'I don't understand this hostility'

Q & A/ Pradip Baijal

"The whole world is moving to unified licence and cellular operators don't even want to discuss it"

Though upset by the vociferous attack on the Telecom Regulatory Authority of India's (Trai's) consultation paper for a unified licence for basic and cellular operations, telecom regulator Pradip Baijal is determined he's going to see it through "" "do you think I'll give up so easily?" he says during the course of an hour-long interview.

Baijal's answers, though, don't always add up. He takes credit for implementing the IUC (interconnect user charges) regime, for instance, but this was an order passed by his predecessor, that only had to be implemented.

Similarly, Baijal insists mobility was always allowed through Wireless in Local Loop (WiLL) services right from 1996, but the Trai's own recommendations of January 2001 say, "While the licence agreement for the basic service operators provides for use of WiLL, it does not permit mobility."

But while his answers may not fully satisfy critics, the new Trai chief is clear that the need of the hour is to be pro-active, otherwise the sector will remain bogged down in litigation.

Excerpts from an interview with Sunil Jain:

Why did you come up with this consultation paper now?

I don't understand why there's so much hostility. It's just a consultation paper. If the cellular operators feel a unified licence should not be given, then let them say so during the consultation...if they feel they need to be compensated for having paid, according to them, higher licence fee, let them say so...I just don't understand their reaction. The whole world is moving to unified licence and they don't even want to discuss it.

But you said to UBS Warburg that if the Telecom Dispute Settlement Appellate Tribunal (TDSAT) ruled that WiLL was illegal, it would be allowed through your unified licence. Doesn't that show a bias on your part?

I've spent eight years in power and disinvestment dealing with tricky issues...do you think I'm so naive as to say something like this? It was a UBS presentation, do you even see any occasion for me to say something like this? The UBS report was a dishonest one, I never said this.

But the issue of the legality of WiLL services is before the TDSAT, and the Convergence Bill deals with unified licences, why did you have to get into this? It is natural to think of this as facilitating back-door entry into the mobile market.

One of the parts of the unified licence is before the TDSAT, not all of it. In any case, the unified licence, provided it does happen, will take place after a while, the TDSAT judgement will come much before that. I've studied the Convergence Bill and the standing committee's report, my proposed licence does not infringe on it...this is just a small part of what the Convergence Bill is aiming for.

I could have waited for the TDSAT order, I could have waited for Parliament to pass the Convergence Bill...but my nature is to get things moving.

Someone said, why are you giving us till just August 7 to respond...this shows the regulator's mind is already made up. Well, my experience has shown me it is important to keep tight deadlines if you want anything done.

What happens to the unified licence if WiLL is declared illegal by the TDSAT?

We will tackle that when it happens. But let's understand a few things. The controversy over WiLL began in 1996 when MTNL began its WiLL services. A licence was also issued to Tata, HFCL and Bharti to do WiLL-fixed line around this time "" but this phone was always mobile.

Then there was a controversy in 2001 when you said okay, let's allow it to move in a limited manner. There will always be a controversy unless we move to fix it.

Hats off to those people, who in 1999, were able to move to a new revenue share regime "" it was full of controversy, but ever since, the sector has grown, hasn't it? Just go to Europe and see how the telecom market is in such a mess because of [the billions of dollars bid for] 3G licences, and they don't have the guts to sort it out. There is no growth there.

Hasn't the Trai under you bungled on issues like the Access Deficit Charge (ADC)? You've calculated it at Rs 13,000 crore by only taking BSNL's costs into account, but did not even look at the revenues it earns from these phones. You implemented it on May 1, and then ordered a review within a fortnight.

You've been brainwashed. When I joined on March 24, the operators were apprehensive about how the IUC was to be implemented, so I told them to meet under BSNL and work out the logistics.

They said they could begin by May 1, but there were several problems, even on the ADC figures. I could have said, let's do research on the ADC.... That's not my habit, so I said let's start and we'll sort out the problems later. I then issued a consultation paper on the matter.

I'm now being accused of being pro-Reliance, but when I implemented the Calling Party Pays [CPP was part of the IUC regime which was mandated to begin on April 1 by Baijal's predecessor M S Verma], I was accused of being pro-cellular!

The CPP, though, benefited even the fixed line operators since they now got increased minutes of usage "" the cellular operators, of course, benefited since they got paid when their network got called.

Didn't you get the ADC calculations wrong?

It's a matter of interpretation.

Does anyone calculate ADC only on the basis of cost, and exclude revenue?

Some countries do calculate ADC only on the basis of capital costs...it is true there have been some problems in the calculation. The issue is that most countries do tariff rebalancing (lowering long distance call rates and relative hiking of short distance ones) before they allow competition. Here we have not done that, so we now have to fix things.

Let me explain more fundamental issues to you. Today, I need ADCs to subsidise BSNL's land lines in rural areas "" BSNL is the only firm actually investing here (none of the fixed line operators who are obligated to do rural telephony have met their commitments).

If I load on all the ADC on to fixed line calls, their rentals/tariffs will go up, so people will move out of fixed lines, so the ADC (for the rural phones) will go up even more...it will become a vicious cycle.

That's why I'm talking of loading on some of the ADC on cellular phones since their cost structure is lower for long-distance. But then there will be the issue of subsidising one service with another...the answers are never as easy as you think. But if we're to work solutions, you cannot accuse people of being either pro-cellular or pro-Reliance.

Why is there such a delay in fixing the ADC?

The consultation is over. I haven't got all the data for the traffic flows, and I now need to test the model we've got...how will traffic flows get affected by different ADC levels...and then freeze some of the parameters.

Cellular firms complain that while you want to give BSNL an ADC, you don't ask it to maintain separate accounts to ensure they don't subsidise their cellular operations with money from other services, including the ADC.

Under the law, I cannot ask them to do so, only the government can. I have written to the government on this and asked them to issue a directive or to change the law to allow me to do so.

Your unified licence will bring in more players into the mobile market, but there isn't even enough spectrum for the existing players?

It's an open question. India gives 1Mhz of spectrum for every one lakh cellular users, China has 32 lakh users per Mhz of spectrum, Italy has 6.8 lakh, Poland has 2 lakh, the UK has 4.47 lakh and Switzerland has just 65,000 users per Mhz of spectrum. What is the optimum amount of spectrum? I don't know. That's why I want to consult.

But no one wants to consult. They just want to hurl allegations.