Monday, October 10, 2011

Right to Broadband? What an idea, Sirjee!

Well done Kapil Sibal! Well done for not buckling under relentless pressure and doing something silly with the new telecom policy. Well done for having the courage to be clear about the objectives of the policy. Well done for being bold and visionary, especially with respect to broadband and m-governance. Well done for keeping consumer interests in the center of the new policy.

There are many visionary things about NTP-2011. But before I come to those, here’s what I want to say about the courage of the minister in formulating the policy. In one fine stroke, Kapil Sibal has announced that he is not one to get scared with arbitrary attacks on the government over the last 12 months on 2G (the scam figure being inflated 70 times by the CAG as per internal records of the institution). This is the not the policy announcement made by a minister or a government under pressure. This is a policy of continuity in many ways – continuing to empower the consumers. And continuity means that the government is finally getting the guts to say that it stands by its policy decisions of the past. That’s something I have always maintained and I am happy that the government has not abandoned the good policies of the past.
The most visionary part of the policy is the objectives statement. “The primary objective of NTP 2011 is maximizing public good by making available affordable, reliable and secure telecommunications and broadband service” (emphasis supplied). In NTP-1994, the policy objectives included availability of telephone on demand, provision of world class services at reasonable prices, ensuring India’s emergence as major manufacturing / export base of telecom equipment and universal availability of basic telecom services to all villages. One can safely say that with the exception of major manufacturing of telecom equipment, all other objectives of the NTP 1994 have been achieved and exceeded. NTP 1999 also had certain interesting objectives: Availability of affordable and effective communications for the citizens is at the core of the vision and goal of the telecom policy; Encourage development of telecommunication facilities in remote, hilly and tribal areas of the country; Create a modern and efficient telecommunications infrastructure taking into account the convergence of IT, media, telecom and consumer electronics and thereby propel India into becoming an IT superpower; Transform in a time bound manner, the telecommunications sector to a greater competitive environment in both urban and rural areas providing equal opportunities and level playing field for all players;  5) Achieve efficiency and transparency in spectrum management. Again, the NTP 1999 has achieved almost all objectives – most noteworth of which were the points emphasized in italics. Those who complain about 2G policy (as distinct from the corruption in some parts of implementation) should read carefully what the set objectives were in both 1994 and 1999….I am happy that the NTP 2011 continues to stress on affordability. I am happy it brings in a modern perspective by including broadband as a specific objective….
Some of the other visionary parts of the policy include the “One Nation” part – no roaming charges and countrywide Mobile Number Portability (MNP). Imagine having one number across the country and no roaming charges – that would truly break down the arbitrary barriers that exist between the states in our country. Hopefully – and what is not explicity stated – is that it will break down the barriers of caste, race, class and religion and language also that exist all throughout our society. That’s why I have often called 2G telecom as the biggest leveler of all…..Kapil says it as much when he calls telecom the “instrument of empowerment”. I am delighted that Kapil expands on this concept even more when he says that the policy will “treat IT and telecom as a basic necessity – just like health and education” and talks of a concept of “Right to broadband”. Who says the government cannot see into the future? How many countries around the world have made access to broadband a fundamental right? This understanding of how the future world is going to look – where everyone and everything will be digitally interconnected – is what will propel India into the future; not vindictive and irresponsible politics of blaming each other for exaggerated scams and the like. In one way, the NTP 2011 takes a break from the vicious politics that has gripped the country. In another way, it signals the resolve of the government to fight its way out of the logjam by making bold policy announcements. If it does that, it will get itself back into the fight….
I especially like the emphasis on faster broadband speeds (will improve 9 times in 4 years); I like the convergence between mobile, IT, broadcast and electronics because that indeed is where the technology is evolving. I like the legalizing of Voice over Internet Protocol (VoIP) as it will cut international calling rates to near zero. I like the determination to bring in competition and cut SMS rates as well as rates of other VAS (Value Added Services) products. I like the emphasis on m-governance; hopefully this will mean that the government will legalize and expand m-commerce and m-banking facilities. Many have written in the past on the powers of the humble mobile phone to act as a bank. Money transfers between a casual laborer in Delhi and his family in Orissa can be done at nearly zero cost compared to the 2-4% that the cheapest money transfer service costs today. Payments for products and services using mobile phones will reduce demand for cash and do more for removing corruption than the Lokpal ever can. Broadband on the handset will revolutionize the way we do business; the way we study; the way farmers get the best pricing for their produce by knowing when to sell and whom to sell to; in short…..faster broadband connectivity will bring in the next revolution to the telecom business.
Not unexpectedly, the telecom companies are groaning. They see a further reduction in margins. Notwithstanding what the lay public thinks, most telecom companies are in dire straits inspite of the free 2G spectrum. Except for Airtel – which has EBITDA margins of about 30% (nothing out of the ordinary, given the high capital costs and hence high borrowings. Interest charges come below the EBITDA line) – almost all other companies are either making losses (Reliance (-758 crores Net Loss in FY11; perhaps Docomo and almost all new telcos) or really small margins (Idea – 5.5% net profit margin, Voda – even lesser etc). Those who don’t understand things often tend to make the most noise – but then one can understand that their points of view are mostly political in nature – and they would oppose almost anything that the opposing party did! I am sure many of them will oppose this NTP 2011 also! Telecom companies now fear a further reduction in revenues and margins as roaming rates, VAS rates, and broadband rates will all start to fall. What must give them hope and confidence though (and they realize it) is that they will be able to transform themselves into full-service banking and m-commerce companies from merely being telecom companies. That’s what should give them reason to cheer. I believe today the stock markets will cheer the listed telecom companies. Let’s wait and see! (PS: The stock markets open now….and the stocks of Bharti, Idea and RComm are all up 3-5%)…..
The one complaint I have with the policy is that it does not say “explicitly” that it will keep 2G license free (or very cheap). It does say “affordable” in its objective; so I am hoping that it will keep spectrum free. My worry also is that telecom prices may rise a bit from where they are today – because operators will try and recover their loss from removal of roaming charges – however I am hoping the impact of this will be small. The larger impact on telecom pricing will continue to come from the burden that the 3G auctions have put on telecom companies…..already most telecom companies have increased rates by about 20%. More hikes can be expected…..So much for those who believe telecom spectrum should be auctioned…..
The real truth is that telecom is a revolutionary service which should indeed be treated like a fundamental right. So far, India has done extremely well in the way it has rolled out telecom services over the last 15 years. The word “revolution” (not “scam”) looks like the correct word to follow “2G”……I am happy the government has shown courage in sticking to what’s good for the country and has not cowed down by continuous and irresponsible criticism. Hat’s off to you Kapil Sibal!

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