Telecom Main
How the Telecom Act undermines personal liberties
The Telecommunications Act cements government’s power to suspend internet services, does not establish independent oversight mechanism for interception, suspension orders. The article originally published in the Indian Express can be read here.
“Is Big Brother watching you? At the press of a button a civil servant can inspect just about every detail of your life your tax, your medical record and periods of unemployment. That civil servant could be your neighbour. There is mounting concern over this powerful weapon that the computer revolution has put in the government’s hand. But no civil servant will be allowed to examine personal files from another department, without written authority from a Minister. I shall be announcing legislation enabling citizens to take action against any civil servant who gains unauthorised access to his file.” (Yes Minister). The year is 1980, the computer revolution is just about beginning and questions of surveillance have become pertinent; safeguards in the form of separation of powers between the executive and legislative are announced by the Minister for the protection of citizens.
Although theatrical, Yes Minister can yet be invoked to characterise governments in most parliamentary democracies especially India’s.
More than four decades on, the Indian Parliament witnessed the smooth passage of several pieces of legislation, including the Telecommunications Act (TA) 2023, which justifiably seeks to bury remnants of colonial-era laws. While the modern digital age creates conditions for unprecedented surveillance reflecting the Benthamite tenet of maximum monitoring at minimum cost, the question on everyone’s minds is whether the law has enough safeguards and an independent regulatory architecture to protect the rights of citizens.
Before contemplating this weighty query, let us set the narrative in context with a quick recap of the major markers in digital governance in India that have concluded, at least for the moment, in the passing of TA 2023.
The institutional regime for telecommunications dates back to the late 1990s and was created more by accident and less by design. The Telecom Regulatory Authority of India (TRAI) became necessary because private sector investment came in when the public sector operator was both player and referee. Massive litigation followed, leading to the setting up of TRAI. Within a few years, the Telecom Dispute Settlement Appellate Tribunal (TDSAT) was carved from TRAI to fast-track excessive litigation. In between, there was the dissolution of the first TRAI, only confirming who the “boss” was.
The desire to serve in regulatory regimes has surely been tainted by the goal of securing sinecures. This is not just an Indian phenomenon. For example, the Biden administrators wish they continue in office for long. It is in the nature of such positions that many of those appointed will never again be in a position of authority. There have been few instances after its dissolution that TRAI has taken on the government. The relationship between the legislature and the executive is complex but suffice it to say that such a separation in telecom is met much more in the breach.
The regulatory regime for telecom described above notifies subordinate legislation, enforces and adjudicates disputes — it performs the role of the executive and the adjudicator. One key safeguard for the protection of ordinary citizens is, therefore, already undermined. The separation of powers remains on paper and the exercise of authority through delegated rule-making ensures the government can intervene with little resistance.
In this background, TA 2023 poses challenges. Although undoing colonial-era laws is one of the stated goals, the re-purposing of some existing provisions and ambiguous drafting does little justice to that aim. For example, the definition of telecommunication services has been left open to interpretation. Internet-based services like WhatsApp and Gmail are, therefore, likely to fall under the Act’s ambit. Provisions empowering the government to notify standards and conformity measures or ask for alternatives to end-to-end encryption such as client-side scanning could undermine privacy. Further requiring messages to be disclosed in an “intelligible format” is irreconcilable with end-to-end privacy engineering. Tinkering with end-to-end encryption for compliance could create potential points of vulnerability.
The grounds on which such information may be sought, outlined in Section 20 (2) include sovereignty and integrity of India, security of the state and public order. Prima facie these appear reasonable. However, the current phrasing leaves room for expansive interpretation by overenthusiastic enforcement machinery — it could go beyond the letter of the law to please political masters. Research conducted in 2021 by Vrinda Bhandari and others found that many orders issued under the guise of public order restrictions would not qualify as legal per se. The Act cements the government’s power to suspend internet services (Section 20(2)(b)) and does not include procedural safeguards envisaged in the Supreme Court’s Anuradha Bhasin judgment such as the proportionality test, exploration of suitable alternatives and the adoption of least intrusive measures.
The Act also does not establish an independent oversight mechanism for interception and suspension orders related to telecommunications. These rules, framed in 1996 in line with the directions of the Supreme Court in PUCL v. Union of India and requiring a committee consisting exclusively of senior government officials, reflect inadequate separation. In the UK the law mandates approval of interception warrants by judicial commissioners. Separation of powers is however not a panacea; it is just a necessary condition for the effective functioning of institutions. We must also observe the counsel of John Stuart Mill for the maintenance of institutional integrity namely, not “to lay [their] liberties at the feet of even a great man, or to trust him with powers which enable him to subvert [their] institutions” — JS Mill, quoted by BR Ambedkar on November 25 1949, requoted by sitting Chief Justice of India on Constitution Day (November 26, 2018).
Kathuria is Dean, School of Humanities and Social Sciences and Professor of Economics at the Shiv Nadar Institution of Eminence and Suri is Research Lead, CIS.
Comments to the Telecommunications Bill, 2023
The comments were reviewed by Tanveer Hasan. Click to download the PDF
Key concerns
Definition of Telecommunication Service
The definition of the terms telecommunication (section 2(p) and telecommunication service (section 2(t)) is extremely broad and would effectively include transmission of any signal by any electromagnetic systems. This wide definition increases the scope of the Bill to include almost all kinds of means of communication used in modern times including messaging services, email, OTT services, among others. Even if one were to accept the argument that the scope of the Bill has been deliberately kept wide so that the government has the power to regulate all means of telecommunication in order to prevent mischief and illegal activities, the problem arises with the onerous language of section 3(1) which makes it compulsory to obtain an authorisation from the Central Government for any and all telecommunication services, unless specifically exempted under section 3(3).
In simpler words the Bill not only seeks to regulate all communication services, but requires government permission to provide such services in the first place. Such an approach has the very likely potential to hamper future telecom innovation especially in light of the fact that the penalty for not obtaining permission is imprisonment upto 3 years as well as fine of upto Rs. 2 crores.
Such a wide definition leads to ambiguity and lack of regulatory certainty to businesses as well as users participating in the ecosystem. This proposal triggers immediate concerns, particularly a confusing definition of telecommunication services which may also incorporate the provision of a broad range of digital and online services. Such a wide definition could lead to confusion and arbitrary implementation on one hand, and if made applicable to the content layer of the internet architecture stifle innovation in the digital ecosystem due to onerous licensing/registration requirements on the other hand. It is also pertinent to note that some of the internet-based services listed in the definition in 2(21) are already regulated under the Information Technology (IT) Act 2000. For example, the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 regulates intermediaries, including the significant social media intermediaries (SSMI) such as Facebook and Twitter. Putting an additional regulatory burden on these service layer companies will hamper innovation and competitiveness of the sector and also amount to regulatory overreach.
Power of authorisation and assignment
Section 3 (7) - Any authorised entity which provides such telecommunication services as may be notified by the Central Government, shall identify the person to whom it provides telecommunication services through use of any verifiable biometric based identification as may be prescribed.
All services do not require a biometric based identification of the person. While there is a legitimate need to verify a person in the case of financial transactions, however a similar level of scrutiny is not warranted for applications that a person might use once, or applications that do not pose a threat. For example the need to verify a person through Know Your Customer (KYC) or otherwise for an application to order food, or an application which is meant for communication can be excessive regulation. In addition to the enhanced burden of collecting and storing this data that will come on the telecommunication service, there will also be the added requirement to maintain strict data protection and security measures under the Digital Personal Data Protection Act 2023. Furthermore, as has been seen in multiple instances of data breaches and cyber security attacks such as the one at AIIMS[1], Justpay[2] demonstrate that both public and private organisations can be affected by cyber attacks. It is therefore advisable to reduce the number of entities that store and collect sensitive personal data such as biometric information in the interest of privacy as well as national security.
The Supreme Court while looking at the constitutionality of the Aadhaar Act upheld the need for banking and financial institutions to require an individual’s Aadhaar number stating the legitimate aim of preventing money laundering; however, the Court struck down the provision that required any private entity to collect Aadhaar details. Justice Bhushan held that the collection by private entities violated the right to privacy, by failing the first prong of the test laid down in Puttaswamy judgement, the test of legality.[3]
More importantly, through the requirement of ‘verifiable biometric based identification’, the Bill is likely to nudge telecom service providers to incorporate Aadhar Based identification, even though the Indian Supreme Court in 2018 held that the mandatory linking of mobile connections with biometric identification is unlawful.
Standards, Public Safety, National Security and Protection of Telecommunication Networks
Power to notify standards
Section 19 (f) The power to notify standards and conformity measures on encryption is a sweeping power that allows the central government to potentially request for backdoors on encryption, or ask for alternatives to end to end encryption such as client side scanning, which have been critiqued[4] as measures that undermine privacy for all users. If the objective is to provide recommendations for certain encryption techniques when dealing with sensitive government data, a more specific compliance certification can be issued to such firms. For example, the United States government mandates certain government agencies to comply with the Federal Information Processing Standards (FIPS)[5] which also apply to non-government firms holding government contracts. Standards like FIPS recommend specific cryptographic modules to ensure secure communication of sensitive data. Such conditions and cases must be explicitly scoped in defining the standard setting powers of government with regard to encryption, in consultation with the industry and civil society organisations.
Provisions for public emergency or public safety
Section 20(2) (a) - Messaging apps such as WhatsApp and Signal enable end to end encryption, where messages are encrypted on endpoints such as user devices. Service providers and intermediaries cannot decrypt messages. Requiring messages to be amenable to disclosure in an 'intelligible format' is technically impossible within the end to end paradigm of privacy engineering[6]. Technical means of disclosing the contents of messages can either reside on a user’s device, in a middle-box that mediates communication, or on servers where some computation can occur. Restructuring end-to-end encrypted communication networks to facilitate these technical means of disclosure would result in the creation of potential points of vulnerability and encryption backdoors. These vulnerabilities can be exploited by malicious actors and backdoors act as ‘intentional vulnerabilities’[7] that can be used for excessive surveillance of communication that users believe to be private.
Section 20 (2) states the grounds for which such information may be sought. These include sovereignty and integrity of India, defence and security of the State, friendly relations with foreign States, and public order. Prima facie, these may appear to be reasonable grounds for facilitating government access, however, the current phrasing is too wide and leaves room for an expansive interpretation. This is particularly true for maintenance of “public order” that is routinely invoked in a variety of situations.[8] According to research conducted in 2021 by Vrinda Bhandari and others on the “Use and Misuse of Section 144 found orders issued under the guise of public order restrictions to regulate a variety of activities, many of which would not qualify as illegal activities per se. For instance, orders were issued to prohibit flying of hot air balloons, unmanned aerial vehicles, unmanned aircraft systems, use of “special” or “metallic” manjhas to fly kites and carrying tiffin boxes inside cinemas.[9] And tracing encrypted messages to thwart such perceived public order threats would be excessive and disproportionate. The order to intercept, detain, disclose or suspend a communication made between private individuals, acts as a violation of privacy and provides extensive grounds to surveil people.[10]
These grounds may be used to intercept or monitor all communication where a particular word or set of words is used. And its implementation would require communication of all users to be monitored effectively leading to a lower degree of privacy for all users[11] - including internet communication based apps due to definitional ambiguity. The Supreme Court has held that any infringement of the right to privacy should be proportionate to the need for such interference.[12] The judgement in the Puttaswamy case provides some guidance to assess the limits and scope of the constitutional right to privacy in the form of the three prong test. The test requires the existence of a law, a legitimate state interest and the restriction (to privacy) should be ‘proportionate'. This provision violates a user’s fundamental right to privacy since it fails to meet the proportionality requirement as laid down by the Supreme Court.
Section 20 (2) (b) provides for suspension of telecommunication service or class of services on similar grounds. The Bill empowers the DoT to suspend telecommunication services and if applicable to internet based communication services such as WhatsApp, Signal, among others without the need for any judicial oversight or procedural safeguards as enunciated by the Supreme Court in Anuradha Bhasin vs Union Of India. The provision must incorporate an independent oversight mechanism for such orders and also incorporate safeguards laid down by the Supreme Court in the Anuradha Bhasin judgement[13] to prevent arbitrary, frequent, and prolonged suspension of telecommunication services in India.
Protection of users
Measures for protection of users
Section 28 - This section should also provide mechanisms for de-registering from “specific messages” . While this section mentions the need for prior consent of users for receiving the specified messages/ class of specified messages, it should look at the full spectrum of rights the Digital Personal Data Protection Act 2023 provides, which includes the right to withdraw consent. Hence we suggest that Section 28(3) adds that the authorised entity providing telecommunication services shall establish an online mechanism for withdrawal of consent, in addition to grievance redressal.
Duty of users
Section 29 - While listing out the duties of the users the Act puts the onus on the user to furnish correct information. It fails to take into account instances where the information is fed into the system by third parties, due to issues of access and literacy on the part of the users. While the section heading states “duty of the user” the preceding text “no user shall” has the potential to penalise users for acts carried out without a malicious intent. Additionally, there is also a need to look at how notices and terms and conditions of most telecommunication services are primarily in English, making it even more difficult for a large number of Indian users to read and hence understand the requirements. Furthermore, the associated penalty for failing to comply with these provisions are, i.e. up to INR 25,000 for the first offence and for the second or subsequent offences, up to INR 50,000 for every day till the contravention continues. Considering the low digital literacy rates, the government would be well advised to reconsider imposition of such hefty fines.
If applicable on internet based services, this will also impact the ability of a user to retain anonymity over the internet. Individuals may choose to remain anonymous online for a number of reasons. It is important to understand that an individual may remain anonymous for a variety of legitimate purposes such as expressing opinions about their employers and whistleblowers, providing anonymous tips to newspapers or law enforcement, expressing political opinions and criticism that may be subject to persecution, or simply someone saying something that they may be embarrassed about. [14] In India, in particular, an individual’s caste can be identified from their name, and they may choose to remain anonymous or adopt a pseudonym to escape centuries of stigma and discrimination that their communities have faced. The broad definition of telecommunication services as elaborated above places restrictions on anonymity online and severely degrades an individual’s ability to exercise their fundamental right to freedom of expression.
[1]Business Today Desk, “Cyber attack at AIIMS Delhi: Hackers demand Rs 200 cr in crypto, says report” Business Today, 22 November 2022, https://www.businesstoday.in/latest/in-focus/story/cyber-attack-at-aiims-delhi-hackers-demand-rs-200-cr-in-crypto-says-report-354475-2022-11-28.
[2]Ashwin Manikandan, Anandi Chandrashekhar, “Juspay Data Leak fallout: RBI swings into action to curb cyberattacks”, The Economic Times, 6 January 2021, https://economictimes.indiatimes.com/tech/technology/juspay-data-leak-fallout-rbi-swings-into-action-to-curb-cyberattacks/articleshow/80125430.cms
[3] “Judgement in Plain English Constitutionality of Aadhaar Act”, “Supreme Court Observer, accessed 22 December 2023,https://www.scobserver.in/reports/constitutionality-of-aadhaar-justice-k-s-puttaswamy-union-of-india-judgment-in-plain-english/
[4] “Why Adding Client-Side Scanning Breaks End-To-End Encryption”, The Electronic Freedom Foundation, accessed 22 December 2023, https://www.eff.org/deeplinks/2019/11/why-adding-client-side-scanning-breaks-end-end-encryption.
[5] “Compliance FAQs: Federal Information Processing Standards (FIPS)”, NIST, accessed December 22 2023. https://www.nist.gov/standardsgov/compliance-faqs-federal-information-processing-standards-fips
[6] “Personal Data in the Cloud Is Under Siege. End-to-End Encryption Is Our Most Powerful Defense.”, Lawfare, accessed 22 December 2023, https://www.lawfaremedia.org/article/personal-data-in-the-cloud-is-under-siege.-end-to-end-encryption-is-our-most-powerful-defense
[7] “Breaking Encryption Myths”, Global Encryption Coalition, accessed 22 December 2023, https://www.globalencryption.org/2020/11/breaking-encryption-myths/
[8] Smriti Parsheera “Political misinformation is a problem. But asking WhatsApp to risk user privacy is the wrong solution”, The Indian Express, October 28 202 https://indianexpress.com/article/opinion/editorials/remedy-worse-than-malaise-9002600/.
[9] Vrinda Bhandari, et al, The Use and Misuse of Section 144 Cr.P.C, https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID4404496_code2801004.pdf?abstractid=4389147&mirid=1&type=2
[10]CIS’ Comments to the (Draft) Indian Telecommunication Bill 2022 “Centre for Internet and Society, accessed 22 December 2023 https://cis-india.org/telecom/blog/cis-comments-to-draft-indian-telecom-bill-2022#:~:text=Comment%3A%20The%20draft%20bill%20attempts,power%20over%20the%20local%20government.
[11] The Telecommunications Bill, 2023, PRS Legislative Research, accessed 22 December 2023, https://prsindia.org/billtrack/the-telecommunication-bill-2023
[12] Justice K.S. Puttaswamy (Retd) vs Union of India, W.P.(Civil) No 494 of 2012, Supreme Court of India, September 26, 2018.
[13] Writ Petition (Civil) NO. 1031 OF 2019, accessed 22 Decmber 2023, https://main.sci.gov.in/supremecourt/2019/28817/28817_2019_2_1501_19350_Judgement_10-Jan-2020.pdf.
[14]Palme, Jacob, and Mikael Berglund. "Anonymity on the Internet." Accessed 22 December 2023: 2009.
CIS’ Comments to the (Draft) Indian Telecommunication Bill 2022
Preliminary
The Centre for Internet and Society (CIS) is a non-profit organization that undertakes interdisciplinary research on the internet and digital technologies from policy and academic perspectives. Through its diverse initiatives, CIS explores, intervenes in, and advances contemporary discourse and practices around the internet, technology, and society in India, and elsewhere. Over the last decade, CIS has worked extensively on policy issues related to telecommunication, internet access, digital inclusion, and so on.
In the past, CIS has responded to various public consultations pertaining to telecommunication such as the Telecom Regulatory Authority of India (TRAI) consultation on 5G Auctions[1], TRAI consultation on regulation of over-the-top (OTT) services[2], to name a few .
