Interventions helped the sector, says Baijal

Pradip Baijal, the chief of the Telecom Regulatory Authority of India (Trai), said on Saturday that the interventions of the regulator on issues related to limited mobility and cellular services were justified.

Baijal, who addressed the industry men in Ahmedabad on Saturday, strongly defended the regulatory interventions in 1999, 2001 and 2003, and added that they benefited the sector.

The Trai chief also criticised the 'misleading' marketing strategies adopted by one of the top telecom players in the country.

Referring to Reliance Infocomm without naming it, he said, "In December 2002, one private operator proposed a tariff of 40 paisa per minute, but the effective tariff was actually around 90 paisa per minute. The 40 paisa per minute tariff was a marketing gimmick as the prevailing tariff then was Rs 2 per minute. The Trai wanted to intervene as the tariff was considered predatory. But, after intensive discussions within the authority, it was decided not to intervene and the tariff was left as forborne, and the decision led to consequent fall in tariffs of other operators and even led to explosive growth in the telecom sector."

Speaking about the interventions, Baijal said, "In 1999 we introduced NTP 99, which, among other things: converted the regime towards revenue sharing; reduced the licence fee for mobile operators from Rs 20,000 crore to Rs 5,000 crore; created Universal Service Fund Policy, which reduced the emphasis on licensee's roll out; and increased the competition."

In return to the concessions cellular licensees agreed to unlimited competition in place of the duopoly regime, during which peak tariffs were initially fixed at Rs 16 per minute.

"In 2001 intervention, spectrum was given last mile to Mahanagar Telecom Nigam Ltd in 1995, and licences for wireless in local loop (WiLL) were given in 1997 as a part of basic services. Moreover, a set not connected by wire could move and it was getting smaller and cheaper, resulted in damand for mobility. Some countries had even allowed limited mobility within a tower called the 'breathing tower'. In India limited mobility was allowed within short distance covered area (SDCA), and while giving limited mobility, cellular players were given further concessions," said Baijal.

These interventions resulted in reduced revenue sharing from 15 per cent to 12 per cent, 10 per cent and 8 per cent in A, B and C circles leaving huge losses of around Rs 15,000 crore to the government.

Further, cellular mobile service providers (CMSPs) were permitted to retain five per cent of pass-through revenue paid to basic service operators.

CMSPs were allowed to offer fixed services using their GSM infrastructure. They were also allowed to offer mobile PCO services.

In 2003, the regulator's intervention led to the approval for unified licensing by the government and introduction of unified access licensing.

The other benefits in 2003 interventions were a further reduction in revenue-sharing by 2-4 per cent and an increase in the FDI and FII limit to 74 per cent instead of 49 per cent in telephony services.

While the 2001 intervention lead to a fall in WiLL and cellular tariffs due to aggressive competition, 2003 witnessed explosive growth due to the slide in tariffs.

During 2004 and 2005, the government's revenue sharing is expected to be higher than the licence fee of the earlier regime.