Rediff Logo Infotech The Rediff Music Shop Find/Feedback/Site Index
April 3, 1999


 A cop gone bad: TRAI is supposed to police Indian telecom. But today it is on the lam instead.

Sanjay Kapoor in New Delhi

Sitting on the 16th floor of Vyapar Bhavan, near Connaught Place in New Delhi, the Telecom Regulatory Authority of India betrays an existential conundrum.

Email this story to a friend. Barely two years after TRAI's creation through an Act of Parliament, very few really want it.

TRAI trouble
EnThnik to seek VC
Call-mail launched
Tektronix acquisition
The Department of Telecommunications sees TRAI as a threat. Communications Minister Jagmohan thinks TRAI is a fashionable aberration. The private telecom industry finds TRAI toothless. And the lawmakers are still wondering as to why they created it.

The Prime Minister's Office wants TRAI, but only after it has been redefined in the New Telecom Policy of 1999.

The uproar that the Parliament witnessed over the revised telephone tariff order of TRAI was an expression of impatience with the regulatory authority.

The alacrity with which Jagmohan decided to keep in 'abeyance' the TRAI tariff order after Trinamul Congress President Mamta Banerjee's threat to boycott the Parliament session, clearly shows what exactly the government thinks about it.

Interestingly, TRAI's tariff order had been prepared after a detailed discussion with DoT. However, the communication ministry washed its hands off TRAI's exercise by claiming that the matter of raising resources should be left to an elected government.

The Left, for a change, endorsed the stand of Jagmohan. TRAI's tariff order, the first in 50 years, was condemned for being "anti-rural" and "pro-corporate sector".

Even All India Anna Dravida Munnetra Khazagam General Secretary J Jayalalitha has condemned the steep hike in phone rentals that the TRAI wants.

The aggressive attitude of the DoT has caused disquiet in the industry. Under Jagmohan, the communication ministry has reasserted its role as a 'prime investor' rather than just a 'facilitator'.

DoT's attempt to redefine its role has brought back the memories of the communication ministry under Sukh Ram when corruption was rampant. As documented by the Comptroller and Auditor General's reports, DoT was used as a vehicle for making money out of all kinds of contracts.

It is to Sukh Ram's credit that he opened the basic and cellular telecom services to the private sector and ended the DoT's monopoly.

In the new scheme, TRAI was meant to provide regulatory framework to ensure free competition and look after the interests of consumers.

DoT was then meant to be an operator that had to compete with those from the private sector.

Sukh Ram's tenure in this sector may have cast a shadow on the reforms process, but the telecom sector was truly liberalised.

Taking advantage of some of the adverse rulings of the courts against TRAI, DoT has chosen to reassert itself in its old avatar.

Nowhere does this attitude reveal itself more than its interface with the corporate sector. Latching on to one of the legacies of Sukh Ram's tenure, the cellular license fee, DoT has asked private operators to pay up 20 per cent of the fee or attract forfeiture of security.

Each cellular operator has to give Rs 6,023 per subscriber as license fee to the government. Greater numbers makes it more viable for operators. Although cellular operators agreed to pay license fee, later their dram turned sour.

At the face of it, the communications ministry's demand looks justified until one takes a close look at the circumstances in which this issue has been resurrected.

One of the operators, AT&T, a partner of the Aditya Birla Group, has been crying foul over the manner in which the ministry has marked it out for special treatment.

Corporate sources claim that the government is not only asking 20 per cent in cash, it is also seeking 80 per cent 'securatisation' of the outstanding license fee amount.

Sources claim that as the number of the cell phones have increased, it has become difficult to securatise 80 per cent of the outstanding.

Birla-AT&T, which even got cellular licensees for Gujarat, Maharashtra and Karnataka circles, claims to have paid the entire license fees till March 1998.

Later, the ministry granted the industry a deferment of payment as private operators realised that they had badly miscalculated their growth projections.

"At the time we came in, GDP was 7 per cent and there was political stability," claims Virat Bhatia of AT&T. Other areas where cellular operators miscalculate badly was on usage time. Indians, on an average, never speak for more than a minute. Besides the market factors, the US telecom major also holds DoT responsible for its misery. "DoT caused losses to the tune of Rs 1,944 crore (Rs 19.44 billion) from delays due to breach of several contractual obligations," charges an AT&T communiqué.

The operations launch of the network was scheduled for September 1996 but the delay in spectrum clearance and SACFA approvals prevented AT&T from launching its network till early 1997.