We appreciate the efforts of the Department of Telecommunications (DoT) for having consultation on the “Draft Indian Telecommunication Bill 2022”. We are grateful for the opportunity to put forth our views and comments to the draft bill.
Summary of Recommendations
- At the outset, we recommend that in the interest of transparency and accountability, prior to enacting important legislations like the Telecom Bill, the government would be well-advised to conduct an “impact assessment” exercise such as “regulatory impact assessment” and put the report in public as practised in jurisdictions such as the European Union.[3] We would also recommend the government to disclose responses and submissions that it receives during the process to ensure a transparent and consultative process of policymaking.
- We recommend that the scope of the bill should be reconsidered and internet-based services should be removed from the definition of telecommunication services. From this definition read with other clauses of the bill, it appears that the bill tries to licence (or control !) not just telecommunication but all kinds of communication and internet-based services. Putting onerous regulatory requirements on every bit and byte flowing through the internet is unnecessary and regulatory overreach.
- The draft bill’s attempt to provide for a non-discriminatory and an affordable Right-of-way (RoW) regime is appreciable. However, the central government has been given an overriding power over the local government which has constitutional powers with regard to permissions in their jurisdiction. The bill must clarify the modalities to ensure coordination between centre, state, and local authorities.
- We recommend that clause 46 of the draft bill which significantly dilutes TRAI’s power should be deleted. Moreover, the government must work towards further strengthening TRAI by hiring subject matter experts to ensure that India has a powerful sector regulator which is well prepared to usher in the next wave of innovation.
- We recommend that the Bill be inline with the Puttaswamy Judgement, and that of Anuradha Bhasin vs Union of India. The Bill, while paying close attention to the protection of users and duty of the user, fails to uphold rights of the user such as the right to privacy and the freedom of speech and expression.
- As per clause 29, the objectives for which Telecommunication Development Fund (TDF) can be utilised is broad and therefore the government would be well-advised to specify that TDF can only be utilised to ensure digital access, adoption and usage for digitally marginalised groups. Furthermore, TDF must be ring fenced and not credited to the Consolidated Fund of India to ensure timely implementation which has thus far remained a significant challenge with the universal funds (USOF) regime.
- The bill does not have any provisions upholding the principles of net neutrality. The government must act on TRAI’s recommendations and set up the multistakeholder body to check adherence to net neutrality requirements by incorporating provisions to that effect.
- In the interest of transparency and accountability, a clause requiring the government to report (quarterly or annually) vital statistics relating to the functioning and financial aspects of matters contained within the draft legislation. The reporting should also include the number of licences provided, licences revoked, number of blocking and suspension orders passed among others.
Detailed Response
Preamble |
No comments
Chapter 1: Short Title, Extent and Commencement |
No comments
Chapter 2: Definitions |
➔ 2(9): “message” means any sign, signal, writing, image, sound, video, data stream or intelligence or information intended for telecommunication.
Comment: The terms “intelligence” and “data stream” are not clear in the definition and these terms have not been defined elsewhere in the bill. Moreover, the definition of message is broad and may have implications with regard to surveillance and privacy of users, when read with clause 4(8) and clause 24(2)(a).
Recommendation: We recommend that the terms “intelligence” and “data stream” are defined under the bill, in order to reduce chances of excessive surveillance and to maintain the informational privacy of the individual. Additionally the definition could have an expansive list of what could constitute a message in order to prevent mission creep.
➔ 2(18): “telecommunication equipment” means any equipment, appliance, instrument, device, material or apparatus, including customer equipment, that can be or is being used for telecommunication, and includes software integral to such telecommunication equipment;”
Comment: The inclusion of customer equipment in the definition of telecommunication equipment has implications. The definition of the “customer equipment”[4] as provided in clause 2(5) of the Bill is broad enough to include personal devices such as phones, routers, among others. As per clauses 23 to 26 the Central Government has wide ranging powers with respect to telecommunications equipment and telecommunications networks such as issuing various directions for telecommunications networks and even has the power to take over such networks. As the definitions currently stand, these provisions would automatically become applicable to customer equipment as well which may be a violation of the right to privacy of the citizens of the country.
Moreover, according to 3(2)(c), possession of wireless equipment requires authorization. On reading 3(2)(c) with the definitions of wireless equipment in 2(23) and customer equipment in 2(5), an argument could be framed that the customer equipment could technically also require a licence, and so would the software integral to such equipment. If customer equipment is in fact included in telecom equipment and software integral to it is also included therein, then arguably even Android OS or other OS can be licensable.
Recommendation: Thus, we suggest that the government should remove customer equipment from the definition of telecommunication equipment.
➔ 2(21): “telecommunication services" means service of any description (including broadcasting services, electronic mail, voice mail, voice, video and data communication services, audiotex services, videotex services, fixed and mobile services, internet and broadband services, satellite based communication services, internet based communication services, in-flight and maritime connectivity services, interpersonal communications services, machine to machine communication services, over-the-top (OTT) communication services) which is made available to users by telecommunication, and includes any other service that the Central Government may notify to be telecommunication services;”
Comment: Clause 2(21) expands the scope of “telecommunication services” significantly. The overly-broad definition of “telecommunication services”, and what constitutes a “message”[5], brings within its ambit a host of internet services including but not limited to email, instant messaging, social media services, and even payments and e-commerce transactions. Neither the bill, nor the accompanying explanatory note provides a satisfactory rationale for an all-encompassing definition of “telecommunication services”. The explanatory note attached to the bill suggests that legislations in Australia, EU, UK, Singapore, Japan, and USA have been examined while drafting this bill. However, our research[6] suggests that none of these jurisdictions define “telecommunication services” so expansively and seek to regulate entities offering only internet based services companies through licensing, in particular. It may also be worthwhile to note that TRAI recommended against such an approach and also clarified that there is no issue of financial arbitrage.[7] However, the bill attempts to bring OTT communication services within the purview of licensing. From this definition read with other clauses of the bill, it appears that the bill tries to licence (or control !) not just telecommunication but all kinds of communication and internet-based services. Putting onerous regulatory requirements on every bit and byte flowing through the internet is unnecessary and regulatory overreach. There can be major implications of expanding the definition of telecommunication services, some of which are listed below:
● The draft bill has stringent provisions on surveillance and shutdowns [clause 23 to clause 28]. These clauses would be naturally applicable to the expanded bucket of telecommunication services. This has serious implications on user’s right to privacy and freedom of expression online. For example, the bill gives the government the power to surveil citizens over apps such as WhatsApp, Telegram, to name a few, and even email. [some of this will be delved into greater detail in the foregoing sections]
● Some of the internet-based services listed in the definition in 2(21) are already regulated under the Information Technology (IT) Act 2000. For example, the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 regulates intermediaries, including the significant social media intermediaries (SSMI) such as Facebook and Twitter. Putting an additional regulatory burden on these service layer companies in the form of licensing, as envisaged in clause 3 and clause 4 of the bill would hamper the innovation in the sector. Furthermore, it has been observed that the compliance burden of regulations is higher on small businesses in cases where regulations impose identical requirements on entities regardless of the firm size.[8] Therefore, inserting such a requirement would have a detrimental impact on innovation because excessive compliance requirements would act as a significant entry barrier for smaller firms.
Moreover, there is significant overlap between various services that are mentioned in the definition of telecommunication services which may lead to significant challenges. As these services are not defined elsewhere in the bill, it leaves scope for ambiguity. The bill makes a mention of “over-the-top (OTT) communication services” without defining it. We argue that making a distinction between communication and non-communication OTT services is superficial and does not take into account today’s realities where categorising applications into different categories is extremely difficult. A majority of the OTT applications such as e-commerce, healthcare, food delivery, payments, and so on, provide integrated communication channels. Disaggregation and making an artificial distinction of such apps into communication (with licensing requirements) and non-communication (without licensing requirements) would result in fragmentation of the internet which is definitely not a desirable outcome.
The “same-service same-rules” argument put forth by Telecommunication Service Providers (TSPs/ telcos) for the regulation of OTT apps which provide communication services [generally referred to as OTT communication services] at par with them is flawed for the reasons elaborated herein below: ● It is well recognized that there are significant differences at the technical and architectural level between TSPs and OTT apps which provide communication services . Regulating OTT apps which provide communication services at par with TSPs just on the basis of functionality without considering the inherent technical and architectural differences between them is a definite recipe for failure. ● Moreover, even at the functional level, OTT communication apps offer several additional features which are not available in the traditional TSP services.[9] Due to this, establishing functional equivalence between TSP’s services and OTT communication services is not only technically unfeasible but also unnecessary since those apps are better regulated by MEITY. ● Furthermore, TSPs enjoy privileges which OTTs don't. For example, TSPs have exclusive rights to spectrum, right of Way (RoW), numbering resources, to name a few. TSPs have control over underlying broadband infrastructure which OTTs and other internet-based service companies do not have. |
As opposed to what has been suggested in the bill i.e, licence all telecommunication services [clause 3(2)(a)] including the internet-based services, it may be prudent to explore alternative approaches to regulate this space. For instance, a “two-layered framework”[10] for regulatory intervention can be considered. In this two-layered framework, the first layer would be the network layer consisting of the network and infrastructure; and the second layer would be the service layer consisting of applications and services. The services in the second layer can be further refined into the following three categories: (i) services provided over a non-Internet Protocol (IP) based architecture e.g Public Switched Telephone Network (PSTN) voice calls provided over a circuit switched network; (ii) specialised services that are provided over an IP based architecture in a closed network including facility-based services e.g., facilities-based VoLTE calls to PSTN and IPTV; (iii) IP-based/ Internet-based services such as OTTs. The gist[11] of the framework is:
- The network layer may be regulated by way of licensing.
- Non-IP Services and Specialised services may be regulated by way of licensing.
- Internet-based services should be regulated by instruments other than licensing. Such instruments should preferably be in the form of legislations like the IT Act and its rules thereunder.
While there can be approaches apart from the one described above to regulate internet-based services such as the OTT and those approaches can be discussed and debated, putting licensing requirements for every internet-based service is not the way forward.
Recommendation: We recommend that the scope of the bill should be reconsidered and internet-based services should be removed from the definition of telecommunication services. In the interest of transparency and accountability, prior to enacting such a legislation the government would be well-advised to conduct a “regulatory impact assessment” exercise and put the report in public, as done in jurisdictions such as the European Union.
Chapter 3: Licensing, Registration, Authorization and Assignment |
Clause 4. Licensing, Registration Authorization and Assignment
➔ 4(6): “The possession and use of any equipment that blocks telecommunication is prohibited, unless authorised by the Central Government for specific purposes.”
Comment: While assuming jurisdiction over equipment capable of blocking telecommunication via this clause is a welcome step, it is not clear why equipment capable of intercepting telecommunications has been kept out of the scope of this clause. Since unlawful and unauthorised interception of telecommunications is a violation of the fundamental right to privacy of an individual,[12] it is imperative that the scope of this clause be increased to include interception equipment as well. Furthermore, the latter part of the provision mentions “specific purposes” without adequate checks and balances in place. As such, the specific purposes must be defined exhaustively to ensure that this power is not misused.
➔ 4(7): "Any entity which is granted a licence under sub-clause (2) of clause 3, shall unequivocally identify the person to whom it provides services, through a verifiable mode of identification as may be prescribed."
Comment: All services do not require a verification of the identity of a person. There is a legitimate need to verify a person in the case of financial transactions, however a similar level of scrutiny is not warranted for applications that a person might use once, or applications that do not pose a threat to anyone. For example the need to verify a person through Know Your Customer (KYC) or otherwise for an application to order food, or an application which is meant for communication can be excessive regulation. Furthermore, number based internet communication apps such as Whatsapp require users to sign in through a mobile number, which have already gone through a KYC process. Therefore, dual KYC would be redundant and serve no purpose.
The Supreme Court while looking at the constitutionality of the Aadhaar Act upheld the need for banking and financial institutions to require an individual’s Aadhaar number stating the legitimate aim of preventing money laundering; however, the Court struck down the provision that required any private entity to collect Aadhaar details.[13] Justice Bhushan held that the collection by private entities violated the right to privacy, by failing the first prong of the test laid down in Puttaswamy, the test of legality.[14]
Recommendation : Clause 4(7) should be deleted.
➔ 4(8) “The identity of a person sending a message using telecommunication services shall be available to the user receiving such message, in such form as may be prescribed, unless specified otherwise by the Central Government.”
Comment: Although the intent behind this provision may have been to curb the menace of anonymous harassment of users, a blanket requirement to reveal the identity of the sender of a message in every instance may be considered a violation of the right to privacy of the sender. . There are clearly a number of competing rights involved here and the issue needs to be addressed in a more nuanced manner. Additionally there are a number of services such as chat applications providing support for mental health, that allow users to be anonymous in order to remove the concern and stigma around seeking help. A requirement that the user's name be revealed in these applications could hinder the functioning of these services as well as prevent more people from seeking help.
Anonymity was also explained in the Puttaswamy Judgment where it was stated that - “Privacy involves hiding information whereas anonymity involves hiding what makes it personal. An unauthorised parting of the medical records of an individual which have been furnished to a hospital will amount to an invasion of privacy.” In his judgement, Justice F. Nariman talks about different aspects of the right to privacy in the Indian context and observes “Informational privacy which does not deal with a person’s body but deals with a person’s mind, and therefore recognises that an individual may have control over the dissemination of material that is personal to him. Unauthorised use of such information may, therefore lead to infringement of this right”.[15]
In this backdrop it is perhaps preferable that the issue be addressed through separate guidelines rather than through a blanket direction in the Statute. Recently the Department of Telecom sent a reference to the TRAI for framing a mechanism for using KYC based identification.[16] It would be advisable if the TRAI in its response also takes into account the competing rights involved in this issue of caller identification and suggests a framework that addresses these concerns as well.
Retaining anonymity on the internet: Individuals may choose to remain anonymous online for a number of reasons. This includes employees expressing opinions about their employers and whistleblowers, people providing anonymous tips to newspapers or law enforcement, people expressing political opinions and criticism that may be subject to persecution, or simply someone saying something that they may be embarrassed about.[17] In India, in particular, an individual’s caste can be derived from their name, and they may choose to remain anonymous or adopt a pseudonym to escape centuries of stigma and discrimination that their communities have faced. Religious, gender and sexual minorities may also make this choice for similar reasons. The broad definition of telecommunication services in the bill places restrictions on anonymity online and severely degrades an individual’s ability to exercise their fundamental right to freedom of expression.
Right to privacy: The overly broad definition of “telecommunication services” and what constitutes a “message” also brings a number of digital services under the ambit of this bill. This can include email, instant messaging, social media services, and even payments and e-commerce transactions. Mandating identification of individuals as they navigate these services, which they require to go about their daily lives, creates an unprecedented potential for surveillance and abuse of personal information. To evaluate the legal validity of this infringement on privacy, we can utilise the necessity and proportionality tests put forth by the Puttaswamy Judgment. The explanatory note accompanying the bill states that the purpose of this provision is to “prevent cyber frauds”, establishing a legitimate aim for mandating identification. However, it fails to justify whether this is the least intrusive means necessary to achieve the stated aim. Law enforcement agencies have access to a wide variety of metadata, such as IP addresses, already collected by digital services today, which can be used to identify individuals committing cyber crimes. Furthermore, as the internet is a global network, bad actors can evade identification by routing their internet traffic through another country by using services such as Virtual Private Network (VPNs), proxies and onion routing. Well resourced actors can simply hire someone in another country to communicate on their behalf. The infringement upon the right to privacy by this provision is also disproportionate to the objective sought. By mandating storage of personally identifiable information that is not required for the operation of the wide range of services that fall under the ambit of this bill, it allows not only for state surveillance, but also creates the possibility of misuse by criminal actors and hostile states who may gain unlawful access to this information through data breaches. Overall, this provision can easily be circumvented by the bad actors it intends to catch, leaving us with a surveillance mechanism that is ripe for misuse against ordinary, law-abiding citizens.
Misunderstanding how the internet works: This draft bill assumes and propagates a centralised view of the internet. Unlike traditional telecommunication services, which require access to a finite spectrum or other physical infrastructure, the internet allows any individual or organisation to self-host their own communication service. Several organisations and technologically savvy individuals host their own email services, instant messaging services, blogs and social media networks. It is unclear how the licensing provisions in this bill apply to people developing and hosting their own communication equipment.
Recommendation : Clause 4(8) should be deleted.
Clause 5. Spectrum Management
➔ 5(2)(b): “administrative process for governmental functions or purposes in view of public interest or necessity as provided in Schedule 1; or”
Comment: Even though the draft bill seeks to provide an explicit statutory framework and predictability for spectrum management policy in India, it appears that for the large part it would be relying on spectrum auctions for assignment of spectrum. While the bill provides for administrative allocation of spectrum for governmental functions or purposes in view of public interest or necessity as provided in Schedule 1, the explanatory note provided for the draft bill indicates auction to be the predominant method for spectrum assignment. Even though the explanatory memorandum cannot be used for legal interpretation, it can be used to indicate that for the foreseeable future the government intends to allocate spectrum predominantly through auctions. While it can be argued that an auction based regime ensures transparency, it also creates significant barriers to entry for smaller operators. It is also pertinent to mention that in the seven auctions held since 2010, the government has successfully sold 100 percent of the auction only once. Relying solely on auctions since 2010 has led to unsold spectrum, lost revenue, and deferring of the rural digital ecosystem.[18] Therefore, auctions should be supplemented with “administrative allocation” and other innovative approaches to ensure that affordable broadband connectivity does not remain within the remit of a few. For instance, Canada has initiated a consultation on a non-competitive local licensing framework in the 3900-3980 MHz Band and Portions of the 26, 28 and 38 GHz Bands, and one of its objectives is to facilitate broadband connectivity in rural areas.[19] Therefore, we would like to recommend the DoT to explore other forms of spectrum assignment and not rely solely on auctions to ensure efficient utilisation of available spectrum and to also ensure affordable access to hitherto underserved regions.
Moreover, the bill does not provide clarity with regard to unlicensed spectrum for public Wi-Fi, and assignment of shared spectrum for satcom services.[20] Spectrum allocation for satcom becomes all the more important as the draft bill seems to give a preference to auction for spectrum assignment, while the global practice on spectrum assignment for satcom has been administrative allocation.
