Heading for court again

TDSAT's ruling on WLL limited mobility has put the government in a spot. Last fortnight, telecom minister Arun Shourie tried to hammer out a solution but his talks with industry czars collapsed and cellular service companies are now poised to head for the Supreme Court

India's telecom czars have been converging on New Delhi during the last few days. Reliance Infocomm chairman Mukesh Ambani winged his way twice (on August 16 and 22) to the capital and met communications minister Arun Shourie and deputy prime minister L. K. Advani.

On Wednesday, August 20, Tata group chairman Ratan Tata too flew down to meet Shourie and finance minister Jaswant Singh.

Ambani and Tata, of course, had come for a pow wow with government ministers and mandarins on the biggest crisis to have gripped the telecom industry "� a ruling by the quasi judicial Telecom Dispute Settlement Appellate Tribunal (TDSAT) on August 8.

On the one hand, TDSAT had permitted fixed line service companies to offer wireless in local loop (WLL) limited mobility services. On the other, it tethered limited mobility services.

TDSAT raised four crucial points for the government to consider:

It suggested that WLL limited mobility service companies pay an entry fee.

It said that limited mobility service companies do not have permission to use a mobile switching centre (MSC "� the backbone of a fully mobile service, an MSC allows service providers to offer roaming and virtually unlimited mobility).

It said that the mobility of WLL services had to be restricted to a short distance charging area (SDCA, roughly equivalent to an area where you make local calls).

It said that WLL operators would have to pay for additional spectrum requirements.

That cast doubts on the viability of WLL services because TDSAT asked the government to address the issue of a level playing field between cellular service companies and fixed line companies.

Soon after the TDSAT order, the Telecom Regulatory Authority of India (TRAI), the industry's regulator, shot off a letter to the department of telecommunications (DoT) asking it to modify the licence conditions of fixed line service companies so that limited mobility services would be truly limited.

TRAI recommended that limited mobility service companies be banned from offering facilities like call forwarding "� a recommendation that would, in effect, crimp the mobile service ambitions of Tata Teleservices and Reliance Infocomm.

In combine, the TDSAT order and TRAI's recommendation would have far-reaching consequences for mobile service companies.

Both the order and the recommendation sent the government into a tizzy. DoT secretary Vinod Vaish and Shourie immediately went into a huddle.

Senior DoT officials worked on public holidays (including Independence Day) to decide on the government's future course of action. They first tried to persuade the two telecom camps to not go to court again and suggested that the matter could be resolved.

Next, DoT considered sending to TRAI (for its recommendation) the crucial part of the TDSAT ruling, namely, on level plaing field issues. It also made it clear to cellular service companies that it couldn't prevent "the march of technology" and prevent fixed line service companies from using MSCs.

An internal DoT committee on unified licensing, meanwhile, suggested that any further consultations with telecom companies should stop and the government should wait for TRAI to submit its recommendations on unified licensing.

The action heated up at the political level. Prime minister A.B. Vajpayee is said to have asked Jaswant Singh to take stock of the WLL issue. Singh then met Shourie on this. Law minister Arun Jaitley and Advani were roped in too.

The TDSAT ruling had clearly put the government in a spot. Says Sanjay Mehta, head of telecom practice at Ernst & Young: "A decision to implement the TDSAT order in toto is likely to see the basic operators go to court. At the same time, if cellular service companies feel that the government is not acting, they may go to court."

Inevitably, the ruling has led to fierce sparring between cellular service companies and the fixed line services camp.

The Cellular Operators' Association of India (COAI) and the Association of Basic Telecom Operators (ABTO), which represents the interests of fixed line service companies, have shot off half a dozen letters to the government and the regulator pressing home their viewpoints.

At a recent Confederation of Indian Industry's national telecom council meeting chaired by Kishor Chaukar, managing director of Tata Industries, a free for all erupted between the cellular and fixed line service camps.

On Tuesday, August 19, a COAI delegation led by Dilip Modi, the next COAI president, COAI director general T.V. Ramachandran and Bharti group representative Anil Nayar met Vaish to demand that the TDSAT judgment be implemented immediately and limited mobility rules be enforced.