It claims that "through methods not utilised by Birla-AT&T, the direct competitors in several markets were able to obtain many approvals much more quickly".

Sources close to the consortium allege that DoT has not taken action against those operators who have not paid their 20 per cent, do not have adequate guarantees in place or have not submitted post-dated cheques that are required by DoT.

These sources charge the ministry of communication for showing special favours to Fascel, a consortium comprising Hindujas, Shinwatra and HFCL.

The communication ministry, sources allege, has not pressurised Fascel to scrutinise its deposits. Au contraire, this consortium fruitfully utilised the money, that should have been in mandatory fixed deposit, for expansion of its network.

Allegation of favouritism and corruption are becoming common. Finance Minister Yashwant Sinha and his former advisor Mohan Guruswamy have hinted at the murky goings-on in the telecom sector. But the whole issue goes beyond corruption. The central point of the telecom crisis is governance.

Corporate sources suggest that the communication ministry and the Prime Minister's Office are playing a Jekyll and Hyde act on the telecom issue.

While some of the officers in the Prime Minister's Office promise the harassed companies that they would be able to provide them some relief, Sanchar Bhavan refuses to give in.

In fact, corporate sources claim that the Sanchar Bhavan, displaying its antagonism towards the PMO, chose to strike against the telecom operators when they got a copy of the draft discussion paper prepared by the Prime Minister's Group on Telecom.

The GoT, headed by Jaywant Singh, was constituted by Prime Minister Atal Bihari Vajpayee to prepare a new telecom policy that many feel is preparing grounds to do away with the license fees.

According to GoT's discussion paper, "Worldwide, telecom projects are financed by a combination of sponsor equity and vendor finance and only seek non-recourse debt from banks or capital markets after the project has progressed to an extent and lenders can assess the tax flow potential.

In India, the project cost has been excessively high on account of license fees and project sponsors have been unable to take up even a part of this external fund commitments... therefore if the license fee component is removed a major part of the project expenditure would be met by present level of equity commitments."

This draft note clearly reveals the intentions of the Prime Minister's Office towards the license fees that run into several hundreds of millions of rupees.

Even on the issue of the regulatory authority, the GoT was candid enough to admit that it would be TRAI that would settle disputes between DoT as the licensor and the private operators.

The prime minister also talked of an out-of-court settlement between TRAI and DoT. All this and more has made it amply clear to DoT brass that they have to move before matters get out of hand.

"It is indeed intriguing that the communications ministry chose to issue the directive to private operators to pay 20 per cent of the license fee barely 24 hours after the GoT draft had been made public," claimed a corporate source.

He also wondered what the need was for fixing the February 28 deadline when the prime minister was yet to take a decision on the matter. Later, the PMO extended the deadline to March 31.

The arbitrariness and confusion are causing a major setback to the telecom reforms. For some strange reasons, reformers like former finance ministers Manmohan Singh and P Chidambaram have not come forward to save the TRAI or its harassed chairman, Justice S S Sodhi.

Sodhi has questioned the communications minister's decision to keep the tariff orders in abeyance. He is also puzzled by the manner in which the communications ministry has done a volte-face on the issue of tariffs.

In a letter to Justice Sodhi, Telecom Commission Member A Prasad has categorically stated that "We are in general agreement with the overall approach of TRAI."

Even thought he Telecom Commission revealed a patronising attitude towards the TRAI, there was nothing to suggest that the government would undermine its very existence.

"TRAI has been methodically subordinated to achieve certain objectives," confided a professional associated with the regulatory authority.

Telecom companies, meanwhile, are reworking their options. Companies like AT&T are threatening to pack their bags if their interests are continuously ignored.

"This type of operating environment makes it difficult to justify the Rs 1,000 crore (Rs 10 billion) of equity that has been invested in this venture, let alone warrant any additional consideration as a place to infuse any more equity,' claims a Birla-AT&T communication.

This shows that there is no regulatory authority to hear their point of view to ensure that the licensor and the licensees get a level playing field.

What will happen if the telecom majors in their attempt to cut their losses get out? "There is a clause where the DoT can come in as the third party in a duopoly situation if one of the operators back out. The need and timing would decide whether DoT steps in or not," claimed a senior DoT official.

For some of the US telecom companies do decide to leave, then it would cause a setback tot he entire process of economic liberalisation. Prime Minister Vajpayee is keen to avoid such a situation but there is so much ideological confusion in his government that one is not sure of how these cross-connections would be sorted out.

Courtesy Sunday

Tell us what you think