Furthermore, clause 5(2)(b) read with Schedule 1 suggests that BSNL and MTNL can acquire spectrum through an administrative process in view of public interest or necessity. However, we would like to submit that spectrum assignment to BSNL and MTNL may no longer serve the public interest and it only protects a very small interest group. For context, BSNL and MTNL have a combined market share of only 9.83%, as per TRAI subscription data of Aug 31, 2022.[21] For such a small subscriber share, it cannot be argued that these PSUs serve a public interest. The government can easily migrate these subscribers to the other three telcos. Moreover, this also provides the PSUs with an unfair advantage over its competitors and distorts the level playing field, thereby creating competition concerns in the market.
➔ 5(8): “The Central Government may, to promote optimal use of the available spectrum assign a particular part of a spectrum that has already been assigned to an entity (“primary assignee”), to one or more additional entity/ entities (“secondary assignees”), where such secondary assignment does not cause harmful interference in the use of the relevant part of the spectrum by the primary assignee, subject to the terms and conditions as may be prescribed.”
Comment: “Secondary assignment” of spectrum and the shift from “right to exclusive use” to “right to protection from interference”, as envisaged in 5(8) is a progressive move towards efficient utilisation of spectrum.
CIS, in its past submission[22] to the TRAI had highlighted the merits of a “use-or-share” approach in spectrum. The chasm that exists between expensive exclusive spectrum licensing and the licence-exempt ecosystem can be bridged by enshrining “use-it-or-share-it” provisions in spectrum licences. As such, ‘use-it-or-share-it’ rules enable the regulator to grant secondary access to licensed or governmental spectrum that is unused or underutilised.[23] ‘Use-it-or-share-it’ rules expand the productive use of spectrum without risking harmful interference or undermining the deployment plans of primary licensees. Clauses such as 5(8) enable “use-or-share” provisions are a step in the right direction.
➔ 5(9): “The Central Government, after providing a reasonable opportunity of being heard to the assignee concerned, if it determines that spectrum that has been assigned, has remained unutilized for insufficient reasons for a prescribed period, may terminate such assignment, or a part of such assignment, or prescribe further terms and conditions relating to spectrum utilization.”
Comment: There is lack of coherence between 5(8) and 5(9) when read together. 5(8) and 5(9) should be put as sub-clauses under a parent clause to ensure clarity.
We believe that the provision must be articulated clearly to state that licensees would first be given an opportunity to share spectrum and in cases where the entity fails to do so within a reasonable amount of time, the spectrum licence would be cancelled to prevent wilful spectrum hoarding. The Independent Communications Authority of South Africa (ICASA) in the 2nd Information Memorandum has expressed similar provisions with clarity. While, we feel five years may be an unnecessarily long timeframe for the government to enact spectrum sharing provisions, the language put forth by ICASA captures the essence of our argument:
“11.6.2 In cases where the spectrum is not fully utilised by the licensee within 5 years of issuance of the Radio Frequency Spectrum Licences, the Authority will initiate the process for the Licensee:
11.6.2.1 to share unused spectrum in all areas to ECNS licensees who may, inter alia, combine licensed spectrum in any innovative combinations in order to address local and rural connectivity in some municipalities including by entrepreneurial SMMEs;
11.6.2.2 to surrender the radio frequency spectrum licence or portion of the unused assigned spectrum in accordance with Radio Frequency Spectrum Regulations, 2015”
Recommendation: Clause 5(8) and 5(9) must be brought under one clause and it must be clarified that licence holders would lose their licence in case they fail to successfully incorporate spectrum sharing.
Clause 7. Breach of Terms and Conditions
➔ 7(1): “In case of breach of any of the terms and conditions of licence, registration, authorization or assignment granted under this Act, the Central Government may, after providing an opportunity of being heard to the party concerned, do any one or more of the following: ……”
Comment: Usually the consequences of breach are specifically illustrated in the licence. Listing the consequences of breach in the statute itself may lead to lack of clarity unless the terms of licence are also referenced. It could also be argued by a defaulting licensee that the powers listed in clause 7(1) are exhaustive and the Central Government cannot add any other conditions for breach of the conditions of the licence as in the licence agreement and any such conditions not specified in clause 7(1) are void and ultra vires the Statute.
Recommendation: In order to avoid such a situation, the clause should clearly state whether the powers listed in clause 7(1) are in addition to the terms and conditions that may be specified in the licence.
Chapter 4: Right of Way for Telecommunication Infrastructure |
Comment: The draft bill attempts to provide for a non-discriminatory and an affordable Right-of-way regime, which is appreciable. However, the provision suggests that the central government has an overriding power over the local government. Provided that the Constitution of India defines certain powers which reside with the local authority in terms of providing permissions in the local areas, it is unclear from the bill on how the coordination between various authorities will take place. We recommend that there needs to be a mechanism that ensures coordination between centre, state, and local authorities.
❖ 14(3) : “In the event the person under sub-clause (1) does not provide the right of way requested, and the Central Government determines that it is necessary to do so in the public interest, it may, either by itself or through any other authority designated by the Central Government for this purpose, proceed to acquire the right of way for enabling the facility provider to establish, operate, maintain such telecommunication infrastructure, in the manner as may be prescribed.”
Comment: The right of the Central Government to acquire the right of way should be in lieu of adequate and appropriate compensation to be paid to the property owner. This requirement should be clearly mentioned in sub-clause (3). The clause as it currently stands only mentions the Central Government’s right to acquire but contains no mention of said acquisition being in lieu of adequate and proportionate compensation.
Chapter 5. Restructuring, Defaults in Payment and Insolvency |
➔ 19(1): “Any licensee or registered entity may undertake any merger, demerger or acquisition, or other forms of restructuring, subject to provisions of applicable law, after providing notice to the Central Government of the same.”
Comment: Sub-clause (1) only requires that the Central Government be given a notice in case of merger, demerger, acquisition or restructuring of the licensee. Although sub-clause (2) requires that the successor entity shall comply with all the terms and conditions of the licence, considering the strategic nature of the telecommunications sector[24] it would be advisable to change the requirement of notice to a requirement of permission from the Central Government for restructuring the business rather than a mere notice requirement. In order for this requirement to not be a hindrance to the growth of the industry there could be a provision for deemed approval if the approval is not granted within a particular period of time.[25]
Recommendation: Any merger in the sector must be approved by the DoT. In order to ensure that this does not lead to unnecessary delays, a deemed approval route may be considered.
Chapter 6: Standards, Public Safety and National Security |
❖ 24(2): “On the occurrence of any public emergency or in the interest of the public safety, the Central Government or a State Government or any officer specially authorised in this behalf by the Central or a State Government, may, if satisfied that it is necessary or expedient to do so, in the interest of the sovereignty, integrity or security of India, friendly relations with foreign states, public order, or preventing incitement to an offence, for reasons to be recorded in writing, by order:
(a) direct that any message or class of messages, to or from any person or class of persons, or relating to any particular subject, brought for transmission by, or transmitted or received by any telecommunication services or telecommunication network, shall not be transmitted, or shall be intercepted or detained or disclosed to the officer mentioned in such order; or
(b) direct that communications or class of communications to or from any person or class of persons, or relating to any particular subject, transmitted or received by any telecommunication network shall be suspended”.
Comment: The pre-conditions for interception contained in the Bill are similar to those contained in the Telegraph Act, 1885, i.e. “occurrence of any public emergency or in the interest of the public safety, the Central Government or a State Government or any officer specially authorised in this behalf by the Central or a State Government, may, if satisfied that it is necessary or expedient to do so, in the interest of the sovereignty, integrity or security of India, friendly relations with foreign states, public order, or preventing incitement to an offence”. Although more stringent, these conditions are different from those contained in the Information Technology Act, 2000 which does not contain the added safeguard of there being a “public emergency or in the interest of public safety”.[26] With consumers spending more and more time on the internet and using internet based technologies and applications for communications, there is significant regulatory overlap between the Telecommunications Bill and the Information Technology Act, 2000. It is therefore advisable that the interception and blocking provisions under both the legislations should be aligned and standardised.
The judgement in the Puttaswamy case provides some guidance to assess the limits and scope of the constitutional right to privacy in the form of the three prong test. The test requires the existence of a law, a legitimate state interest and the restriction (to privacy) should be ‘proportionate'. The order to intercept, detain, disclose or suspend a communication made between private individuals, acts as a violation of privacy and to ensure that this does not provide extensive grounds to surveil people, the three prong test especially the grounds of proportionality combined with the necessity provision are essential to ensure that this provision is not used disproportionately.
More recently in Anuradha Bhasin vs Union Of India the Supreme Court stated “A public emergency usually would involve different stages and the authorities are required to have regards to the stage, before the power can be utilised under the aforesaid rules. The appropriate balancing of the factors differs, when considering the stages of emergency and accordingly, the authorities are required to triangulate the necessity of imposition of such restriction after satisfying the proportionality requirement.” The court while passing the judgement also stated “The concept of proportionality requires a restriction to be tailored in accordance with the territorial extent of the restriction, the stage of emergency, nature of urgency, duration of such restrictive measure and nature of such restriction. The triangulation of a restriction requires the consideration of appropriateness, necessity and the least restrictive measure before being imposed.”[27] The judgement while examining the duration of the suspension mentioned that any order which suspends the internet must adhere to the principle of proportionality and must not extend beyond necessary duration.
Recommendation: There is a need to look at the implications of such an order enabling blocking or suspension of services post the Puttaswamy judgement where informational privacy, and dignity were considered as some of the aspects of privacy. While this clause uses the test of necessity and expediency, we suggest that along with these two the clause also introduce the three prong test laid out in Puttaswamy I. In addition to this since this legislation has been drafted subsequent to the Anuradha Bhasin judgement the provisions of the legislation must be in conformity with the same in order to avoid confusion and reduce litigation.
Chapter 7: Telecommunication Development Fund |
➔ Clause 29: “The sums of money received towards the Telecommunication Development Fund under clause 27, shall first be credited to the Consolidated Fund of India, which shall be appropriated by the Central Government, in accordance with law made by the Parliament, to the Telecommunication Development Fund from time to time for being utilised to meet any or all of the following objectives:
(a) support universal service through promoting access to and delivery of telecommunication services in underserved rural, remote and urban areas;
(b) research and development of new telecommunication services, technologies, and products;
(c) support skill development and training in telecommunication;
(d) support pilot projects, consultancy assistance and advisory support towards provision of universal service under sub-clause (a) of this clause; and
(e) support introduction of new telecommunication services, technologies, and products.”
Comment: Clause 27 of the draft bill proposes to rename the Universal Service Obligation Fund (USOF) to Telecommunication Development Fund (TDF) and expand its scope to include underserved urban areas in addition to rural and remote areas. This has been done, ostensibly to expand the scope of current USOF to include within its ambit underserved urban areas, research and development, and skill development, among others.[28] While there is a need to spend the vast amount of unspent balance within the USOF, and spending it on skill development, investments in innovative low cost-technology that enables affordable broadband connectivity for all is important, the manner in which the TDF is currently defined is loose and vague. In order to ensure that the fund is spent to include digitally marginalised groups only, the purpose for which the TDF can be used needs to have an “exact” and “specific definition”. The purpose should be narrowly defined to include only those activities that have the potential to mitigate and bridge the many digital divides that exist in our country because in its absence TDF may be misused to subsidise urban middle class users as opposed to originally intended beneficiaries - the hitherto marginalised sections of the society.
Furthermore, the Bill suggests that the money received towards the TDF shall first be credited to the Consolidated Fund of India, which shall be appropriated by the Central Government, in accordance with law made by the Parliament. This is a relic of the erstwhile USOF policy funds, and allocations are made on a demand and review basis. One of the reasons that India has an unspent balance of nearly INR 50,000 crore in USOF is owing to a delay in its implementation due to bureaucratic delays since all credits to this fund require parliamentary approvals.[29] In order to ensure that funds received through USOF/TDF are utilised efficiently, the government must ring fence these funds and ensure that they are only spent on the objectives envisaged under the TDF. Furthermore, funds collected for this purpose must not be credited to the Consolidated Fund of India since requiring additional approvals delays implementation of the fund. For instance, the rural road fund is ring fenced which has ensured smoother flow of funds.[30] Moreover, auction proceeds, and other levies on the sector such as service tax and GST are already credited to the Consolidated Fund of India, therefore the government can afford to ring fence funds collected for universal service as opposed to crediting them to the Consolidated Fund of India.
Recommendation: The objectives for which the TDF can be utilised is vague and too broad and therefore the government would be well-advised to specify that TDF can only be utilised to ensure digital access, adoption and usage for digitally marginalised groups. This would go a long way in ensuring that the funds are not misspent on providing subsidies to users that may not be in need for such a subsidy. Furthermore, TDF must be ring fenced and not credited to the Consolidated Fund of India to ensure timely implementation.
Chapter 9: Protection of users |
➔ Clause 34 : “In the interest of the sovereignty, integrity or security of India, friendly relations with foreign states, public order, or preventing incitement to an offence, no user shall furnish any false particulars, suppress any material information or impersonate another person while establishing identity for availing telecommunication services.”
Comment: The intent behind this provision appears to be to prevent misrepresentation or identity and the giving of false information for availing telecom services. Whilst it is understandable that there may be privacy issues involved in the matter of revealing one’s identity for availing telecommunications services, the requirement to provide correct identity documents is a well established and accepted norm in the industry today which is manifest in the KYC requirements that have to be fulfilled by every customer. Therefore there is no need to qualify the obligation to provide true and accurate documents with the phrase “in the interest of the sovereignty, integrity or security of India, friendly relations with foreign states, public order, or preventing incitement to an offence”.
Chapter 10: Miscellaneous |
➔ Clause 46: Amendment to Act 24 of 1997
Comment: Clause 46 of the Bill significantly dilutes the power of TRAI and effectively renders the Regulator to the role of the government’s rubber stamp through proposed amendments to clause 11[31] of the TRAI Act. Section 11 of the TRAI Act as it currently stands requires DoT to solicit recommendations from TRAI on issues pertaining to licensing, new services, and spectrum management, where the powers vest with the government. However, if the Bill becomes a law, this would not be mandatory on the government’s part. It may or may not seek the Regulator’s recommendations, thus eroding the transparency which was built in the process of policymaking. Consequently, as per the current Bill, the government will effectively be the licensor, operator, and the Regulator. Since the government owns BSNL/MTNL (a telecom operator) the role of an independent regulator assumes even more significance. Even without the proposed amendments, the Indian regulator has been largely ineffective since it lacks significant functional autonomy including negligible penalisation powers, limited role in its hiring decisions, and lack of financial autonomy since it needs DoT’s approvals for its budget.[32] Even in its present form, TRAI has lesser power as compared to many regulators across the globe. For instance Federal Communications Commission (FCC) of the USA, Ofcom of the UK, and regulators in Pakistan, Bangladesh, and Sri Lanka have powers over spectrum and licensing, while TRAI has only recommendatory powers.[33] With the advent of 5G, the lines between telecom and digital services are likely to blur even more and in order to ensure that we are able to exploit the vast potential this new wave of innovations could unleash, it is important to have skilled policymakers well-versed with technology at the helm of affairs. Amidst this backdrop, it is important to invest in enhancing TRAI’s competence by hiring subject matter experts, and ensuring that TRAI functions as an independent and transparent regulator.
Furthermore, the bill empowers the government to set up an alternate dispute resolution mechanism effectively making the role of Telecom Disputes Settlement and Appellate Tribunal (TDSAT) redundant. Currently, TDSAT is the first body which looks into any dispute between two (i) telecom operators, (ii) telecom operators and the government, and (iii) between operators, the government and as well as the regulator. Only once the TDSAT has passed orders on such disputes can they be appealed in the Supreme Court. Therefore, clauses diluting the power of TRAI must be deleted. The government must also clarify what it means by an alternate dispute resolution mechanism, and the role it envisages for TDSAT.
Lastly, TRAI process is consultative by design providing various stakeholders with an opportunity to participate in the policymaking process. However, the proposed bill does not have any provisions mandating the DoT to hold transparent stakeholder consultations.
Recommendation: Clause 46 of the proposed bill should be deleted. Furthermore, the government must work towards further strengthening TRAI by hiring subject matter experts and further empowering TRAI by giving it penalising powers. Also, TRAI must be responsible for conducting spectrum audits and ensuring that licensees are adhering to licensing conditions.
➔ 46(k): “Provided further that the Authority may direct a licensee or class of licensees to abstain from predatory pricing that is harmful to the overall health of the telecommunication sector, competition, long term development and fair market mechanism” shall be inserted.”
Comment: The Bill through clause 46 (k) empowers the TRAI to decide on ‘predatory pricing’, which falls within the remit of the Competition Commission of India (CCI) which could potentially create jurisdictional overlaps between the two regulators. Even in the past, there has been friction between the two regulators on whether TRAI has jurisdiction to decide on matters relating to competition and predatory pricing in telecom tariffs.[34] In Competition Commission of India v. Bharti Airtel Limited & Ors[35], Supreme Court of India rejected the contention by the incumbent dominant operators (IDOs) that TRAI, as the sectoral regulator, had exclusive jurisdiction to rule on competition-related aspects in the industry. It ruled that if TRAI had determined that the IDOs had formed a cartel or colluded to block Jio’s entry, the CCI then would have jurisdiction to decide whether the IDOs’ actions had an appreciable adverse effect on competition. While TRAI’s powers of sanction were limited by the TRAI Act, the CCI had the power to prescribe and enforce structural remedies to promote genuine competition in the telecom sector. The court prescribed comity between TRAI and the CCI in the discharge of their roles.[36] Over time, the telecom sector has evolved from being a rudimentary voice service to being a complex data-centric converged service, and even though overlapping jurisdictions cannot be completely wished away,[37] there is a need for clearly defined roles for various ministries and regulators. And there will also be a need to adopt a consultative approach towards policymaking through inter-departmental consultations, an area that India has thus far been lacking in. As evidenced by the International Telecommunication Union’s (ITU) Global ICT Regulatory Outlook 2020, which ranks India at 94 (out of a total of 193) countries in terms of the maturity and collaborative approach shown by telecom regulatory bodies, lower than countries such as Japan, Singapore, Korea, Pakistan, Kenya, and Nigeria.[38]
Therefore, inserting such a provision may create more chaos and regulatory uncertainty. It is advisable that the government ensures there are no jurisdictional issues between the two regulators by clearly defining the role of TRAI and inserting provisions to facilitate inter regulatory consultation mechanism.
