Opinion A flawed convergence

The bureaucrats in the DoT and TRAI have produced a world-class policy. However,in seeking to protect government revenues,they implement policy unconventionally,ignoring more defensible options.

The move to unified licences makes sense. Old licensing schemes that specified technologies or infrastructure players could use to deliver service make little sense today. Now services can be delivered in multiple ways. Diverse devices (cellphones,TV etc) can deliver phone calls,internet access and TV on diverse infrastructure (wires,cellular towers,satellite) with technologies like optical fibre,GSM etc. This “convergence” of devices,infrastructure,and technologies has made traditional distinctions irrelevant.

Convergence is also an opportunity for innovation and improved efficiencies. So,mature regulatory regimes have abandoned licensing rules,fees that could limit benefits of convergence. In the EU,old licences have given way to authorisations,(individual or general). Individual authorisations (similar to India’s licences) are given in case a player seeks access to scarce resources like spectrum. General authorisation (also called class licence) applies in all other cases. Players are free to deploy any service or technology anywhere,without additional fee.

The Indian proposals permit companies to exploit convergence,but seek an economic rent to do so. TRAI,which,as regulator,implements policy,has recommended several restrictions and fees.

NTP 2012 may speak of a single licence across services and service areas. However,TRAI’s recent proposals for unified licences distinguish between services and recommend district licences in some cases. Unfortunately,for a sector specialist regulator,TRAI offered no rationale for different categories of licences. It has recommended separate categories for providers of closed private networks like VSAT and radio trunking and for services like voicemail.

Take fees. A justification for high entry and licence fees (6-10 per cent of adjusted revenues) for mobile operators was that the fees were a proxy price of precious spectrum bundled with old licences. The new proposals retain both even if India has the world’s highest government levies on telecom players. Internet Service Providers too face greater fees and more regulation — even when this is not the norm and India is a laggard in data services. Infrastructure Providers who set up and run telecom towers face higher compliance and licence fees several years after large initial investments. There is no explanation for singling out towers from other major services that operators also outsource,like customer support.

TRAI’s new draft of guidelines for different types of licence still speaks of application fees and “non-refundable” deposits. It will hinder,not facilitate convergence or unified licensing.

It is unrealistic for the government — especially in the current economic climate — to forego the thousands of crores it receives in telecom licence fees by moving to an “open-entry” regime. Nor can India abandon its legitimate concerns about security. Fortunately,revenue generation,scrutiny of prospective players and legal interception of traffic are not incompatible with an open market. However,arbitrary fees and other restrictions are.

What can the government do? It can set annual revenue targets in the budget for levies on the sector,and recover it exclusively from wireless operators with scarce resources such as spectrum,who already contribute over 90 per cent of the sector’s revenues and fees. For all other players,a token administrative fee is sufficient. This will provide much-needed incentive to expand data services and to invest in infrastructure.

Wireless players would pay in proportion to the spectrum they receive. This will not impact spectrum allocation (with or without auctions). Besides being transparent,it would promote efficient use of spectrum with inefficient users contributing a larger proportion of their revenues. And,it would mirror best practices in spectrum management.

Current proposals for unified licences are retrograde and inconsistent and neither DoT nor TRAI has demonstrated their practicality. The constraints and fees deter smaller (but now important) players without adding significantly to government revenues that come predominantly from players using spectrum. A tweak will allow the policy to address the agenda of most stakeholders.

The writer is a telecom consultant express@expressindia.com