Vaish is believed to have merely replied that the government interpreted the judgement differently "� it believed that all the majority TDSAT judgement had done was to seek a review of the level playing field matter and that this was the operative part of the judgement.

The answer to this, he said, was unified licensing. The COAI camp later privately grumbled that the DoT argument was eerily similar to that of (ABTO).

Still, the government wants to disallow WLL roaming. It will consult law minister Arun Jaitely on this. If it does ban WLL roaming, Reliance Infocomm will be hit "� 20 per cent of a cellular service company's revenue comes from roaming subscribers. Reliance has not ruled out going to court if DoT bans roaming.

"We will do anything to keep the interests of our consumers intact", says Amit Khanna, Reliance Infocomm spokesman and chairman of Reliance Entertainment.

All this is disquieting news for fixed line service companies. They say that the TDSAT order is being wrongly interpreted to kill the WLL business, that they have already paid a higher entry fee than cellular service companies and that, therefore, a separate entry fee for WLL services is unwarranted.

They also fiercely oppose any change in their licence. For instance, Reliance Infocomm offers call forwarding (roaming) services to its three million subscribers.

Predictably, it is vehemently against any change in its licence. "We are offering services as per our licence conditions and any change in the service norms has to be done by the licenser in agreement with the licensee. Why should we be asked not to offer a service that technology permits? It will be like asking us to offer black & white TVs in the era of colour TVs, " says Khanna.

Says Mehta: "The best solution would be for the government to come up with a solution that is acceptable to all. That seems unlikely." Shourie, in fact, did try and hammer out a solution but his talks with the two sides seem to have collapsed.

The government's position was that clause 99 of the TDSAT order (which dealt with providing a level playing field) should be referred to TRAI which would then be asked to make recommendations in four months.

In the interim, some restrictions could be imposed on WLL service companies. For example, roaming could be stopped. Shourie and DoT also argued that a unified licence would resolve the problem.

"We feel that all the dispute has arisen because the licence is service specific. If we have a licence that is technology neutral, most of these disputes will go," says one government official.

Backing the government's initiative, Chaukar has suggested setting a benchmark entry fee, based on the amounts paid by the fourth cellular operator.

All fixed line service companies that want to offer full mobility could be asked to pay the benchmark fee after deducting the licence fee already paid by them.

Cellular service companies that have already paid more than the benchmark could be exempted from paying the annual licence fee for 2-3 years.

Ambani had, in fact, asked the government for permission to offer fully mobile services and said that Reliance would pay Rs 1,000-1400 crore, about the same cellular service companies paid for the fourth licence in circles.

Late last week, the government is understood to have suggested to him that Reliance Infocomm should stop offering roaming for the time being.

In any case, fully mobile service companies pointed out that the comparison with the fourth licensee was odious. The fourth cellular service company in circles was given spectrum of 1800 mhz, which some cellular service companies say is inefficient.

In Mumbai, the Bharti group had to set up over 600 towers to launch services, versus the 400-500 towers the older cellular service companies had. In sum, the Bharti group had to invest more. So the licence fee for WLL service companies should be much higher, perhaps as much as Rs 4,000-5,000 crore.

What is more, the Tatas too seem to have made a presentation to Shourie that expressed reservations about a unified licence.

COAI too, predictably, opposes the unified licence proposal, arguing that this is but yet another government attempt to legitimise the entry of fixed line service companies in mobile services.

Cellular services companies also think that while a unified licence could come into being three to four years from now, it does not address the immediate WLL limited mobility problem.

"Forget three years, we can't even wait for the four month period given by TDSAT to DoT for working out a level playing field. We have only 60 days to appeal against the TDSAT judgment. If the government does not act immediately, we could go to the Supreme Court asking it to uphold the minority judgment by Justice Wadhwa which severely indicted the government for allowing limited mobility," says a senior cellular services company executive.