➔ Clause 48: “If the person committing an offence under this Act is a company, the employee(s) who at the time the offence was committed, was responsible to the company for the conduct of the business relating to the offence, shall be liable to be proceeded against and punished accordingly.”
Comment: While there is a need to ensure that offenders and violators of provisions under this Act are provided with penalties, there is a need to look at ways to ensure that the fear of penalties does not stifle innovation. This legislation intends to bring into its ambit a number of new stakeholders who might not be able to comply with all the requirements due to the inexperience, which could lead to inadvertent offences and violations. The current wording of clause 48, does not make any distinction between offences that were done with prior knowledge and malafide intentions and those done without knowledge of its commission.
Recommendation: We suggest that the Act keeps the wordings in line with similar legislations such as the draft Personal Data Protection Bill 2019. The revised text could have a proviso that reads as “Nothing contained in sub-clause (1) shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.”
Keeping in mind the existing burden of work both on the executive and the judiciary, and the time sensitive nature of the provisions of the Bill there is a need to look at different, swift, and inexpensive strategies. One possible way could be through Informal Guidances, similar to Security and Exchange Board of India (SEBI)’s Informal Guidance Scheme, which enables regulated entities to approach the Authority for non-binding advice on the position of law.[39] As there will be a number of new players that will be under the Bill, it would be useful for entities to get guidance. Another possible step could be to use Undertakings, where the regulator enforces the errant party to seek contractual undertakings to take certain remedial steps.[40]
➔ Clause 51: “Notwithstanding anything contained in any law for the time being in force, where the Central Government, a State Government or a Government of a Union Territory is satisfied that any information, document or record in possession or control of any licensee, registered entity or assignee relating to any telecommunication services, telecommunication network, telecommunication infrastructure or use of spectrum, availed of by any entity or consumer or subscriber is necessary to be furnished in relation to any pending or apprehended civil or criminal proceedings, an officer, specially authorised in writing by such Government in this behalf, shall direct such licensee, registered entity or assignee to furnish such information, document or record to him and the licensee, registered entity or assignee shall comply with the direction of such officer.”
Comment: The requirement to provide information or document even for “pending or apprehended civil or criminal proceedings” is too wide and could be misutilised, specially given the fact that there is no judicial authority making the determination that the information or document is required for such proceedings. Even in clause 91 of the Cr.P.C. , the requirement to provide documents or information is only for existing investigations, inquiries, trials or proceedings. Therefore the requirement to provide information, document or record for apprehended civil proceedings should be deleted.
Additional Comments |
➔ Comment: The bill fails to incorporate net neutrality requirements
Technological convergence and vertical integration within the sector make adherence to net neutrality critical to keep discrimination and anti-competitive conduct in check. While extant TRAI regulations, forbid TSPs from discriminating on the basis of content, sender or receiver, protocols or user equipment based on prior arrangements, by slowing down one application or providing fast lanes to another. However, there is lack of clarity on how adherence to net-neutrality principles is currently being monitored. In 2020, TRAI had recommended setting up a Multistakeholder body for monitoring adherence to net neutrality by licensees.[41] However, the draft bill fails to codify net neutrality requirements and as such non-discriminatory treatment of traffic does not find a mention in the bill or the explanatory note accompanying it.
Recommendation: The government must act on TRAI’s recommendations and set up the multistakeholder body to check adherence to net neutrality requirements by incorporating provisions to that effect.
➔ Comment: There is no provision in the bill that requires the government to report vital statistics and other information relating to the sector. We understand that both TRAI and DoT have taken efforts in publishing those statistics through DoT dashboard and reports such as the annual report, performance indicator reports, and subscriber reports. But, putting reporting requirements in the statute would be better.
Recommendation: In the interest of transparency and accountability, a clause requiring the government to report (quarterly or annually) vital statistics relating to the functioning and financial aspects of matters contained within the draft legislation. The reporting should also include the number of licences provided, licences revoked, number of blocking and suspension orders passed among others.
[1] “Response to TRAI consultation on Auction of Spectrum in frequency bands identified for IMT/5G”, Centre for Internet and Society, accessed 10 November 2022,https://cis-india.org/telecom/blog/response-to-trai-consultation-auction-of-spectrum-in-frequency-bands-identified-for-imt-5g
[2] “Response to TRAI Consultation Paper on Regulatory Framework for Over-The-Top (OTT) Communication Services”,Centre for Internet and Society, accessed 10 November 2022, https://cis-india.org/internet-governance/blog/response-to-trai-consultation-paper-on-regulatory-framework-for-over-the-top-ott-communication-services
[3] “Impact Assessments”, European Commission, accessed 10 November 2022,<https://ec.europa.eu/info/law/law-making-process/planning-and-proposing-law/impact-assessments_en#:~:text=Impact%20assessments%20examine%20whether%20there,support%20the%20decision%2Dmaking%20process.>
[4] Clause 2(5) defines customer equipment as follows: “ “customer equipment” means equipment deployed on the premises of a person, other than the equipment of the licensee or registered entity, to originate, route or terminate telecommunication, or equipment used by such person for accessing telecommunication services;”
[5] As defined in clause 2(9) of the draft bill.
[6] Japan: "Telecommunications service" means intermediating communications of others through the use of telecommunications facilities, or any other acts of providing telecommunications facilities for the use of communications by others; Singapore: “telecommunication service” means any service for telecommunications but excludes any broadcasting service; UK: “electronic communications service” means a service of any of the types specified in subsection (2A) provided by means of an electronic communications network, except so far as it is a content service. Those types of service are— (a)an internet access service; (b)a number-based interpersonal communications service; and (c)any other service consisting in, or having as its principal feature, the conveyance of signals, such as a transmission service used for machine-to-machine services or for broadcasting.
[7] Muntazir Abbas, “Regulating OTT players complicated: Trai”, The Economic Times, 30 January 2020,<https://economictimes.indiatimes.com/industry/telecom/telecom-policy/regulating-ott-players-complicated-trai/articleshow/73759307.cms?from=mdr >
[8] Justin Douglas and Amy Land Pejoska, Regulation and Small Business, <https://treasury.gov.au/sites/default/files/2019-03/p2017-t213722-Roundup_Sml_bus_regulation-final.pdf>
[9] See, for instance, “Features, Whatsapp (2020), <https://www.whatsapp.com/features>; “Signal
Messenger Features”, Signal (2020)
[10] CIS has recommended this “two layered framework” in its previous submissions to TRAI.
[11] “Response to TRAI Consultation Paper on Regulatory Framework for Over-The-Top (OTT) Communication Services”,Centre for Internet and Society.
[12] “Internet Privacy in India”,Centre for Internet and Society, accessed 10 November 2022,https://cis-india.org/telecom/knowledge-repository-on-internet-access/internet-privacy-in-india
[13]Justice K. Puttaswamy and Others v. Union of India and Others 1 SCC 1 (2019)
[14]“Judgement in Plain English Constitutionality of Aadhaar Act”, “Supreme Court Observer, accessed 10 November 20222,https://www.scobserver.in/reports/constitutionality-of-aadhaar-justice-k-s-puttaswamy-union-of-india-judgment-in-plain-english/
[15] “Right to Encrypt : Subset of Right to Privacy?”, SFLC, accessed 10 November 20222,https://sflc.in/right-encrypt-subset-right-privacy
[16] PTI, “Trai to moot mechanism for KYC-based caller name display”,The Economic Times, 20 May 2022,https://economictimes.indiatimes.com/industry/telecom/telecom-news/trai-to-moot-mechanism-for-kyc-based-caller-name-display/articleshow/91695117.cms?from=mdr
[17] Palme, Jacob, and Mikael Berglund. "Anonymity on the Internet.” <https://people.dsv.su.se/~jpalme/society/anonymity.pdf >
[18] Rajat Kathuria, Isha Suri “Why spectrum needs a change in approach”, Indian Express, 20 October 2022, https://indianexpress.com/article/opinion/columns/why-spectrum-needs-a-change-in-approach-8235997/
[19] Consultation on a Non-Competitive Local Licensing Framework, Including Spectrum in the 3900-3980 MHz Band and Portions of the 26, 28 and 38 GHz Bands - Spectrum management and telecommunications
[20] Aneesh Phadnis“Extant rules choke growth, telecom bill needs review: Broadband India Forum”, Business Standard, 23 September2022<https://www.business-standard.com/article/companies/extant-rules-choke-growth-telecom-bill-needs-review-broadband-india-forum-122092301265_1.html >
[21] Highlights of Telecom Subscription Data as on 31st August, 2022, TRAI, accessed 10 November 2022, https://www.trai.gov.in/sites/default/files/PR_No.67of2022.pdf
[22] “Response to TRAI consultation on Auction of Spectrum in frequency bands identified for IMT/5G”, Centre for Internet and Society.
[23] Calabrese, M. (2021). Use it or Share It: A New Default Policy for Spectrum Management. Available at SSRN 3762098. <https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3762098_code2826029.pdf?abstractid=3762098&mirid=1 >
[24] “Guidelines for Implementation of New Public Sector Enterprises (PSEI Policy for CPSEs in Non-Strategic Sector' regarding”, “Government of India Ministry of Finance Department of Public EnterPrises, 10 November 2022, https://dpe.gov.in/sites/default/files/DPE_OM_DTD_13.12.21_Guidelines_on_New_PSE_Policy_0.pdf, Economic Survey 2021-2022, India Budget, accessed 10 November 2022, <https://www.indiabudget.gov.in/economicsurvey/ebook_es2022/index.html#p=86 >
[25] A similar approach has been taken in the new Occupational Safety, Health and Working Conditions Code, 2020 for registration of establishments under clause 3(3) of the Code.
[26] Sections 69 and 69A of the Information Technology Act, 2000.
[27] Anuradha Bhasin vs Union Of India, 3 SCC 637 (2020)
[28] Explanatory Note to the draft Indian Telecommunication Bill, 2022, Pg. 14.
[29]“USOF Scheme for Aspirational Districts in 5 states”, “Drishti IAS”, accessed 10 November 2022, https://www.drishtiias.com/daily-updates/daily-news-analysis/usof-scheme-for-aspirational-districts-in-5-states
[30]“What BharatNet can learn from the rural-roads scheme: involve states, local bodies, private sector” “ Centre for Internet and Society, accessed 10 November 2022, https://cis-india.org/telecom/blog/what-bharatnet-can-learn-from-the-rural-roads-scheme-involve-states-local-bodies-private-sector
[31] Functions of Authority, clause 11, TRAI Act, 1997.
[32] Pratap Vikram Singh, “Trai, try again: India’s toothless telecom regulator fights for more powers”, Aug 31, 2021, The Ken, <https://the-ken.com/story/trai-try-again-indias-toothless-telecom-regulator-fights-for-more-powers/>
[33] Ibid.
[34] “PTI” “Have power to settle competitive tariff issues: TRAI to CCI”, Aug 7, 2017, The Economic Times, https://economictimes.indiatimes.com/news/economy/policy/have-power-to-settle-competitive-tariff-issues-trai-to-cci/articleshow/59959144.cms?from=mdr
[35] CIVIL APPEAL NO(S). 11843 OF 2018
[36] Ibid at Para 90
[37] “Market Study on the Telecom Sector”, Jan 22, 2021, Competition Commission of India
[38] Global ICT Regulatory Outlook 2020 - Pointing the way forward to collaborative regulation (2020), ITU, https://www.itu.int/dms_pub/itu-d/opb/pref/D-PREF-BB.REG_OUT01-2020-PDF-E.pdf
[39]Informal Guidance Scheme of SEBI: Understanding the Concept and Analyzing the Guidance Provided by SEBI, Vijay Kumar Singh https://www.researchgate.net/publication/228226352_Informal_Guidance_Scheme_of_SEBI_Understanding_the_Concept_and_Analyzing_the_Guidance_Provided_by_SEBI>
[40] We have made similar recommendations to the Personal Data Protection Bill 2019, on the offences and penalties under the Bill. The comments can be viewed here: <https://cis-india.org/accessibility/blog/cis-general-comments-to-the-pdp-bill-2019>
[41]Recommendations On Traffic Management Practices (TMPs) and MultiStakeholder Body for Net Neutrality, TRAI, accessed 10 November 2022, https://www.trai.gov.in/sites/default/files/Recommendations_22092020_0.pdf
The comments were drafted by Abhishek Raj, Divyank Katira, Isha Suri, Shweta Mohandas and Vipul Kharbanda, and reviewed by Pallavi Bedi. Click to download the submission here
Why spectrum needs a change in approach
One must bear in mind that the cost of deploying other infrastructure in remote areas is nearly twice as much, while revenue opportunities are far lower, damaging if not destroying the rural business case. The stark digital divide needs a fresh approach to crack it.
On September 22, the government released the draft Indian Telecommunication Bill, 2022, seeking to replace the colonial era Indian Telegraph Act, 1885. The draft bill compares spectrum to aatma: “In a way, spectrum is similar to aatma, which is ajar, amar as described in Shrimad Bhagwad Gita. Like aatma, spectrum too does not have any physical form, yet it is omnipresent.” And yet there is one immutable difference in this material world. While the value of aatma is inestimable, spectrum has always had a banal price tag associated with it.
Click to access the full article published in Indian Express on October 29, 2022
An Overview of Telecommunications Policy and Regulation Framework in India
It summarises the legal and policy instruments that regulate telecom and internet service providers in the country. It covers following areas:
- General overview of acts and associated policiesO
- Operator licensing
- Spectrum and associated fees
- Backbone and backhaul infrastructure
- Universal service/financial support
- Gender and telecom
Read the full document here
The information from this document has also been added to the India’s country profile on the LocNet Wiki, which is regularly updated to keep abreast with developments in telecom policy.
The author is thankful to Divyansha Sehgal, Gurshabad Grover and Isha Suri for their review and suggestions.
Response to TRAI consultation on Auction of Spectrum in frequency bands identified for IMT/5G
This submission brings out the merits of a “use-it-or-share it” approach for spectrum to help bridge the rural connectivity gap. CIS appreciates the continual efforts of Telecom Regulatory Authority of India to have consultations, and is grateful for the opportunity to put forth its views and comments. Read our full response here.
Opinion: Delicensing 6 GHz, 60 GHz bands is crucial to improve Wi-Fi scenario in India
The article by Abhishek Raj was published by the News Minute on December 21, 2021.
The Wi-Fi space has become a lot more exciting with the emergence of new Wi-Fi standards such as Wi-Fi 6E (the latest generation of Wi-Fi) and WiGig (that uses the V-band and offers advantages such as faster gigabit speeds). These standards require airwaves in 6 GHz and 60 GHz frequency bands to operate. As a consequence, governments and telecom regulators across the globe are deliberating on policy options for spectrum allocation in the aforementioned bands.
Stakeholders are divided on the issue of allocating 6 GHz and 60 GHz bands in India. For instance, there are certain telcos who strongly oppose delicensing these bands and demand a licensed framework with the use of auctions for allocation. As per their argument, delicensing the said bands will put their investments at risk and upset a level playing field. Whereas, on the other side, US tech majors Cisco and Intel, alongside industry bodies and forums such as the ITU-APT Foundation of India and Broadband India Forum, are in favor of delicensing. Notably, the delicensed/ unlicensed frequency bands are “free to use” by anyone, and the users need not pay any fees or obtain a license (right to use) from the government. On the contrary, licensed bands come with a “right to exclusive use” and are usually allocated through auction. They have associated costs including auction amount, license fees, usage charges, etc.
In this article, I argue that the government should consider delicensing the 6 GHz band and 60 GHz range in the V-band, simply known as the 60 GHz band, to meet the increasing data demand, provide a better connection experience, and, more importantly, unlock the economic value and potential of these bands.
Evolution of Wi-Fi Standards
Let us begin by understanding the fundamentals of Wi-Fi and its evolution over the years. Wi-Fi is a wireless networking technology based on the Institute of Electrical and Electronics Engineers (IEEE) standard 802.11. To keep things simple, consider ‘Wi-Fi’ a user-friendly name for IEEE 802.11 standard. Since its advent in 1997, Wi-Fi has become an indispensable wireless technology alongside mobile technology. The term ‘Wi-Fi’ is used synonymously with the internet by many users as a result of its widespread use in providing an interface with the internet.
IEEE 802.11 standards have evolved over the years, from 802.11a to 802.11ax. Again, these terms don’t sound so user-friendly, and for this reason, Wi-Fi alliance, a non-profit organisation that owns Wi-Fi trademark, came up with simplified generational names such as Wi-Fi 4, Wi-Fi 5, Wi-Fi 6, etc. The most recent Wi-Fi 6E [read Wi-Fi 6th generation- extended] is a simplified name for IEEE 802.11 ax standard. Needless to say, every new generation of Wi-Fi brings greater speed, lower latency, and a better user experience.
Benefits of Wi-Fi 6E & WiGig: Case for Delicensing
In addition to the pre-existing growth in demand for data, the COVID-19 pandemic has escalated data requirements due to the radical shift to work-from-home, online classes, etc. Dependence on Wi-Fi has increased in parallel to meet this increase in demand. On the other hand, India has only around 700 MHz of spectrum available for unlicensed use, concentrated majorly in 2.4 GHz and 5 GHz bands which are currently used for Wi-Fi services in India. The 2.4 GHz band is already crowded, and the same is anticipated for the latter. In order to support the growing data demand, policymakers in India need to explore the option of opening up more unlicensed spectrum. Notably, the quantum of unlicensed spectrum in India is significantly lower than in other countries such as the USA, UK, China, Japan, and Brazil, all of which have approximately 15,000 MHz of unlicensed spectrum.
The policy reluctance of DoT to delicense more spectrum is partly because of fear of losing out on revenues which licensed spectrum generates, and partly because of a narrow interpretation of Supreme Court’s 2012 judgement. However, considering the recent developments in Wi-Fi, 6 GHz and 60 GHz bands appear to be ideal candidates for creating more unlicensed spectrum. Let us explore this further.
