them out.

But UASL 2003 was also used to bail out Reliance Infocomm.

Yes, it was. But one wrong doesnt justify another. Also, things are different today. First, none of these firms have much of a subscriber base, Reliance had several million when it was bailed out by Shourie. You have number portability today; you didnt have it then. In any case, at that time, the WLL phones were lockedthey had no SIM cards that allowed subscribers to use their instruments with another telcos SIM card. So there was a genuine issue of what was to be done with several million subscribers in case Reliances services were stopped.

So is there nothing an NTP 2011 can do

We dont need an NTP 2011 in the way we needed an NTP 1999, and a lot of what needs to be done can be done without an NTP 2011. TRAI has made a lot of recommendations on this and they just need to be accepted. But if the minister wants to club all of them in one grand policy to leave his mark, an NTP 2011 can be a good idea.

What are some of these things

For one, NTP 2011 could be genuinely technology and licence agnostic. So, the government could just auction spectrum and allow users to offer mobile, broadband, Internet telephony, television, whatever. Right now, the government specifies what a licence can be used forin 1994, the policy even said that mobile telephony could only be offered using GSM cellular mobile technology!

Two, have a flat licence/spectrum fee/charge. Right now, it is 0% for some kind of Internet services, 6% for long distance calls and 6-10% for mobile phonesspectrum charges have even more permutations. This encourages regulatory arbitrage and misclassification of revenue streams to save on licence fees.

Third, allow spectrum sharing/trading. A firm that has spectrum should be allowed to licence/rent this out to others. Indeed, both MTNL and BSNLs turnaround plans involve being able to do this. Both have paid a lot of money for 3G spectrum, neither appear to have the capability to monetise this, given how theyre losing market share to private firmsallowing them to rent this out to the private sector or to enter into revenue-sharing arrangements with them is a good idea.

Fourth, give Trai more powers. Transfer licensing powers to it, subject to overall guidelines laid down by the ministry, and make it report directly to Parliament. Make Trai self-financing through a cess on telecom services.