Is the Shift from Concentration to Competition for Real?

Is the Shift from Concentration to Competition for Real? 

Its been a decade since the Telecom Dispute Settlement & Appellate Tribunal (TDSAT ) is in existence. Although, the telecom growth story is a huge success in terms of 10 million subscribers per month and the world staking their investments with us, have we managed to get rid of the hurdles and red tape that was expected from an independent regulatory body?

Is this regulatory authority equipped to decide matters speedily, so as to bring efficiency in the running of business which the regular civil courts could not?

Historically, PSUs ruled –

The public sector undertakings take the bigger pie with their concentration of market power where infrastructure and overhead costs are large, especially in sectors like power & gas, telecommunications & electricity. While the government runs such businesses, there are natural and artificial barriers of entry for private enterprises.

Regulatory Regime & Emergence of Telecom sector competition –

Although Regulatory bodies are set up as quasi-judicial autonomous authorities – their members performing the regulatory functions are retired bureaucrats, trained under a typical government / public sector mind set. And as usually done, the vested interests of the ministers have to be incorporated under the guise of policy decisions.

Having said all this, one such evolving area of business which has been opening up to fierce competition is the Telecom sector…

So, how do the various facets of this regulatory regime function?

The Telecom Commission and the Department of Telecommunications are responsible for policy formulation, licensing, wireless spectrum management, administrative monitoring of PSUs, research and development and standardization/validation of equipment etc[1].

The DoT grants telecom licenses while the regulator / TRAI is empowered to make recommendations either suo motu or on request of the licensor in specified matters including –

  • need and timing for introduction of new service provider;
  • terms and conditions of license facilitating competition, efficiency and technological improvement;
  • Fix tariff in the telecom sector based on the various parameters and models developed by them from time to time;
  • They also fix the ceiling, floor or standard tariff or leave it to the industry to regulate the tariff prices.

The TRAI is equipped with powers to show the stick, by way of its recommendatory / adjudicatory / regulatory authority.

Before the Amendment of the TRAI Act in 2000, TRAI was performing both the function of a regulator and dispute redressal forum. However, the power of TRAI would be challenged each time a direction was passed against DoT ( the licensor / service provider). The main object that was sought to be achieved through this amendment was to create a Quasi Judicial body ( TDSAT ) which could independently decide over the disputes arising between service providers including the department of the government providing telecom services as licensor, ensuring a level playing field.

Setting up of regulatory bodies is a growing trend to look into sector specific issues and handle them efficiently.

So, if the appointment and tenure of the TRAI chief is the prerogative of the telecom minister, is it possible for him not to function as a subject of the government but as a crusader of this so called independent regulatory body?

Actually, the telecom regulator is meant to play a crucial role in these times of evolution of Indian telecom market from a Government owned monopoly to a multi-operator / multi-service competitive market.

PSUs Vs. Private Competition 

A perusal of the cases before the TDSAT shows how regulatory certainties are disturbed by tussles between the private players and PSUs as incumbents for an equal footing.

BSNL, being the alter ego of DoT, its resistance from providing interconnection at points advantageous to private operators is clearly to foreclose competition. It has managed to extend its reach into mobile and internet service provision riding on its dominance in fixed line telephony.

WALKY upsets BSNL – Never mind the BSNL coated monopoly over telecom infrastructure, the private telcos mean the business !!

BSNL’s monopoly position gets distorted when new technology enters market – For instance when Reliance brought ‘Walky’ into the market with advertisements displaying that ‘walky’ provided mobile services at landline rates – It could receive/ originate calls in a short distance ( of 50 kms ), it affected BSNL by 

(a) taking away some of its business and

(b) if it was treated as a mobile service instead of fixed, then BSNL was entitled to Access Deficit Charges ( ADC )[2]

Some Important Issues Get Settled With The Advent Of NTP 1999

New Telecom Policy, 1999 enshrining its commitment by Universal Service Obligations, has given voice to all telecom service providers to question charges & levies to be paid to the incumbents.