Unlike its previous versions, which operated in either the 2.4 GHz or the 5 GHz band, Wi-Fi 6E operates in the 6 GHz band. The 6 GHz band contains radio frequencies between 5.925 and 7.125 GHz, and is much wider than the 2.4 GHz and 5 GHz bands. The wide channels, along with other distinct features such as lesser interference, enable Wi-Fi 6E to perform with better speeds, even in multi-user connected, congested, and dense networks.
Furthermore, Wi-Fi 6E is a new and niche technology, whose market will undoubtedly develop in the coming years. Indian telecom hardware and software companies have the opportunity to capture a chunk of this market in India as well as globally. We know that service provision in unlicensed bands is less expensive, and thus attracts a lot of innovations. We need to open up the 6 GHz band very soon to foster innovations by indigenous companies. We took a late call on delicensing the 5 GHz band which affected the prospects of Indian innovators and companies. We can’t afford to repeat this.
Similarly, we have WiGig – another exciting Wi-Fi technology. WiGig uses the V-band’s 60 GHz range (i.e., airwaves between 57-71 GHz frequency) to operate. The V-band offers advantages such as faster gigabit speeds and lack of interference due to oxygen absorption within its frequency range, making this band ideal for shared unlicensed use. The government launched a public Wi-Fi initiative of India known as PM-WANI in December 2020. PM-WANI aims to promote broadband in the country through the deployment of public Wi-Fi access points. Supporting such a dense deployment of Wi-Fi access points would require a “fiber speed” backbone. However, cost structure and right-of-way hurdles may be prohibitive for the deployment of fiber backhaul in dense urban environments. WiGig offers a cost-efficient wireless backhaul solution as an alternative to fiber backhaul, with multigigabit speeds and reliability similar to fiber. Delicensing the 60 GHz band can thus especially benefit PM-WANI, because of its potential to provide alternative backhaul solutions.
It is important to remember that unlicensed bands for Wi-Fi access have significant economic value. Although unlicensed bands do not generate direct revenue for the government through auctions, spectrum usage charges, etc., the economic value of unlicensed Wi-Fi is huge. According to a report by Wi-Fi Alliance, the global economic value of Wi-Fi will reach Rs 362 lakh crore (USD 4.9 trillion) by 2025. A BIF (Broadband India Forum) report authored by Prof. Rekha Jain estimates the economic value of Wi-Fi in unlicensed spectrum bands (2.4 GHz, 5GHz, 6 GHz, and 60 GHz) for 2025 to be INR 12.7 lakh crore in India. A major concern raised by telcos recently is that the government might lose out on revenue if 6 GHz and 60 GHz bands are delicensed instead of licensing and sold through auction. However, this concern seems to be evidently misplaced due to the huge economic potential of these bands, as also pointed out by other experts.
Several other jurisdictions have already started delicensing these bands. Almost 35 countries, including the USA, UK, Brazil, UAE, and Korea have delicensed the 6 GHz band, and several others are considering the same. Similarly, around 70 countries across the globe have delicensed the V-band in the 60 GHz range.
Conclusion
Wi-Fi 6E and WiGig are exciting technologies with numerous benefits and will play a crucial role in improving the Wi-Fi scenario in India. Had the 2.4 GHz and 5 GHz bands not been delicensed in the past, could we have even imagined a Wi-Fi revolution? The government must consider delicensing the 6 GHz and 60 GHz bands to bring in the next Wi-Fi revolution.
(The author is thankful to Arindrajit Basu and Isha Suri for their review and suggestions.)
Gram Panchayat Development Plan (GPDP): An Opportunity for Funding Rural Internet Connectivity in India
Internet connectivity has become important for socio-economic development of any region, especially the rural and remote regions. However, a major population of the world including India still remains unconnected to the internet. The traditional ‘top-down’ approach for enabling connectivity has proved to be insufficient for rural and remote areas. In this paper, we discuss an alternative ‘bottom-up’ sustainable multistakeholder model for enabling connectivity in rural India which has an active involvement of the village community through ‘Gram Panchayats’ (also known as Village Council). We also discuss the funding mechanism for this model through ‘Gram Panchayat Development Plan (GPDP)’. We suggest that ‘Internet for Development’ be included as one of the cross-cutting development areas in the GPDP to fund access to the internet in villages.
Click here to access full PDF of the paper. (Refer p. 129- 146). The author extends thanks to co-authors of the paper Dr. Sarbani Banerjee Belur and Ritu Srivastava.
Response to TRAI Consultation Paper on Broadband Connectivity and Speed
This submission presents a response by individuals working at the Centre for Internet & Society (CIS) to the Telecom Regulatory Authority of India’s Consultation Paper on Roadmap to Promote Broadband Connectivity and Enhanced Broadband Speed (hereinafter, the “TRAI Consultation Paper”) released on 20 August, 2020 for comments.
CIS appreciates the continual efforts of Telecom Regulatory Authority of India (TRAI) to have consultations, and is grateful for the opportunity to put forth its views and comments.
Read the response here.
Unlock = Open, not Choked!
This article first appeared in the Business Standard and on June 4, 2020.
A recent column in this newspaper juxtaposed the way smart, experienced people have high expectations, only to be disappointed by our weak state’s predictable failures (Strong expectations from a weak state, May 25). Is there justification for any optimism, or at least hope? Here is an exploration of reasons for persisting in the face of continued odds, and pushing for economic recovery. Why should one persist with constructive efforts? Because a rising tide lifts all boats, and one’s contribution can affect outcomes. And because attempts at partial opening will not suffice.
Kick-start the economy with cash flow
This article first appeared in the Business Standard and on May 7, 2020.
Amidst the welter of problems the government is dealing with, one hopes that the removal of restrictions and lockdown status are being thought through with expert inputs and analysis. We can conjecture on the priorities for economic revival, and here is a short wish list.
Cash flows have to start for any downstream problems to be addressed, without questioning that a major remediation to India’s lockdown trauma is providing food and shelter to stranded workers, and getting them to where they want to go. Many will scatter from their work or holding areas back to their homes. What’s needed for economic revival is the opposite: For workers to return to work and resume productive activities. But this may be unrealistic to expect after the loss of confidence from the shocks of the peremptory lockdown, the deprivation of livelihood, and of food and shelter.
Other stranded people who have the means also need the right to move freely while maintaining prudent constraints. Indians abroad are being flown home; Indians in the country need facilitation too.
Next on the list is restarting the economy by ending the forced closure of productive activity for compensation, spending for products and services, and of economic flows. Recall that before the lockdown, we had a monumental late-payments problem, namely, the non-performing assets (NPAs) of the banks and financial institutions. While there has been considerable scrutiny of the NPAs and fraudsters, much less attention is directed at a major component — that is, late payment of dues and refunds by government and its agencies. These encompass all payments, such as to state and private electricity generators and distributors, airlines, hotels, restaurants, manufacturing companies and service providers, and all refunds of taxes, including goods and services tax (GST) and customs duties.
This aspect escapes corrective action despite its magnitude, although it is remediable through decisive action. It has to be resolved through executive intervention, because it is a precursor and cause of a significant proportion of NPAs. Among larger commercial enterprises, late payments are a problem for some countries more than others, as seen in the heat map for 2018 by Euler Hermes, a trade credit insurance company (see chart). Surprisingly, India has a reasonable rank of 24 out of 36 countries, and its average at 67 days is close to the overall average of 65 days. Also, 25 per cent of corporations paid before 30 days, although another 25 per cent paid after 96 days. China had the highest average at 92 days, followed by Greece, Italy and Morocco.
However, smaller enterprises suffer considerable delays, as represented to the finance minister before the Budget recommendations in January this year, because their receivables take months to clear.
The biggest problem is not reflected in the chart: It is in delayed government payments and tax refunds.
All the delays have a cascading effect resulting in NPAs. For instance, Nasscom complained in 2017 that overdue payments from central and state governments and public sector undertakings for IT projects amounted to nearly Rs 5,000 crore. A survey is under way on the present status. Another example is delayed subsidies to fertiliser manufacturers that are notorious for creating cash flow crises. A third example is large dues and contested payments owed by the National Highways Authority of India (NHAI). In August last year, the NHAI was the focus of an effort by the Prime Minister’s Office (PMO) to clear its enormous debt overhang, and its contested dues.
Yet, the government resists timely payments even towards public sector dues, while being remorseless with its charges and collections. It is as though there is no understanding of cash flows, except perhaps for election funding. Overdue government payments are an obvious starting point to clear NPAs and create confidence through liquidity, emulating what is already practised here by India’s best corporations.
Another inexplicable impediment is the totally conflicted approach to information and communications technology (ICT). As the past two months have shown, reviving and remodelling our economy depends on effective digitisation and communications for two streams. One is for more efficient production and service delivery in all areas, such as agriculture, dairy farming and horticulture, and so on, as well as finance, manufacturing, trade, logistics, tourism, and in compliance. The other is in functioning in an altered paradigm that depends on effective support for remote working. Yet, telecom companies and high-tech manufacturers are beset with overdue payments on the one hand, while the former are crushed by government charges and retrospective demands. Meanwhile, a failed approach of high-priced spectrum auctions continues, while the most elementary and logical regulatory reforms for wireless broadband are ignored, such as enabling 60GHz and other spectrum bands discussed below.
Is it possible that the authorities do not understand that without wireless reforms, India is just holding itself back, or are they simply not acting on what they know? Consider what other countries are doing to improve productivity. Last month, America opened up the entire 6GHz band consisting of 1,200MHz of spectrum for unlicensed use for faster Wi-Fi.1 Licensed primary users of microwave for backhaul, utilities, and public safety were protected. The EU countries are likely to follow soon. For India, following this lead for Wi-Fi is a foregone conclusion. Dithering because nobody in power cares to even follow feasible measures wisely will only hold India back, as in disallowing the use of unused spectrum bands (60GHz, 70-80GHz, and 500-700MHz).2
If only the PMO would task appropriate authorities to consider permitting the use of four bands, namely, 60GHz, 70-80GHz, 500-700MHz, and 6GHz, the likelihood of better connectivity for high-speed broadband countrywide would greatly improve. The first three bands would be for licensed operators excepting indoor use of 60GHz, and the fourth would be for Wi-Fi. Such action will comply with the Supreme Court’s requirement of having public-interest policies in place for not auctioning spectrum.
Acting on cash flow plus connectivity, both initiated by the government, can effectively kick-start the economy.
High priced restrictive entry, distorted regulations make India's telecom sector unattractive
This article first appeared in the Economic Times on 17 May 2020.
In the wake of COVID-19, the PM has emphasized the opportunity to attract FDI by transforming the business environment and urged policy makers to ease the way business is done. The current configuration of broken supply chains and the problem arising from dominance of China in many sectors provide a space where investments in India look attractive.
The obvious question that arises is why not take this opportunity to review the policy and regulation for domestic players ? The need to focus on sectors like telecom that are the bedrock of the knowledge and service economy is critical. This is a sector where Indian businesses have scale (each of the private operator has more than 325 mn subscribers.) and yet only a single private operator of the three seems to be doing well. In no other part of the world, the sector as a whole is under stress. And remember this stress was there long before COVID -19.
This situation was caused not only by the entry of a new operator Reliance Jio, with an all IP network designed and optimized for data usage and a business model optimized for data, but also because of legacy policy and regulatory issues that affected the two older operators, Bharti Airtel and Vodafone Idea more. It is a fact that businesses must bear the consequences of disruptive challenges from new entrants with new technologies and business models. But when policy and regulatory framework cause sectoral disruptions, then these need to be rectified. This is more important in core infrastructure sectors such as telecom.
Given the rapid pace of technological developments and their effect on the economy, the telecom sector, more than any other sector, needs to have a policies that facilitate growth and are in coherence with global trends. The following will illustrate how much catching up India has to do.
A recent news item highlighted that China has installed a 5G network on Mt Everest not only to facilitate communications but also to gather data for research. When we also consider that in many countries, operators have not only been allocated spectrum for 5G networks, they have initiated deployments of such networks, the contrast with India is obvious. In India, 4G coverage is patchy, including in metros. With so much financial stress in the sector, 5G spectrum auctions do not invite a lot of excitement in the two private operators and auctions for 5G are likely to be delayed yet again.
A large part of the financial distress was caused by the penalty and interest payments on license fee and Spectrum Usage Charges (SUC) that are linked to AGR and high spectrum prices paid in 2016. While operators were responsible for devising appropriate mechanisms for managing the outflows due to the AGR issues, the question to ask is, should the DoT have come out with license conditions that are onerous? Just because it has the right and authority to do so, should it do so? Should it take the operators nearly 15 years to seek a review of the license conditions, as the matter goes between TRAI, TDSAT, DoT and the Supreme Court? Should DoT, as the policy maker be filing cases against TRAI and TDSAT? Should these arms of the government not be working in coherence?
Besides these structural issues, the policy framework has deeply embedded anomalies arising out of legacy issues and the orientation of policy makers is to not only continue with them but twist themselves in Gordian knots around them. For example, the SUC was imposed prior to 2012 when the spectrum and service licenses were bundled. But despite unbundling of the latter, this charge continues. This is despite several studies and representations seeking its revocations. A recent TRAI consultation paper (SUC for spectrum trading, April, 2020) highlights, how even regulatory agencies spend so much time in refining such distortions, rather than advocate for its removal.
Even when DoT proposes forward looking market instruments, such as spectrum trading, it distorts the underlying principle of allowing the market to function by over-specification of regulatory parameters such as units in which spectrum may be traded, geographic limits and imposing liability of past dues on the buyer (even when several SC judgments in other sectors have ruled otherwise). Regulation of new technologies and new instruments, it is necessary to start on a clean slate based on certain principles of openness and fairness rather than on legacy parameters.
Should Indian businesses not have a right to a streamlined, forward looking policy environment? Examples from the telecom sector merely highlight a deep malaise in our decision makers that is more broadly prevalent. Should the accountability of the executive not be based on outcomes for the sector such as investments generated and quality of service vis-a- vis global benchmarks? (Despite all the talk about growth of mobile Internet, we continue to have among the lowest upload and download Internet speeds globally). Another benchmark could be how much spectrum was DoT able to make available for commercial use? Timely and appropriately priced spectrum and removal of distortions exemplified above will see these parameters go up and there will be consequent increase in service and corporate tax for the government. High priced restrictive entry and distorted regulation make the sector very unattractive.
Even if businesses wish to move away from China, there are alternatives besides India available to them. That is why, streamlining our policy environment in all sectors to enable Indian enterprises to flourish should be the first step in attracting FDI.
(The author is Principal Advisor at Broadband Forum of India)
Short on Spectrum: Need for an enabling policy and regulatory environment
This article first appeared Tele.net in March 2020.
Internet and telecom are the key drivers of economic growth. India has the potential to become the largest internet-using country after China, with current estimates showing that five to seven million mobile internet users are being added and about 35 million smartphone shipments happen every quarter in the country. The huge demand for mobile broadband requires adequate spectrum and capacity in radio access networks. Further, due to poor fibre connectivity, estimated at only 15-20 per cent of the existing towers, backhaul spectrum availability is critical.
Given the growth driver of telecom and internet in India is mobile, a critical resource for sector growth is spectrum – the only natural resource that is equally endowed across all nations. However, in India, operators and citizens are spectrum starved. There is a need to introspect why that is so. Further, with an economy on the rise that places ever higher demands on telecom services, the sector should have a growth trajectory that surpasses others. However, the Indian telecom sector story is that of the proverbial killing of the goose that lays golden eggs.
In the current scenario, there are three private sector operators – Bharti Airtel, Vodafone Idea and Reliance Jio – and public sector entities Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). BSNL and MTNL have a declining market share of 10.5 per cent and hardly any 4G services as they were not allocated spectrum for it. As of November 2019, the teledensity stood at nearly at 88.9 per cent, urban being 157.3 per cent and rural being 56.7 per cent. Mobile services contributed to nearly 98 per cent of the urban and nearly 100 per cent of the rural teledensity.
Vodafone Idea and Bharti Airtel are under tremendous financial stress, caused by accumulated losses of more than Rs 2.2 trillion that include due payments of revenue share (based on adjusted gross revenue [AGR]) due as a part of their licence fee, penalty and interest payments for delayed payments to the Department of Telecommunications (DoT), high prices paid in auctions for spectrum in 2016 and business disruption following the entry of Reliance Jio. To put the numbers in perspective, the entire revenue for the sector was Rs 2.11 trillion for 2017-18. Given the current poor financial situation of the private operators, the government had to delay the auction of 5G spectrum as most private sector operators are not in a position to bid for new spectrum and also invest in the new networks required. A major concern for policymakers is that there could be a significant reduction in competitiveness and consumer choice as there is a possibility that Vodafone Idea may exit the sector, given its weak financial state. Since BSNL and MTNL’s market share is very low and is not likely to grow significantly, the telecom sector could effectively have a duopoly.
What has caused the telecom sector to be in this state? While the private sector’s strategies and actions have contributed to the current situation, a major portion of the responsibility is due to the restrictive policy and regulatory environment in which the sector has operated. While the private sector must contribute to paying its dues for using a public resource (spectrum or right of way) for private gains, overly restrictive licence conditions, a constrictive environment for making more spectrum available from DoT and infeasible pricing of spectrum recommended by the Telecom Regulatory Authority of India (TRAI) could make the sector unviable. I would like to highlight some key concerns that could be addressed in the short term.
AGR
This is exemplified in the basis for AGR calculation that included total income from both activities that require a licence such as provision of telecom services and also that do not such as interest income and equipment sale. AGR forms the basis of licence fee and spectrum usage charges (SUC). While the licence explicitly identified all components of AGR and telecom operators accepted the licence conditions when they signed the licence, and must bear the consequences of the same, it is difficult to understand the logic of DoT in coming out with such conditions. It is true that the government has a sovereign right to specify any condition, but an enlightened and long-term view would indicate that it is not in the interest of the sector to have restrictive conditions.
Another such example is the legacy of SUC that originated when service and spectrum licences were bundled. Since these have been unbundled, there is no longer any requirement of SUC, which constitutes a significant outflow (3-5 per cent), as operators pay a licence fee for the spectrum. This is double charging and unfair. While DoT may be concerned that the removal of SUC would lead to lower revenue for the government, new services, higher adoption of existing services and the corresponding increase in service tax and corporate tax should more than compensate for it. Further, government dues on licence fee and SUC have come down, as the AGR of two of the private operators has come down.
