Regulatory purgatory

Pressed to explain why he thought his performance as a regulator was top-class, former Trai chief Pradip Baijal would inevitably point to the sharp fall in tariffs in the sector as well as the rapid increase in mobile phones each month, more than 3 million currently. But if this was a sign of telecom regulatory nirvana, how come there's not one foreign investor who's put in an application for setting up long-distance networks in the country after this was allowed, not one new operator wanting to set up mobile networks that are the fastest-growing segment of the industry, and not one operator who wants to set up Skype-type services in the country that would reduce long-distance tariffs to a fraction?

The answer is simple: there is no regulatory nirvana. The bulk of the change that has taken place has taken place despite the regulator"" Calling Party Pays, which resulted in mobile tariffs halving and the subscriber base shooting up, took four years to implement and was finally done only after a bitter court battle. There are a host of such examples of regulatory inaction (or deliberate bias?) one can cite, including the preferential treatment given to Reliance Infocomm, right from legalising its controversial service to not prosecuting it for changing the numbers on calls to avoid paying several hundreds of crore rupees as ADC charges.

That, then, is the subject of this book written by Ashok Desai, whose weekly columns, first in this newspaper and now elsewhere, never fail to provide readers with a new insight. So, Desai traces the first stirrings of the change in telecom policy in the early 1990s, and goes on to document how the department of telecommunications (DoT) refused to cooperate with the new players, even stymied the new regulator, and generally played the bully, as incumbents the world over do until they are reined in by the regulator. A good chronicling of how MTNL was allowed to provide mobile services on its fixed-line licence shows just how the regulator was reined in, oftentimes by just amending the law.

In quintessential Desai style, there are a lot of deviations that, for most, would appear to have little to do with the subject on hand. So, readers are told that the government, the DoT and PSU telcos like BSNL and MTNL are the way they are on account of a class system in operation that rigidly distinguishes between workers and managers; that the government is riven with multiple trade unions with conflicting interests; and that pay commissions are appointed every few years to construct a compromise amongst them; and so on.

How does all this connect with the subject? It does, since everything connects with everything (remember six degrees of separation?)""besides, the telecom industry has this thing called "convergence".

On a more serious note, the book disappoints: it makes few new points, though the suggestion to wind up DoT and to hand over its functions to existing ministries is welcome. The suggestion of a National Interconnection Authority (NIA) to provide a fibre backbone for local operators across the country to connect to, is interesting, and is meant to replace the current interconnection regime that, as Desai rightly says, has not worked well. However, there's nothing to ensure it will work better than the current system since BSNL also has much the same fibre the NIA is supposed to have. The attempt, one would think, should be to find ways to ensure interconnection takes place, not to find ways around it.

Desai fails to appreciate the havoc played by Arun Shourie and Pradip Baijal when they were in charge of things (indeed, Desai is convinced Shourie's one of the few ministers who've done a good job), and so doesn't see the favours to Reliance as an anti-competitive measure. He also buys Baijal's argument that the regulator has been defanged with the authority on interconnection taken away, but doesn't comment on the shoddy homework the regulator's done on so many occasions (the ADC being the best example), and its refusal to even try to tame BSNL when it could. Nor is there any mention, or censure, when the regulator refused to regulate the exorbitant profits in the long-distance business""it was this that gave Telecom Minister Dayanidhi Maran a legitimate excuse to step on the regulator's turf with his One India plan.

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INDIA'S TELECOMMUNICATIONS INDUSTRY
Ashok V Desai
Sage
Price: Rs 395; Pages: 293