Wednesday, May 2, 2012

Rescue Telecom from politics and everything else.….

The sordid telecom saga continues and in fact gets worse by the day. It all started off with the totally sensationalized assertion by the CAG that the government had lost revenues of Rs 1.76 lac crores by not auctioning 2G spectrum (On the other hand, I have always argued that maximizing revenues could never be the government’s sole objective when it came to policy making). Then the Supreme Court went overboard in canceling the 122 licenses that had been allotted to the nine new operators – paying no consideration to our international obligations or the suffering that this decision would cause honest telecom operators which made the mistake of trusting the government. Now the TRAI has thrown another googly – by recommending that only 5 MHz of spectrum be auctioned in this year. This means that only one of the nine affected operators will be able to come back into business.

It’s a crazy situation really. It’s designed to kill the telecom sector. What was once touted as the most successful liberalization program of the government (along with IT) will soon become the sickest of them all.

What could possibly be the logic of allowing the auction of only one slot of 5 Mhz this year when the government has recovered so much more spectrum by canceling the licenses? How would it be fair if eight out of the nine affected operators who rolled out their networks all over India are disallowed from protecting their investments by winning back their licenses? Just think about it. The government announced a policy and went out to invite the operators. The operators dutifully rolled out their networks. Suddenly, their licenses were canceled. And now they are not even being allowed to win back their licenses. It’s bizarre – in fact a loud statement to foreign investors that they are absolutely not welcome in India.

But then the politics in this country has been headed southwards for some time now. In a country where there is zero focus on good governance (how many agitations have taken place which demand that government projects be completed on time?), but 100% on corruption, we have developed a culture where it’s better not to take decisions. The bureaucrat who thinks big also trips at times. There is a very good chance he would be called corrupt. We are ok with bureaucrats who sit on decisions and pull the country back from the path of progress. This is acceptable to us. The Anna movement has caused a huge disservice to the country, by making this feature even more prominent (By the way, even former President Kalam believes that the Lokpal is no solution to the problem of corruption). Today, the bureaucracy (and the political class) is happy to avoid decision making; and if it does take decisions, it wants to be absolutely safe. Countries that play safe do not progress.

Add to this bureaucratic play-safe, the over-zealousness of Constitutional authorities like the CAG. The CAG has been eager to step into policy making territory. After all, the highlight of its 2G investigation should have been to unearth corruption (of Raja and the bureaucrats), not comment on the FCFS policy. In so many countries, FCFS is the preferred route to allocate natural resources- this ensures that consumers get the benefits of those services and products at low prices. When the entire country is the beneficiary of such a policy (there are nearly 900 million telecom subscribers today), it should be called a good government policy. But the CAG had a different plan. The SC did no better. It should have ruled on charges of corruption. But instead it chose to cancel the licenses. After all, what was the fault of the companies that bought into the extant government policy? In future, do we expect global corporates to question government policy when it is announced? Does the Government of India have no credibility? Does the SC realize what damage its decision has done to the country’s reputation?

And what is the logic for TRAI’s restriction on license auctions this year if it is not to dramatically increase spectrum fees? Any half intelligent person will tell you that auctions should not be carried out under scarcity conditions. It will create anomalies in pricing. But that is precisely what TRAI wants. The TRAI’s objective appears to be to help the government maximize revenues. By raising bid prices through artificial scarcity, it will set the ground for similar high prices in subsequent rounds. It appears that the TRAI has lost its independence and is kowtowing the government line. This is warped logic. If prices do increase that much, telecom prices will rise dramatically and the telecom revolution will be over. It will be the modern day killing of the golden goose. Besides, what happened to the TRAI’s job of protecting the consumer?

That’s why I am happy that Telenor has appealed against this TRAI decision in the Supreme Court. Hopefully the court will undo some of the damage its earlier decision has inflicted on the sector.

The real truth is that the telecom sector is in doldrums. It needs to be rescued from the politicians and the politics they play. The biggest losers are going to be 900 million common citizens of this country. It’s time saner counsel prevails and we all collectively pull back from the brink. But given the destructive politics that prevails in the country at the moment, I have few hopes….

1 comment:

  1. This is so true... I am a part of this industry and am shocked to see that a country like India which till recently prided itself in growth rates that rivalled the chinese and the south asian tigers is now going back to the stone ages with policy decisions like these... Its not only the 900mn consumers, but, thousands of employees whose jobs, careers, family life are going to get impacted by this shortsighted "cut the golden goose" approach of the govt.