Spectrum availability
Compared to several other countries, India has a relatively constrained supply of spectrum for commercial use, both in the unlicensed and licensed bands. In a spectrum-starved country such as India, where each operator gets about one-fourth of the licensed spectrum as compared to operators in other countries, making more bands both licensed and unlicensed bands available unleashing the potential of unlicensed spectrum is important.
Licensed spectrum
Often operators have not bid when licensed spectrum was made available in auctions. This has been due to the arbitrary and high reserve prices set by TRAI. These are high in comparison to those in several developed countries. Lower propensity to pay and higher competition levels in India (with a peak of 12-14 operators per service area until 2012 and nearly five operators until the recent spate of mergers), and lower amount of spectrum per operator is a recipe for financial stress of the companies. TRAI has a peculiar and unique practice of setting the reserve price in any auction the same as the winning price in the previous auction and when it is a new band or recent auctions have not been held in existing bands, some arbitrary multipliers on the nearest band’s winning price are used. Despite the failure of the 2016 auctions, where bands that are globally in high demand had no bids, TRAI once again set very high reserve prices for the 3.3-3.6 GHz in its recommendations in 2018. After several iterations between DoT and TRAI on reconsideration of prices, TRAI announced that it had reduced them by 43 per cent. Even after this arbitrary reduction, prices continued to be much higher than those in the developed countries where such spectrum had been auctioned.
Unlicensed spectrum
India has around 660 MHz of spectrum available for unlicensed use, spread across various spectrum bands. In comparison to other countries (the US 15,403 MHz, the UK 15,404 MHz, China 15,360 MHz, Japan 15,377 MHz and Brazil 15,360 MHz), this is significantly less. There is a perceived reluctance on the part of DoT to make more spectrum licence-exempt, largely because of a narrow interpretation of the Supreme Court judgment (2012). According to this perspective, the Supreme Court had mandated the allocation of spectrum only through auctions. However, a more informed reading and interpretation indicate that the Supreme Court, in its judgment, had referred to spectrum allocation as a policy decision within the purview of the executives. In a subsequent Presidential reference made by the government, the apex court had elaborated that the scope of the judgment was limited to 2G spectrum distributed on a first come, first served basis during 2007-08. Further, any alienation of scarce public resources needs to be done in a fair and transparent manner, backed by a social or welfare purpose. In the case of unlicensed spectrum, since there is no need to allocate spectrum specifically to any user, there is no contention regarding the choice of the allocation method. By not adopting clarifications in the judgment and the Presidential reference, DoT has delayed spectrum allocation in different bands, including unlicensed bands.
Conclusion
The above examples indicate the restrictive policy regime that has characterised private entry into the sector since its inception. There have been instances in the past, such as a shift from a one-time entry fee to a revenue sharing regime or moving to a technology-and service-neutral licence, where the government has shown how an enlightened policy perspective that could enable services to take off. A similar approach that views the private sector as a partner in growth (with relevant provisions to prevent abuse) and enables competition to bring in consumer choice, innovation and reasonable pricing will see services take off.
While the private sector must take a long-term perspective of what drives the growth in the sector and not just seek redressal through short-term measures, the onus on the government is much higher. It is the one that sets the agenda and has a vision of what kind of development citizens have a right to. So far, given the current state of the telecom sector, the government needs to push for a long-term enlightened policy agenda that will provide world-class services to its citizens and increase India’s competitiveness. I also hope that policymakers will recognise that 512 kbps should not qualify as broadband speed (which it is, by current definitions).
If we aim low, we cannot achieve high growth.
What BharatNet can learn from the rural-roads scheme: involve states, local bodies, private sector
This article first appeared in ET Prime on 13 Feb 2020.
With the Internet increasingly becoming the driver of economic growth and considering its poor penetration in rural India, the government came up with the National Optical Fibre Network (NOFN) project in 2012.
It was an ambitious programme to provide high-speed connectivity to 2,50,000 gram panchayats (GP) by 2015. NOFN was designed to incrementally provide the fibre from the sub-district to the GP, as it was presumed that the state-owned Bharat Sanchar Nigam Limited (BSNL) already had fibre connectivity up to the sub-district level.
A special purpose vehicle (SPV) called Bharat Broadband Networks Limited (BBNL), a wholly owned government of India enterprise under the department of telecom (DoT), was set up for implementing NOFN. It was envisaged that it would lease existing bandwidth from BSNL, PGCIL, and Railtel — each allocated a specific state, with BSNL having more than 80% share. After the provision of end-to-end connectivity, BBNL would provide non-discriminatory access to all Internet service providers (ISPs), telecom and cable service providers, and other retailers, and enable the extension of mobile broadband. To facilitate the ROW (right of way) rules, BBNL had tripartite agreements with the state governments and the executing agency for that state.
A tale of missed targets
Despite recognising the role of broadband network that would “transform governance, service delivery, and unleash local innovation capacity through rural broadband”, NOFN missed its targets by wide margins and was extended several times. Its architecture was changed to provide redundancy and a more-ambitious project called BharatNet was envisaged with a cost of INR42,068 crore.
In the BharatNet model, states could also lead and implement the initiative. By December 31, 2019, BharatNet had missed both phase I and phase II targets by a huge margin. Only 50% of the GPs were service-ready. Further, the utilisation of the infrastructure was very poor, with only 15,000 GPs having Wi-Fi connectivity.
Several reasons, including the following, have been cited for this failure.
BharatNet was designed as a top-down scheme of the DoT with little involvement of the states, implementing agencies, or vendors. The proposed network architecture that relied on BSNL’s existing fibre was an issue. In several places, the fibre was not available or not in good condition. The decision to implement NOFN/BharatNet only by state-run enterprises (BSNL, PGCIL, and Railtel) caused several delays due to the inefficient management process —a characteristic of the PSUs. The initial focus was only on providing connectivity the GPs without considering the last-mile connectivity options for the end-user. There was little involvement of the states. Often the agency or the GP, where the connectivity terminated, was not aware of the applications for which they could use the connectivity. No separate project-monitoring organisation was put in place.
BBNL’s functioning was constrained by the fact that it operated within the framework of DoT. It had little operational autonomy and processes for adopting a different approach. The scope for BBNL was further reduced as some of the states, such as Andhra Pradesh, Kerala, and Gujarat, opted to take on this role themselves, citing the slow progress of BharatNet.
Lessons from PMGSY
When we compare the poor outcomes of BharatNet with the Pradhan Mantri Gram Sadak Yojana (PMGSY), one of the transformational development schemes and a key achievement for the government, the question one should ask is: are there some lessons that can be learnt from PMGSY? Though delayed from its earlier target date, PMGSY is set to achieve its deadline. The scheme was initiated by the rural development ministry (MORD) in the year 2000. With an outlay of USD35 billion, it had an objective of connecting all eligible rural habitations having a population of more than 1,000 in three years and all unconnected habitations with a population of more than 500 (in hill states, deserts, tribal areas, and backward districts) by 2007.
PMGSY started as a 100% centrally sponsored scheme financed through cess on high-speed diesel of INR0.75/litre. From 2015, the contribution pattern for financing changed to 60:40 for the centre and state, respectively, and 90:10 for the hilly and backward states. By 2019, it had covered more than 97% of the eligible habitats. Based on the success of the roll-out, the programme was expanded to cover all habitations with a population of more than 500. Given the rapid progress, the completion date was advanced to March 2020 instead of the original date of 2022. As was to be expected, PMGSY has transformed the socio-economic scenario in rural India.
The ownership for deployment of rural roads lies with the National Rural Roads Development Agency (NRRDA), which was later renamed as National Rural Infrastructure Development Agency (NRIDA). The agency reports to the rural development ministry. Its objective is to provide management and technical expertise to various states for implementing PMGSY. For technical aspects of road design, NRIDA works with state PWD and other agencies.
Rural roads are selected and prioritised in a bottom-up manner across villages, blocks, district, and the state. Objective methods to prioritise road selection, standardised processes for engineering, design and contract execution, coupled with independent quality monitoring and in-built maintenance in civil contracts were critical to project outcomes. More than achieving the physical targets, PMGSY has brought about a fundamental shift in the way rural roads are mapped, designed, monitored, and built. This led to several states to adopt the PMGSY model in their state-level rural programme. With time, the focus has shifted to low carbon and green designs, using climate-resilient techniques.
Given the possible transformational potential of a broadband connectivity to GPs, some learnings from PMGSY that DoT can consider are:
- User involvement in design: Since rural telecom connectivity enhances socio-economic development, user agencies and the rural administrations are in a position to identify their demand and requirements. Given that new technologies have the potential to create new applications which a layperson may not be able to identify, there is also a need to meld this with an appropriate top-down design that leverages the technology potential. This model has worked well for PMGSY. While the village-level committees prioritise road development, Central Road Research Institute and other research organisations specify the design parameters, taking into account the local context.
- Multi-functional/cross-organisational committees for design and implementation: A large project such as NOFN/BharatNet necessarily requires involvement of a number of agencies — state governments, and district, tehsil, and village administrations. While designing a telecom network requires professionals with telecom background, the success of such a project necessarily depends also on the management and collaboration processes at all levels of administrative hierarchy. However, DoT did not involve any state-level agency in the design of the network. The NOFN/Bharatnet is being implemented by BSNL/PGCIL/Railtel with their state-level units. On the other hand, PMGSY’s organisational structure involves the newly created separate agency — NRRDA/NRIDA and the SRRDA, PWD, rural-road development agencies, gram panchayats, private operators, etc. These agencies are involved in rural-road planning, sectoral coordination, funds, contracts, and maintenance management. While the state-level units of BSNL may be also doing similar activities, the fact that the design, implementing, and monitoring agency is bundled into one in the case of BharatNet, leading to a lack of transparency and diffused accountability for targets.
- Private sector participation: BharatNet is being implemented only by PSUs that were given the responsibility on a nomination basis. The costs for a PSU are higher due to the inefficiency in management. For PMGSY, road works are awarded on a bidding basis, thus leveraging the efficiencies of the private sector. A concern that could arise in involving the private sector may be the loss of quality. The specification of standards, a five-year maintenance contract as a part of the construction project, and independent monitoring mitigate this aspect.
- Ring-fencing USOF: While telecom operators pay 5% of their adjusted gross revenue towards Universal Service Obligation Fund (USOF), the amount is transferred to the Consolidated Fund of India. Allocations are then made on a demand and review basis. So, despite the unspent balance of nearly INR50,000 crore in USOF, there has been delay in its implementation. On the other hand, the rural-road fund is ring-fenced and is funded through cess on high-speed diesel and petrol. Ring-fencing enables smoother flow of funds
- Partnering with PMGSY: : The NOFN/BharatNet should have partnered with PMGSY. Laying the ducts and fiber while the PMGSY roads were being constructed would have increased the PMGSY cost by a small amount. This incremental cost would then have been much smaller than the cost of laying fibre afresh. This would have also streamlined the ROW permissions etc. — something that has often delayed NOFN/BharatNet implementation. The nation, then, could have a more widely dispersed fiber network at a much lower cost.
Why India functions the way it does
The article was originally published in Business Standard on February 06, 2020, and mirrored on the Organizing India blog.
It’s not obvious why we function the way we do in India, and who gains from it — considering that we are able to go just about anywhere in the world and thrive, but unable to manage too well on our own shores. Could it be because of the operating conditions here apart from the facilities, the prevailing systems and procedures in our environs, and the organisation, structure, and processes? When we go elsewhere, those places have their own systems and procedures, and it appears we are able to adapt and function well. In India, our constraints of systems and procedures in our environs include the full range of our population, just as elsewhere. The sheer number of people with varied levels of education, competencies, process orientation, and expectations is something that those who go away to other environments are not constrained by.
There are other easily recognisable elements of constraints. There are the post-colonial institutions, structures and methods that have been retained in government without modification for a self-governing, democratic society. Another set consists of the underpinnings of a feudal structure that manifests strongly in political processes. The predominant motivation of both is, to put it crudely, exploitation for the governing entity’s gain. Historically, the gain has been for imperial/colonial/exploitative ends, and after the first, largely well-intentioned post-Independence phase, appears to be focused on perpetuating the power of incumbents, or the position of those controlling government (barring exceptions). The fact of governing entities being locally elected does not appear to make any difference. The essential attribute is of otherness, of “us” (those in power) versus “them” (those governed).
The Laws and the Justice System
Latterly, our preoccupation with economic, social, and political pressures has left the serious institutional constraints of our legal system somewhat unattended. There are several dimensions of reforms needed in the legal system. One of these pertains to aspects of law and changes to them, another to the judicial system and its dilatory responses. There is also a third aspect, of approach and motivation, i.e., of a systemic perspective and philosophy, which can be minimalist or the opposite, or something in between.
Too Many Laws
A major encumbrance is the plethora of laws. In December 1993, the Ministry of Finance undertook a project with the United Nations Development Programme on economic and commercial legislation, to make it more market friendly. Called Project LARGE (Legal Adjustments and Reforms for Globalizing the Economy), the first phase from December 1993 until December 1997 dealt with central government legislation comprising about 450 of around 3,000 central acts. The second phase was on state legislation concentrating on government orders, rules and regulations relating to land and labour, and other matters such as dispute resolution and competition policy.
While the material is in the public domain, in practice, it is a bear to find it. For those who want to track it, the reports were published in September 1998 as the “Report of the Commission on Review of Administrative Laws”, Volumes I and II.1 Three articles by the Director of Project Large Bibek Debroy sum up the process, including the later work of the Ramanujam Committee and successive Law Commissions. They are epitomised by his quotation of Tacitus: The more the corruption, the more the laws. The articles are:“Why We Need Law Reform”, “Justice For All: Need Better, Fewer Laws”, and “Old But Not Gold” (links below).2 Another by Vagda Galhotra rounds out the set: “Why We Need To Repeal More Criminal Laws”.3
Too Much Government Litigation
Government litigation expenditure increased threefold from 2016 to 2018, with government being a party to around 46 per cent of lawsuits in July 2018, despite its stated intent of reducing litigation. Quite apart from this, government litigation and some of the disruptive rulings have created chaotic conditions in the economy, such as in coal mines and spectrum after the 2G licence cancellations. This has had a chilling effect on policies facilitating resource use, whether it is coal for electricity, or spectrum for connectivity at a time when there is global advancement in high-speed wireless shared use. The most recent shock to India’s economy was the Supreme Court’s reversal of previous rulings on telecom companies’ adjusted gross revenues. Other disruptive claims, without going into the merits, have been the retroactive tax case against Vodafone, the Tamil Nadu government’s tax claim against Nissan, and the earlier dunning of Nokia.
In 1998, there were an estimated 25 million cases pending in various courts, each taking up to 20 years for resolution, and this increased between 2006 and April 2018 by over 8 per cent. Much of government litigation apparently comprises appeals against lower court judgments, with decisions to appeal taken at the lowest levels of government, whereas decisions to not appeal have to be at the top.
There are many areas we have to work on to move from our present level to being able to grow at a sustainable high rate for any length of time. Beginning from early school, with systems thinking for every child, process discipline and standards, and collaboration and teamwork in lesson plans and play, continuing into work life and polity. Equally, there is a real need for establishing sound institutions. Included in these is a functioning, efficient set of laws and justice system. The discipline and efficient enforcement of contracts, payment terms, and delivery standards to ensure smooth cash flows is critical for markets to function well. This is why reforms on systematic rationalisation of the laws and justice delivery are essential, although such activities do not lend themselves to hoopla and staging events with popular appeal. The talent and experience availablecan contribute significantly to systems and organisation in the public interest. The constitution of the 22nd Law Commission is long overdue, with the 21st Law Commission having ended in August 2018.
1: https://darpg.gov.in/sites/default/files/Review_Administrative_laws_Vol_1.pdf
https://darpg.gov.in/sites/default/files/Review_Administrative_laws_Vol_2.pdf
2: https://www.india-seminar.com/2001/497/497%20bibek%20debroy.htm
https://indianexpress.com/article/opinion/columns/old-but-not-gold/
https://www.businesstoday.in/magazine/cover-story/justice-for-all-need-better-fewer-laws/story/227497.html
3: https://thewire.in/law/why-we-need-to-repeal-more-criminal-laws
Save telecom with a reprise of NTP-99
The article was originally published in Business Standard on January 1, 2020.
If telecom and connectivity are not revived, one of our most successful sectors since liberalisation will be incapacitated. To fix this devastated sector, look no further than the National
Democratic Alliance (NDA) government’s action 20 years ago to rescue and
revolutionise telephony in India through the New Telecom Policy 1999
(NTP-99). It was before India’s growth story and the mobile phone
revolution. The telecom sector had
stalled, and some 15 operators were struggling for survival under the
burden of high licence fee demands, limited customers, and too much
competition, with no money to build out networks to earn more revenues
to service their overwhelming debt. That was when prime minister Atal
Bihari Vajpayee and his team made a bold move, working with industry and
professionals to effect what seems in retrospect like magic. They
implemented some constructive policies for telecom that set in motion
phenomenal growth with vast changes in markets and behaviour.
The sequence of events began in 1998, when the Prime Minister’s Office (PMO) decided to look into the problems in telecom. After considering studies by ICICI and the Bureau of Industrial Costs and Prices, the PMO consulted with professionals within and outside the government, stakeholders in industry and financial institutions, and formulated the NTP-99. While the policies were not optimal because political accommodation was mixed with objective-oriented processes, a fundamental improvement was that government collected charges from operators as a share of revenues actually earned, instead of up-front payments on auction commitments for licences. This was a difficult political decision, because of a mistaken public perception that it was a giveaway to the operators. The government held firm despite being taken to court, and the decision turned out to be clearly in the public interest, as results detailed below were to p
The telecom crisis today is much the same as in 1998. Our regulatory policies have resulted in price-wars and beggar-thy-neighbour strategies disrupting the market, while most people are deprived of good, reliable services. Thus, while India has incredibly low prices, they are unsustainable, far below what could reasonably be expected from the high volumes and the experience curve reduction in costs. These price levels do not support even the maintenance of current service levels, let alone expanding coverage to the sparsely populated countryside. Urban areas with low prices often suffer unreliable services of low quality, while less populated areas are deprived of services altogether. Further, the squeeze on operators is aggravated because of the Supreme Court upholding the government’s apparently gaming approach to defining “Adjusted Gross Revenues”, imposing retrospective dues on all spectrum holders.
