Two decades of private telecom holds many lessons
Nothing symbolises India’s amazing potential, and its equally large ups and downs, than the private telecom industry which is just completing its 20th year. From a time when, at R32 a minute, mobile telephones were only for the well-heeled, India now has the lowest tariffs in the world and more than 900 million subscribers. Hardly surprising then that, despite a wholly unfair tax demand of R20,000 crore, Vodafone is still interested in investing in India. But India didn’t just develop a vibrant telecom sector, it took a lot of fighting, and despite the view that governments are never a positive influence, private telecom couldn’t have taken off without both enlightened regulators and pragmatic government policy—there was bad policy like A Raja’s 2008 licensing and bad regulation which allowed back-door entry to select players in 2002, but there was a lot of good as well.
The back-door entry for Reliance and Tata mobile phones in 2002 was undoubtedly a big setback to the industry, but it wouldn’t even have got there had the regulator not come up with, and enforced, a transparent policy of telecom interconnection. In the mid-1990s, the fortunate few who had phones were subscribers of either MTNL or BSNL. Had these two telcos not been forced to allow private telco customers to connect to their networks, no one would have bought a Bharti Airtel or an Essar phone—to put this in perspective, a decade after the Electricity Act mandated it, open access is still not a reality. Even this, however, was not enough to save the sector and with 3-4 years, telcos were defaulting on licence fee payments. At this point, the government could have simply cancelled their licences, and with the companies going to court—they alleged the government had not lived up to its side of the bargain—the sector would have got locked up in disputes for a few decades. Under Atal Bihari Vajpayee as prime minister, and Sushma Swaraj as telecom minister, a compromise solution called NTP 1999 was hammered out; telcos moved to a more rational revenue-sharing, withdrew all their cases after everyone in the industry had signed on—this was critical—and, most important, the licensed duopoly was broken up forever, paving the way for today’s hyper-competition and 60 paise tariffs. This is a critical learning at a time when large parts of the infrastructure sector finds itself either unviable or locked in dispute, and the government finds itself hamstrung by possible allegations of crony capitalism.
Since even well-intentioned governments and regulators will probably take as many bad decisions as they will take good ones, an important telecom learning is that companies must fight them with full vigour, no matter how distasteful that appears. The Calling Party Pays decision that decisively changed the industry’s fortunes in 2002—that’s when telecom subscribers began to soar—took place only in response to a bitter court battle after the regulator and government played favourites in 2002. The Raja licences were cancelled only after the courts intervened, and the UPA high-handedness in 3G was halted by the court—sadly, this has been challenged by the NDA government. With the telecom regulator saying the next round of auctions can’t be fair or equitable without more spectrum, perhaps telcos will use this to appeal in court if the auctions go forward without any changes in spectrum availability? Watch this space!