Unquestionably, a unified licence will throw up an array of issues. As Mehta points out, long distance licence holders may have to be compensated for having paid over Rs 400 crore as entry fee.

But if cellular service companies put up too stiff a fight on the unified licence matter, the government could resurrect a proposal to issue licences to two more companies per circle, effectively taking the total number of operators to six per circle.

"The migration package given to cellular service companies in 1999 was on condition that the government retains the right to introduce as many players it thinks fit," notes a government source.

Unified licence apart, TRAI is considering allowing cellular service companies to offer long distance services without going through an STD operator. They would thus save on interconnect charges. So they too could offer rock bottom STD tariffs, like Reliance has been able to do.

Cellular service companies offered their own set of solutions, though some of these could be just negotiating positions:

The government should pay them compensation. Cellular service companies say that they are willing to consider unified licensing if it's brought in as a new policy which will have a different migration pattern.

"We are ready to discuss it as long as you acknowledge that it is a new policy and you are ready to pay us compensation," says a cellular services company executive. There's an international precedent of governments paying compensation. In Singapore, the government paid Singtel over US $ 480 million as compensation after its ILD services monopoly was taken away.

In India, the compensation could include some part of the fee the government collects from Reliance Infocomm and Tata Teleservices; a moratorium on revenue share payments to the government; allowing acquisitions of a company within a circle by another company in the same circle (now disallowed); increasing the current foreign direct investment ceiling from 49 per cent to 74 per cent; and increasing the licence period from 20 years to 40 years; or a combination of these.

Amend the licences of fixed line service companies to clarify that those that wish to provide limited mobility services will have to pay an entry fee, that they can't use MSCs or forward calls. Their licences are now silent on these matters.

But the government has realised that changing the licence conditions of fixed line service companies could stir a hornets' nest. They could, for example, demand that cellular service companies be asked to pay an additional licence fee for offering roaming and SMS services since these are not mentioned in their licences.

Also, cellular service companies are not even close to meeting their village telephony commitments, something their licences require them to do.

"So does this mean that we should revoke their licences or ask them to pay compensation for not completing their license commitments," asks a government official. "Fixed line service companies can go to court and say, please amend the licence terms of cellular service companies as they have not met them."

COAI members, on their part, believe that the government is not willing to implement the TDSAT ruling and would prefer to leave the matter for the Supreme Court to decide. COAI itself was split on going to court.

But after much internal discussion, it noted that it has 60 days to appeal against the TDSAT judgement, that it can't wait for four months, and that it has, therefore, to go to the Supreme Court to uphold TDSAT's minority judgment.

But the other side too could go to court. With the government veering round to the view that it has no option but to make limited mobility really limited, at least for the time being (though a decision on this will depend on the outcome of yet another case on MSCs that's before TDSAT), WLL companies too may be looking at the option of a court battle.

In sum, the long, tortuous WLL rumpus is by no means over "� the battle ground will merely shift to yet another court room.

Opening a can of worms?

Telecommunications minister Arun Shourie and the department of telecom (DoT) has been arguing that the solution to the current telecom tangle lies in offering a unified licence to telecom companies.

This means that all telecom companies will be allowed to offer mobile, fixed line, international long distance (ILD) and national long distance (NLD) services.

But some telecom companies have said that a unified licence will open a can of worms. Among the questions they've raised:

Doesn't a unified licence question the validity of the national telecom policy of 1999?

The number of cellular service companies in a circle is now capped at four. Fixed line service companies have no such cap. What happens to this under unified licensing?

Cellular service companies will say that they should be allowed ILD connectivity without paying a licence fee, just as fixed line service companies were allowed to offer limited mobility services without paying an extra fee. So the revenue of ILD companies like VSNL will be hit.

Cellular service companies might lobby for permission to enter the NLD arena. They could then seek direct inter-circle connectivity and bypass the NLD carrier or build their own NLD networks. That could lead to an NLD tariff war and squeeze the revenues of BSNL, the Bharti group and VSNL.

Long distance service licence holders may have to be compensated for the over Rs 400 crore entry fee they paid