- Revenue-sharing for spectrum charges instead of auction fees, as was done for licence fees in 1999, as the major beneficial change. It would also result in more rational use of spectrum as a public resource for connectivity and growth, instead of just for government revenues.
- Removal of additional spectrum usage charges would greatly facilitate communications for development and growth, correcting impediments to efficiency in India compared with the rest of the world. A windfall profit provision could be instituted in the event there are excessive profits, or inappropriate diversion of funds.
- Policies to enable new technologies. For instance, the latest version of Google Pixel hasn’t been introduced in India because 60GHz is available only with limited bandwidth. In 5G, India is already far behind, and will take years to benefit from this without drastic changes in spectrum access.
- Pooling of spectrum to provide broader bands for higher throughput. This can be done through geolocation database-driven shared spectrum, as in Licensed Shared Spectrum (LSA) in Europe, or Authorised Shared Spectrum (ASA) in the US, and harmonising 60GHz regulations with the US FCC, but limiting its use to operators.
- Possibly structuring spectrum sharing through a consortium approach to infrastructure, and unbundled, use-based costs for delivery. This can be done by separating infrastructure (network development and management) from service provision.
- Another possibility is to have two or three vertically integrated consortiums, each with its own infrastructure (which will require significantly more capital investment).
- An active government role in coordinating industry-wide, consultative, goal-oriented action through the formulation of enabling policies and regulations. Multiple government agencies are involved, namely, DoT, MeitY, TRAI, DD, Finance, Law, as well as state governments for uniform Rights-of-Way and tower installation.
Functioning without mobile telephony seems unimaginable today. Instead of being among the leaders using telecom for our benefit, on our present trajectory we are likely to miss these opportunities for years — unless the government finds the imagination and courage to act.
The Telecom Crisis is an NPA Problem
The article originally published in Business Standard on November 7, 2019 was also mirrored on Organizing India Blogspot
The Committee of Secretaries to mitigate financial stress in telecom must act quickly on interim measures for the sector to survive. But is its mere survival sufficient for India’s development and growth? Is it possible to fix telecom in isolation?Our communications needs are very poorly served, although at rock-bottom prices. Is it even possible for our hapless citizens and enterprises to get past shoddy services and productivity foregone, to trade with other countries on a more even footing?
Yes, if we succeed at major structural changes, starting with telecom. But to transform telecom, the government and all of us have to come to the stark realisation that just as finance drives the economy, digitisation and communications have to be at the heart of production and delivery. Telecom and digitisation are strategic enablers for all infrastructure and in all sectors. Leading countries are so far ahead and functioning so effectively that it is difficult for us to imagine. We must want that path, plan for it, and put in the requisite effort.
Simply tweaking overdue payments, tinkering to reduce charges, and plugging along as before isn’t going to get us there. In this sense, the Committee’s charter is too limited. All it can do is assuage the pain, whereas our need is for a revitalised industry to serve our purposes.If the Committee’s scope were broader, could we actually adopt digitisation as our core strategy for development and growth? A study on China, “Telecommunications reforms in China”, about the transformation in policies to make digitisation its development priority, is instructive.1
Their approach to reforms was to balance the government’s aims of universal coverage, governance and control, and efficiency; industry’s profit-seeking; and the people and enterprises’ needs for freer, more rapid communications. This is what we need to do, in a way that works for us.Also, the government, the judiciary, the press and users need to understand and accept that the telecom crisis is part of the larger non-performing assets (NPAs) problem. It has systemic links to NPAs and banking, which links to real estate and construction, electricity and roads, and stable and predictable taxes. Government payment delays and tax terrorism must stop. Business as usual will not resolve NPAs soon to enable growth. These two articles explain why and deserve attention.2
Essentially, entities that take deposits need Reserve Bank of India (RBI) regulation. In a crisis, people with domain expertise and capacity must be appointed to take immediate steps to protect assets and operations, as with Satyam or IL&FS, because seizing/freezing assets often hurts depositors and creditors. A bureaucratic process as with the Punjab & Maharashtra Co-operative bank is likely to result in yet another zombie bank, burning depositors’ money just to stay alive.The Committee’s focus should be on cash flows, modelling cash flows and their timing, not just the present value of discounted flows, or other extraneous emotional, political, or judicial/administrative reasons.
Employment is a legitimate consideration, but has to be sustainable, with timely cash generation. Else, other sources of timely cash support must be arranged, because without sustained cash flows, no gambit or subsidy can succeed (and maintaining unproductive employment will not be possible). Some fixes need major legislative changes to policies.
BSNL & MTNL
On BSNL and MTNL, a recent article sets the context and explains why the revival plan is unrealistic.3 In short, these poorly supported and much-abused enterprises have so much debt that earnings before interest, taxation, depreciation and amortisation would have to be at least 35 per cent. Governments have used them as market spoilers as with Air India, precipitating unsustainable price wars that gutted the industry.An alternative is to downsize, re-skill as needed, and retain the public sector entities (as one or both) in the role of security-and-public-interest-anchors in infrastructure consortiums. These must be run by the private sector (and in strategic areas, by defence). This will facilitate policies such as assigning spectrum for payment on usage without auctions, and extending Wi-Fi to 60 GHz and 6 GHz (details at: https://organizing-india.blogspot.com/2019/10/extend-tax-cut-logic-to-infrastructure.html, and https://organizing-india.blogspot.com/2018/11/a-great-start-on-wi-fi-reforms.html).
Weak Financial Systems
The Committee needs to apprehend and convey the need to strengthen financial institutions. Financial systems provide second-order infrastructure for productive activity and wellbeing. They need an adequate underlay of first-order, basic infrastructure, comprising communications, energy, water, waste, sewerage, and transport, leaving aside housing and the basics of security, and law and order. While most of us take these for granted, there should be no doubt about how critical these attributes are, and that they are being eroded and increasingly at risk because of social disorder and economic inadequacies. In addition, basic health care and education are essential adjuncts for the supply of trainable people to operate these sectors.
Until some years ago, despite weak infrastructure, financial systems were among India’s real strengths, although eroded periodically by disruptions resulting in NPAs. However, there was strength in the professional capacity of this sector that held up in spite of the pressures. Over time, these institutions have been severely degraded, through laxity, complicity, pressures for evergreening, the abrupt imposition of credit quality and NPAs, the extent of frauds because of lax or complicit supervision and the reputational damage, the buffeting from demonetisation and pressures to cross-sell products such as insurance. Governments need to understand this and support building professionalism, avoiding melas and waivers.
The scope of the Committee could be expanded to set the objectives of telecom and digitisation in the interests of governance, industry, and users, and to outline next steps. They could consider the experience of China and others such as Sweden for this vast effort, while addressing linkages and NPA issues. Perhaps, they could be exemplars by setting the tone for a national approach that is not departmental and becomes bipartisan, and helps to move away from our abrasive, confrontational politics that leads to deadlocks.
- Becky P.Y. Loo, October 2004: https://www.researchgate.net/publication/227426547_Telecommunications_reforms_in_China_Towards_an_analytical_framework
- Debashis Basu, October 27, 2019: https://www.business-standard.com/article/opinion/how-to-fix-the-pmc-bank-crisis-119101400006_1.html October 13, 2019: https://www.business-standard.com/article/opinion/lessons-from-pmc-why-govt-is-responsible-for-co-operative-bank-crises-119102700620_1.html
- Rahul Khullar, October 31, 2019: https://www.business-standard.com/article/opinion/don-t-bet-on-bsnl-mtnl-s-revival-119103100040_1.html
Traffic Rules, Mindset and On-Time Payments
The article was published in the Business Standard on September 4, 2019 and carried in Organizing India Blogspot on September 5, 2019.
Payments have gained currency, pun unintended, with the sharp focus on consumer spending and the economy. The following anecdote from newspaper reports begins with a payment problem for a traffic infraction, which leads on to existential questions on behaviour and governance.
A motorcycle rider in Uttar Pradesh was booked for not wearing a helmet. Events spiralled quickly to arrive at the heart of the matter: The state of governance and our utter disregard for due process and the law. But let’s not get ahead of the story.
The rider was an electrician on contract with the UP State Electricity Board. He pleaded with the police to be let off on the Rs 500 fine, saying he earned only Rs 6,000 a month, and hadn’t been paid for four months. The police said it was the law, and issued a ticket. The electrician’s superior interceded at his request, but couldn’t convince the police to waive the fine. (It turned out that tickets had been issued to 70 policemen for traffic violations.)
The electrician checked on the electricity dues owed by the police station. Finding that they amounted to Rs 662,463 over several years, he disconnected their power supply. When questioned, he said that this was as required by the law.
The power supply to the police station was soon restored, with the customary, vague assurance that the bill “would be paid soon”. A positive outcome, however, was that the state electricity board then paid Rs 17 crore of arrears for the month of May to 9,627 contract workers, including the electrician. The remaining amount, they said, “would be paid soon”.
Why were wages delayed? Apparently because consumers delayed payments, and the electricity board didn’t have the money to pay. Employees were still owed back pay for three months. Meanwhile, a formal enquiry reportedly began on the episode.
Such incidents are not unusual. In August, there was an instance in Agra of unpaid sanitation workers responsible for the toilets at the Taj Mahal going on strike. In Noida near New Delhi, two major shopping malls, a hospital, and a school had their water and sewer lines shut off because of unpaid dues. There were apparently 107 defaulters who owed over Rs 10 lakh each, with the highest being Rs 46.35 crore.
It isn’t as though citizens and the private sector are the sole culprits, with only stray government entities defaulting. A former Confederation of Indian Industry chairperson said in an interview on television recently that while hard data on government dues to the private sector are unavailable, informal estimates of the dues from central and state governments, state-owned companies such as electricity boards, and arbitration awards, ranged from Rs 2 trillion to Rs 5 trillion. Her observation was that if these dues were paid, it would provide the biggest boost for the economy, because it would result in much-needed capital formation and economic rejuvenation. As to where the funding could be found, given the government’s finances, she replied that the same sources (for example, bonds) could be used that would fund whatever waivers or incentives the central and state governments were promising. Those funds could be channelled for productive use in capital formation by their rightful claimants.
Stepping back for perspective, the problems appear to stem from slack implementation of protocols (defined, sequential steps), whether it is the discipline of timely payments, or rules and regulations. The same malady afflicting payments shows in the disregard for traffic rules, and the confusion in disallowing tyre shredders to discourage driving the wrong way, which is even more dangerous to the public.
In some cases, the design itself is flawed. For instance, resources for infrastructure such as coal and spectrum need to be priced low to facilitate productivity. If auctioned at a premium, instead of abundant supply of good quality at reasonable prices, the supply is constrained in quantity or quality, or priced high. Other instances are of processes not thought through in terms of design (e.g, stranded power generation. A requirement of Letters of Credit (LC) for purchasing power has been around, but has not been enforced. Will a new directive enforce this, when banks acting prudently can issue LCs only to distribution companies with strong finances?) The design shortcomings could result from fragmented and episodic attention, disaggregated responsibilities, lack of professional capacity, or simply winging it.
These failings have existed over decades, regardless of the governments in office. Some initial successes, as in mobile telephony from 2003 to around 2011, or in road construction or electricity supply, have not been consistent, nor have they been convergent to yield all-round, sustainable growth of the sort that could result from well-organised orchestration across the board. They have not even been able to sustain their performance, and now comprise the troubled sectors for banking and non-performing assets.
The root causes may be in underlying contradictions in our attitudes. These include feudal and post-colonial (exploitative) notions, with the trappings of a Westminster system, without the requisite culture and preparation of policies, practices and training. The result is either government and citizens facing off in an “Us vs Them”, with citizens often being viewed in the way colonials regarded “the natives”, or episodic “schemes” that fizzle out. Our political leadership and we have to realise that we are in the same boat, and that there is no substitute for working together with discipline for our common interests.
There are no colonial masters here, only their mindsets that we adhere to, without refashioning them for our purposes. This is what we must change over time from a total-solutions perspective, from on-time payments, to law and order including traffic, to waste management,1 all infrastructure, finance, industry, farming, the arts and daily living.
Fix Problems Before Complete Failure
The article by Shyam Ponappa was published in the Business Standard on July 4, 2019 and Organizing India Blogspot on July 5, 2019.
There is much talk about improving the big picture in India. What we really need, though, is some successes on the ground — some actual resolution of problems as building blocks for further success. Two instances are discussed below.
The first is a puzzling business failure: Jet Airways running aground in slow motion. It is already bankrupt, but unravelling the sequence could make such financial predicaments, of which there are many, more tractable. India’s once dominant airline slipped up and, inexplicably, was allowed to collapse. Over 16,000 employees are affected, and India’s airline services are in turmoil. One estimate of liabilities was Rs 26,000 crore.
Why didn’t lenders and government agencies use a combination of executive action, judicial process and bridge financing to keep the airline afloat? Did legal obstacles genuinely prevent resolution? Or was it irresolute collective action, including lenders being gun-shy because of the Non-Performing Assets (NPAs) and witch-hunts, or manipulation, complicity, or vindictiveness? Answers and corrective action could help fix other high-profile NPAs.
The second is a macro-level example from telecom: The mishandling of BSNL and MTNL. Since the 1990s, successive governments have repeatedly attempted to give a fresh impetus to these hapless telecom entities, while depriving them of what could actually have made them successful, namely, strong, informed leadership, with independence/non-interference. Consequently, BSNL’s accumulated losses amount to nearly Rs 1 trillion. This is nearly five times Jet Airways’, and double Air India’s accumulated losses until March 2018, the latter being roughly the size of India’s annual health budget.
Sorting out these infrastructure service problems is crucial because of their effect on everything from security, education and healthcare, to work and entertainment. If BSNL and MTNL can change course constructively, we may be able to get them off their collapsing trajectory. Resolving this situation would remove severe impediments to our effectiveness and convenience, and an enormous drag on productivity. Connectivity and communications are so critical to social and economic capabilities, and our approach for decades has been so flawed and on a disastrous trajectory, that it is incomprehensible that we should be resolutely following this failing path without changing it. Now, the government is reportedly considering infusing thousands of crores into the same business, together with monetising land and assets.
What Is In The Public Interest?
The first step is setting appropriate objectives for BSNL and MTNL. What public-interest needs do they serve? The communications minister mentioned strategic areas like home and defence, and services for crisis management during times of disaster such as cyclones and floods. Two others that he mentioned appear unjustifiable: That they are national assets, and leading providers of free services. The first is just an assertion, while the second is inappropriate for commercial undertakings. It’s time to drop wishful thinking and take honest stock. For instance, after policy statements supporting spectrum sharing, regulations were framed to be so restrictive as to make it not worthwhile. Instead, policy-makers should set objectives that actually serve the public interest.
Thus far, we have had confused and absurdly contradictory objectives in practice: High government collections from auction fees and charges, while expecting ubiquitous, reasonably-priced, good-quality services. It seems self-evident that such contradictory objectives cannot possibly be achieved. The fact that high government charges deprive networks of funds and increase user costs are documented in the following reports:
“A Study of the Financial Health of the Telecom Sector”1 and
“The Impact of High Spectrum Costs on Mobile Network Investment and Consumer Prices”2
Suggested Objectives
A genuine reset could be attempted on the following lines:
- Connectivity is the most essential objective. The ideal must be balanced with the practical, through trade-offs and phasing. The top cities and clusters have a major share of economic and social activity and are therefore a priority, of which 35-50 may be the fastest growing, with the next 50 requiring attention because of sheer size. For instance, Sweden’s phasing for 2025 is for 98 per cent of the population to have a minimum of 1 Gbps at home/work, 1.9 per cent at least 100 Mbps, and 0.1 per cent at 30 Mbps. But to the extent communications are available in our hinterland together with roads, water and sanitation, activity and prosperity will spread, with less pressure to migrate to urban centres. The longer term objective therefore needs to be good connectivity everywhere (within reason).
- An equally important objective is to safeguard the public interest, while ensuring good, reliable services at reasonable prices. The question is not whether to shut down BSNL and MTNL, but how to provide the right structuring and support including reskilling and continuing education, so that they participate effectively in consortiums and provide safety, security, and oversight in the public interest.
- A third is to avoid disrupting markets with unsustainable prices, including free services. Governments have done this repeatedly in telecom, airline and electricity services. It needs to stop. People need high-quality infrastructure for productivity, not shoddy services that undermine productivity and waste their time, pre-empting better services because of low pricing.
- A fourth is to actively ensure adequate capacity and quality in services to not constrain or waste public resources and potential. This is to avoid the shoddy services referred to above, that are bottlenecks that subvert alternatives as low-priced barriers to competition, through constraining revenues while draining public resources.
- Finally, we must embrace infrastructure- and spectrum-sharing. Sweden provides a model not only for the European Union, but also for India. Singapore had a model public-private partnership until some years ago, when SingTel, a passive anchor partner, took over OpenNet. We need mandatory active network sharing (including spectrum) through consortiums run by the private sector, with BSNL and MTNL as guardian anchor participants. A report by Stokab in March 2017,3 the City of Stockholm’s IT infrastructure company, provides details of an operator-neutral fibre and mobile infrastructure.
Resolving connectivity problems that affect many people may be more easily doable than, for example, clearing the NPAs, or reconfiguring agriculture.
Shyam dot Ponappa at gmail dot com
1: http://icrier.org/pdf/Working_Paper_380.pdf
2: https://www.nera.com/content/dam/nera/publications/2017/PUB_High_Spectrum_Costs_0517.pdf
3. https://www.stokab.se/Documents/Nyheter%20bilagor/Provins%20rapport%20mars%202017_en.pdf
Fostering Strategic Convergence in US-India Tech Relations: 5G and Beyond
The article by Justin Sherman and Arindrajit Basu was published in the Diplomat on July 3, 2019.