  • Consequently, private operators challenged BSNL charging rates lower than that prescribed by TRAI – For predatory pricing, prescribing concessional rates for STD calls within a Circle, originated by telephone subscribers of BSNL for terminating in the basic service network

TRAI directed BSNL to grant similar benefit to other Basic Service Providers[3]. 

The challenge by BSNL to the directions of TRAI before the TDSAT also failed[4].

  • Regulatory intervention against BSNL charging higher ADC – TRAI / TDSAT responded to the necessity to bring about a degree of regulatory certainty in regard to access charges which was sought to be disturbed by BSNL unilaterally by asking for higher access charges from time to time.
  • Questioning TDSAT’s regulatory powers- About the regulatory authority that TDSAT is empowered to yield, the SC   opined[5] that –  ” the regulatory bodies exercise wide jurisdiction. They lay down the law. They may prosecute. They may punish. Intrinsically, they act like an internal audit. They may fix the price; they may fix the area of operation & so on & so forth. While, doing so, they may interfere with the existing rights of the licensees.”

Regulators battle for free competition when PSUs have monopoly over the local loop?

There is a policy dilemma that telecom regulators in every industrialized nation are faced with today. 

With the advent of DSL/fiber technology, it is now possible to deliver higher bandwidth services over the local loop, making it even more valuable. 

The regulator is thus faced with a dilemma of breaking up the monopoly of these existing service providers over the local loop and encouraging free competition in the provision of high bandwidth services versus intense lobbying and pressure from the government, who have their own DSL/fibre offerings and are actually eager to face limited competition without losing their monopoly on the local loop. These incumbents[6] are the country’s biggest employers. So in the name of fairness, the Regulatory body is considering policies for Unbundling[7].

The intensity of regulatory battles between the regulators and incumbents require the ever so difficult innovative solutions. This is especially so when such solutions are required to come from the stagnated and retired bureaucrats or the judicial member who judges retired after completing a tiring tenure of intense judicial work.

In conclusion, there is no denying, from TRAI/TDSAT’s decisions discussed above, that the telecom regulatory system has facilitated competition. However, it could be faster and pro-active instead of procrastinating on issues where pro-competitive policies are in limbo obviously due to vested political interests.

The lofty objectives of DoT include International cooperation in matters connected with telecommunications, however, their actions contradict the pious policies on paper. 

The Spectrum tussle portrays such a bad example of creating hurdles in competition, vitiating the atmosphere for interested foreign investors.

The New Competition law is now in force. The liberalization policies in different sectors may have been documented. However, we have had the Big Ambani battle over ownership of natural resources / gas –

whether its pricing is government controlled or privately contracted?. Questioning of this kind, reveal more about the intent of the policy makers and how ready they are to deal with competition.

[1] http://www.dot.gov.in/profile.htm

[2] as per rates prescribed in Telecom interconnection Usage Charges Regulations, 2003. BSNL owns 99% of the rural phones. This entitles them to get Access Deficit Charges ( ADC ), a levy imposed by TRAI on operators ( service providers ) as a subsidy given to existing incumbent like BSNL as compensation for its costs exceeding revenue, due to rolling out of telephone service in rural areas. ( Tata Teleservices Ltd. Vs. BSNL – (2008) 10 SCC 556).

[3] TDSAT order dated 27th April, 2005 – Association of Basic Telecom Operators(ABTO) and Others Vs. BSNL.

[4] TDAST order dated 3rd Nov, 2004 -BSNL Vs.COAI

[5] COAI Vs.UOI – (2003) 3 SCC 161 @ para 33

[6] incumbent local exchange carrier / ILEC – existing service providers are referred to as incumbents

[7] Local loop unbundling (LLU or LLUB) is the regulatory process of allowing multiple telecommunications operators to use connections from the telephone exchange‘s central office to the customer‘s premises. The physical wire connection between customer and company is known as a “local loop“, and it is owned by the incumbent local exchange carrier – Wikipedia

 


Share your thoughts

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s