From Business World of 10 January 2005.
The telecom
powder keg
For decades, the Department of
Telecommunications (DoT) used to charge subscribers less bimonthly rent than
the cost of connecting them to the network. That was all right in the socialist
era: cross-subsidies were the hallmark of progressive politics, and the DoT was
minting money as it made Pravasi Bhartiyas pay through their nose when they
called their relatives at home. That beautiful racket collapsed in the 1990s:
callback operators siphoned off the profits on calls from abroad, and
competition brought down international call charges.
So whom to milk
next? DoT’s beady eyes targeted the private operators, who had the cheek to
compete with its favourite daughters, BSNL and MTNL. So it went to Telecom
Regulatory Authority of India (TRAI); and TRAI obliged. Fixed line operators
had been given a bonanza by being let into CDMA cellular business; it decided
to make them pay for the government companies’ pointless munificence. In
January 2003 it levied an access deficit charge (ADC) on private “fixed-line”
operators – essentially their cellular lines, since they had hardly any fixed
lines – to subsidize the government companies’ rentals.
The CDMA
operators howled that this was unfair – that it discriminated against them and
in favour of their bitter competitors, the GSM cellular operators. When CDMA
operators shout, they are heard in the highest quarters, since they include
India’s biggest business houses. So on 15 December 2003, TRAI extended the ADC
to all cellular operators. It also imposed a huge ADC – Rs 4.25 a call against
30 Paise on a local call – on international calls handled only by GSM cellular
operators. That was discrimination against them; but their howl was not nearly
as ear-splitting, and went unheard.
The ADC was a
recipe for fraud; a company that received an international call into its
network could pass it forward as emanating from its domestic network and save
Rs 3.95 per call. Whether fraud arrived or not, allegations of fraud certainly
did. BSNL accused Reliance of changing the caller line identification of
incoming international calls and passing them off as domestic ones, and asked
in October for Rs 1.827 billion in evaded charges. Reliance has been all the
way up to the Supreme Court, which asked it to pay up the amount and go back to
Delhi High Court for judgment.
This court
battle evokes the ghosts of 1999, when every telephone dispute ended up in
Delhi High Court, which used its judgments to cut TRAI to size. It weakened
TRAI to such an extent that the government cut it out of the judicial process
and set up TDSAT to bypass high courts. Then last September, TDSAT itself ruled
that TRAI had no authority to adjudicate in disputes; and last week, it
declared that there was no scope for arbitration in telecom disputes and that
all of them had to end up at its doorsteps.
The rapid growth
of the telecommunication industry gives the impression that all is well with
the industry. But the battle for turf between TRAI and TDSAT has paralyzed the
telecom regulatory system as effectively as the Delhi High Court’s verdicts did
in 2000. If proof is needed, it will be provided within weeks. TRAI has reduced
the ADC on the grounds that traffic is growing much faster than expected, and
that BSNL’s deficit can be met with a much lower call per charge. This should
not concern BSNL, for what matters to it is the aggregate amount it gets and
not the amount per call. But it loves every device that hobbles its
competitors. So it has raised a howl. It is only a matter of time before it too
approaches Delhi High Court.
The interesting
thing about the proceedings is the studied silence of the young minister,
Dayanidhi Maran. And a suit by BSNL will mean that he goes along with his PSU.
This too is a depressing pattern recognizable from the early days of the NDA
government, when minister after weak minister acquiesced while BSNL and MTNL
reduced TRAI to a cipher. Last time it took all the Prime Minister’s men, led
by Sudheendra Kulkarni, to cobble together a solution that bought the
cooperation of DoT and the private operators. This time too the mess will end
up on the Prime Minister’s table; but he will not be able to dispose of it so
expeditiously as he did the NDA’s memorandum on the budget last August. While
he listens to erudite presentations on power and ports from the Planning
Commission, he should bear in mind that he is sitting on a telecommunications
time bomb.