As world leaders gathered for the G-20 summit in Osaka, Japan this past weekend, a multitude of issues from climate to trade to technology came to the fore. Much of the focus was on U.S.-China interactions at the summit, as the two nations are locked in both a trade war and broader technological and geopolitical competition. Despite the present focus on the U.S. and China, however, it is crucial to not overlook another bilateral relationship of ever-growing importance in the process: The tech relationship between the United States and India.
Certainly, the two countries have many disagreements on some technology issues. But this is a geopolitical relationship that is both strategically important for each country, and a vital opportunity for the two largest democracies in the world to collectively combat Chinese-style digital authoritarianism.
Huawei and 5G
First, with respect to national security and 5G roll-outs, the U.S and India are not on the same page. The United States, for several months now, has been on a diplomatic messaging tour of the world to try to convince — with great resistance (some would argue failure) — allies, partners, and potential partners alike to ban Chinese firm Huawei from supplying components of 5G networks. Many officials across Europe, the Middle East, South America, and elsewhere have been reluctant to ban Huawei per the U.S. recommendation, and India is no exception. Indeed, National Security Advisory Board Chairman P.S. Raghavan told The Hindu that “5G is becoming a fault line in the technology cold war between world powers” and that India must avoid getting caught in these fault lines.
In large part, U.S. diplomatic messaging here has fallen short due to heavy conflations of national security- and trade-related risks; and Trump only contributed further to this fact with his latest reference to Huawei, during the G-20, as a potential trade war bargaining chip. The sheer population of India, however, combined with its fast growing technology sectors and desire to digitize, makes the country an important market player when it comes to the 5G revolution. U.S.-India engagement on 5G issues must be managed effectively through robust articulation of each country’s national interests underscored by a clean segregation of trade and security questions in the discussion. This partnership has the potential to wield great influence in the global market, including in ways that could prioritize or deprioritize certain 5G equipment suppliers (like Huawei).
Data Sovereignty and Data Privacy
Data sovereignty is another hot area in which the U.S.-India tech relationship demands careful negotiation. Over the past year, the Indian government has introduced a range of policy instruments which dictate that certain kinds of data must be stored in servers located physically within India — termed “data localization.” While there are a number of policy objectives this gambit ostensibly seeks to serve, the two which stand out are (1) the presently cumbersome process for Indian law enforcement agencies to access data stored in the U.S. during criminal investigations, and (2) extractive economic models used by U.S. companies operating in India.
A range of conflicting developments emerging from the G-20 summit underscore this fact. India, along with the BRICS grouping, focused on the development dimensions of data governance and re-emphasized the need for data sovereignty — broadly understood as the sovereign right of nations to govern data in their national interest for the welfare of their citizens. President Trump reigned in his focus on the need for cross-border data flows and, in direct opposition to some proposals that have emerged from India, explicitly opposed data localization. While India did not sign the Osaka Declaration on the Digital Economy that promoted cross-border data flows, the importance of cross-border data flows in spurring the global economy did find its way into the Final G-20 Leaders Declaration — which, of course, both countries signed.
Geopolitically, the importance of India’s data governance stance cannot be overstated as it could pave the way for the approach adopted by other emerging economies — most notably the BRICS countries. Likewise, the U.S. has important thinking to do around such questions as what shape a national data privacy law could take. Even though the two countries’ views on data may be quite different from one another, the seats that India and the U.S. have at the table for global data governance discussions — alongside others like Japan, China, and the European Union — underscore the value of meaningful interactions and mutual trust and respect on this issue.
Norms for a Democratic Digital Future
Finally, as the United Nations Group of Governmental Experts and the Open-Ended Working Group meet to resurrect the norm-formulation process for fostering responsible state behavior in cyberspace, India has some homework to do. Even though it has been a member of five out of the six Group of Governmental Experts set up thus far, India is yet to come out with a public statement delineating its views on the applicability of International Law applies in cyberspace. Further, India has also failed to articulate a cohesive digital strategy — instead relying on a patchwork of hastily rolled out and often ill-conceived regulatory policies, some of which commentators in the West have hastily labeled as digital authoritarianism. The U.S., for its part, amidst a cutback to diplomatic cyber engagement (as part of cutbacks to diplomacy writ large), could also up its support of international engagement on these issues. Its recent repeal of net neutrality protections could also be argued as a step back from long-time international norm promotion around internet openness.
Through a combination of domestic policy gambits and foreign policy maneuvers, both states need to draw lines in the sand that safeguard human rights, international law, and democracy online, while arriving at some balance with each other’s national interests.
A primary example lies with artificial intelligence (AI). AI has found increasing use in digital authoritarianism, as dictators use automated, intelligent systems to boost their surveillance capabilities. The Chinese government has arguably been at the forefront of this enhanced level of authoritarian rule for the digital age.
In addition to focusing on AI applications for everything from natural language processing to self-driving cars — through investments, strategies, policy documents, and so on — Beijing has also been deploying AI in the service of large-scale human-rights abuses. Chinese strategy papers on AI, while similarly emphasizing many commercial or benign applications and raising attention to such issues as algorithmic fairness, concurrently have discussed using AI for “social governance,” censorship, and surveillance. To combat the rising intersection of AI and digital authoritarianism, the U.S. and India could wield enormous leverage — as the two largest democracies in the world — in governing these technologies in a democratic fashion that counters dangerous arms-race narratives and uses of AI for surveillance and repression.
The same goes for paying attention to technology exports and diffusion to human-rights abusers. For instance, companies incorporated in China, among those incorporated elsewhere, have been heavily involved in exports of dual-use surveillance technologies to other countries, including those with questionable or outright poor human-rights records. Although companies incorporated in democracies may engage in such practices as well, most democracies take steps to curtail these practices as much as possible, such as through the multilateral Wassenaar Arrangement — which lays out export controls around conventional weapons and dual-use goods and technologies. The U.S. has long been a party to this agreement, and India officially joined in 2018. Arguments persist about the extent to which Beijing is involved in these dual-use surveillance technology exports, but these exports may only increase going forward as companies increasingly sell not just internet surveillance tools but also dual-use AI tools. In this way, too, India and the U.S. could play an important role in countering the spread of such capabilities to human-rights abusers and standing against the spread of digital authoritarianism in the process.
The relationship here is, therefore, one that requires careful navigation for its significant geopolitical, economic, and ideological consequences. For the future of the technological relationship between the world’s largest democracies—and the extent to which they respect each other’s strategic autonomy while converging on issues of mutual interest—could determine the future of global digital governance.
5G Aspirations and Realities
The article by Shyam Ponappa was published in Business Standard on June 6 and in Organizing India Blogspot on the same day.
Ah, 5G! The very thought seems to excite so many. What is it? It is a mix of telecom technologies1 delivering much higher data speeds on more extensive connectivity, using much lower power, with extended battery life, and emitting less radiation, for ways to connect and operate most of the conveniences people use regularly. From smartphones and computers for communications, study, work, research, entertainment, to other devices and machines, such as for managing utilities (electricity and water) at home and the workplace, refrigerators and cooking devices, industrial equipment, transport, and more, so that daily activities are eased considerably. The catch is that 5G is at an early stage in a long process — perhaps a couple of years to manifest in large trials in India, and several more years to be widely available, needing huge investment ($100 billion in India).
Yet, there are compelling reasons for developing India’s capabilities. There is the sheer necessity for India to partially meet its requirements, instead of relying entirely on imports. The big draw is the size of the Indian market and prospective demand, the global market, and the possibility of innovation at this early stage. Domestic capabilities are a prerequisite to afford deployment at a level that would otherwise exceed petroleum imports, with unsustainable effects on our balance of payments. Without domestic capacity, energy imports would limit electronics imports. (This highlights India’s need for solar power development, a separate and equally high priority.)
However, the sobering financial condition of India’s communications industry gives pause. Financial capacity — revenue generation and access to capital, both equity and debt at favourable terms — is required to develop capabilities. After the telecom price wars, even Reliance Jio is reportedly cutting staff. Airtel, meanwhile, having invested heavily in 4G infrastructure, has stated its unwillingness to bid for 5G pectrum unless prices are lower.
The government set up a committee for 5G in September 2017 with a steering group chaired by emeritus professor at Stanford Arogyaswami Paulraj, a pioneer in wireless communications. This committee recommended network deployment as the immediate priority, i.e., rolling out early, efficient and pervasive 5G networks. Technology design and manufacturing capacity were recommended for later phases.
Network deployment needs policy support driven by a Systems Approach, especially for a debt-encumbered sector faced with declining revenues per user, and unused, inaccessible spectrum, even as other countries enhance their lead. This is ironic, because India has real strengths in this sector and a large market, with the potential to catapult productivity and prospects. Yet, government policies have not succeeded in coordinating our reservoir of human resources and potential.
India lags in 5G despite the government’s stated interest in establishing a lead. Spectrum allocation and large trials were scheduled towards the end of 2019, and auctions in 2020. However, government statements this week target 5G trials by September, and auctions by the end of 2019. As spectrum band choices and allocations for trials have yet to be made, this appears overambitious without radical improvement in resolving many such issues.
Also, India’s reserve price for spectrum is seven times Korea’s. As sectoral cash flows are weak, there may be takers only at very low prices unless funding is from external sources as for Reliance. A monopolistic outcome would be undesirable in the public interest. Therefore, shared access with Wireless Resource Virtualisation and Network Function Virtualisation may be a much better solution for network deployment and market development.
Inexplicably, government and the public still view communications as a “government cash-cow” instead of as critical infrastructure, while complaining bitterly about poor delivery from low investment. It is obvious that exorbitant government charges (29-32 per cent of revenues plus corporate tax) crowd out investment. The government can change this, or give up on establishing a lead in communications and 5G. Worse, India will continue to lose out on leveraging communications for development.
Initiate a breakthrough - Apply Systems Thinking
The government can catalyse a breakthrough by doing the following:a) Reduce borrowing costs and taxes for communications as infrastructure. This aim of the National Telecom Policy 2012 (NTP-2012) has been ignored.b) Provide adequate spectrum aligned with global allocations. Given India’s low fibre penetration and need for digital technology, allow shared access to all spectrum and infrastructure, with charges for usage based on revenue sharing.c) Clear administrative impasses through coordination and due process without delay. For example, allocate spectrum immediately for 12 months for trials.Many countries have completed 5G spectrum assignments and are already deploying 5G. These include Korea, Switzerland, Finland, UK, USA, Canada, Australia, Germany, Russia, Italy, and Japan.2There are nearly 300 5G deployments, as shown on an interactive map on Ookla’s site (Chart 1).
Chart 1: 5G Map – June 4, 2019
Source: https://www.speedtest.net/ookla-5g-map
In this context, Huawei’s role in India is contentious. One issue is of non-discriminatory trading terms, or fairness in competition. If an entity such as Huawei achieves global dominance through government support, it competes on terms that cannot be matched because of cost of funds and scale advantages. Such entities can establish dominance in any country against competitors who do not enjoy similar support. Second, while Huawei may be doing nothing different from Nokia or Ericsson, the fact that it is supported by a neighbour with apparently hegemonic behaviour, China, suggests that dependence or entanglement are inadvisable.
To succeed with Digital India and 5G, government can begin by classifying communications as infrastructure, and adopting the approach taken for 5 GHz Wi-Fi. Take pointers from the US FCC, ETSI, and so on; use spectrum and network sharing to leverage equipment and spectrum fully; support local technology champions such as a fabless chip design unit and a network equipment manufacturer in Bangalore, and a wireless equipment manufacturer in Delhi; and focus only on delivery with sustainable revenue generation.
Shyam dot Ponappa at gmail dot com
1: 5G technologies include Multi-User – MIMO (MU-MIMO) to improve reception, small cells for better performance and reduced radiation, WiGig and other high-speed wireless technologies, Software Defined Networks with Network Function Virtualisation, Wireless Resource Virtualisation, and a fibre backbone.
2: Page 8: https://img.lightreading.com/5g/downloads/ webinar-breaking-the-wireless-barriers-to-mobilize-5g-
The Huawei bogey
The article by Gurshabad Grover was published in Indian Express on May 30, 2019.
The Trump administration has not only passed orders restricting the US government and its departments from procuring networking equipment from Chinese companies, but is exerting considerable pressure on other countries to follow suit. The fear that Huawei and ZTE will aid Chinese espionage and surveillance operations has become common even though there has been no compelling evidence to suggest that Huawei’s equipment is substantively different from its competitors.
These events have also sparked a larger debate about the security of India’s communications infrastructure, an industry powered by foreign imports. Commentators have not shied away from suggesting that India ban the import of network equipment. C Raja Mohan, in ‘The tech wars are here’ (IE, December 11, 2018), expressed these concerns and asked whether Chinese telecom equipment manufacturers should be allowed to operate in India. A larger point was made by D S Hooda in his piece, ‘At digital war’ (IE, October 25, 2018). He pointed out threats that arise from using untrusted software and hardware all over the stack: From Chinese networking middleboxes to American operating systems and media platforms. As a method to establish trust in ICT infrastructure, Hooda recommends “indigenis[ing] our cyber space”.
The path towards indigenised manufacturing of networking equipment is an expensive, elaborate process. Restricting certain foreign companies from operating in the country without evidence would be a knee-jerk reaction solely based on cues from US policy, and would undermine India’s strategic autonomy.
At the heart of threats from untrusted software or hardware, lies an information asymmetry between the buyer and seller. It is not always possible to audit the functioning of every product that you purchase. Open technical standards, developed by various standards development organisations (SDOs), govern the behaviour of networking software, and remove this information asymmetry: They allow buyers to glean or implicitly trust operational and security aspects of the equipment.
It is clear that various governments including India have repeatedly failed to advance privacy and security in the 5G standards, which are developed at the 3rd Generation Partnership Project (3GPP) — the organisation developing standards for telephony. Government and industry dominance at the 3GPP has ensured that telecom technologies include security vulnerabilities that are euphemistically termed as “lawful interception”. From an architectural perspective, 5G does not contain any significant vulnerabilities that were absent in older telecom standards. Unfortunately, these vulnerabilities are indifferent to those who exploit them: A security exception for law enforcement is tantamount to a security vulnerability for malicious actors. As the report from UK’s Huawei Cyber Security Evaluation Centre Oversight Board confirmed, there is perhaps no technical way to mitigate the security risks that 5G poses now. But there is still no evidence to suggest that Huawei is operating differently from say Ericsson or Nokia.
India needs to establish that Huawei is aiding the Chinese government through their products (5G or otherwise) before reacting. That Chinese companies are rarely insulated from Beijing’s influence is indisputable. However, the legal requirements placed on Chinese companies by Beijing are equivalent to de facto practices of countries like the US, which has a history of intercepting equipment from American companies to introduce vulnerabilities, or directly compelling them to aid intelligence operations. Such influence should be fought back by pushing for international norms that prevent states from acquiring data from companies en masse, and domestic data protection legislation.
In the long term, the Indian government and its defence wings would benefit from understanding the argument Lawrence Lessig has made since the 1990s: Decisions of technical architecture have far-reaching regulatory effects. A long-term strategy that focuses on advancing security at technical SDOs will prove more effective in ensuring the security of India’s critical infrastructure than the economically expensive push for indigenisation.
Democracy, Digital India and Networks
The article was published in Business Standard on May 1, 2019 and mirrored on Organizing India Blogspot on May 2, 2019.
There’s no escaping the blessing or the curse of the Digital Age in India, any more than the benefits and challenges of democracy. The headlong rush into digitised networks provides incredible benefits of reach and efficiency in many different ways, at the individual and many collective levels — of family, friends, community, nation, polity, work, domain, and so on. It also lends itself to the dark side, plumbing the depths of social, religious, or political factions and tribalism, bigotry, autocracy and fascism, anarchy, social dysfunction, and the rest. Yet, there’s no denying that for India, with all its needs, talents, foibles, and contradictions, digitisation is a great enabler.
Likewise democracy. Romanticised notions of it are pure fluff, epitomised by selfies at the Parthenon, conjectures about Vaishali, or the spectacle and pageantry of electioneering. The reality was, and is, much harsher, whether then or now. Then, it was the practice of a privileged elite. Now, the reality of democracy in India with universal franchise and an insufficiently prepared polity is a space captured by politicians, many of them fractious opportunists, not really prepared or equipped for the complex analysis and decision-making that governance requires. Most citizens, however, have an illusory freedom of choice, despite the choice being restricted to accepting or rejecting incumbents, or choosing replacements from among these very politicians. This is where digitisation has a direct role and enormous impact through media in all its forms, including the nexus between money and politics as in the Cambridge Analytica episode.
According to McKinsey’s ‘Digital India’ report of 2019, the benefits of digitising India are impressive, although only 40 per cent of the population has internet access, and there is uneven adoption in businesses, leaving considerable room for improvement. Yet, newly digitising sectors have experienced tremendous gains. For example, in logistics, fleet turnaround time has been reduced by 50 to 70 per cent, and digitised supply chains helped companies reduce inventory by 20 per cent. The question is whether and how this can be managed to yield more benefits than detriments, while preserving privacy, social convergence, and harmony, while avoiding divergence, repression, and instability through disharmony.
The Imperative for Conscious Regulation
Network science tells us that real-world networks share two characteristics. The first is growth with time, and the second is that new nodes link more often to more connected nodes, or hubs. Growth and preferential attachment result in the emergence of a few, highly connected, dominant hubs in all networks, whether the networks are of the cells in our bodies, computer chips, transport networks for airlines, social networks connecting people, or the World Wide Web. These characteristics are common across networks of any size and are scale-free.
The dominance manifested by companies such as Facebook, Amazon, Netflix, and Google, combined with the attenuated influence of less connected nodes highlights the role of regulation and structure for equitable development and outcomes in networks. The same issues of dominance and the need for regulation arise in democracy. In India, outrageous changes introduced recently with regard to election funding have increased opacity and the potential for abuse at the heart of democratic processes. Political parties can now receive foreign or domestic funding from any source without constraint, and funds can be anonymous through electoral bonds. Introduced with retrospective effect, both the National Democratic Alliance and the Congress benefitted, as previous adverse judgments were nullified. Therefore, one pointer is the need for regulation and appropriate controls applied in a host of areas including news and social media.Evidence-Based Policies
An entirely constructive aspect of digitisation relates to the application of network science to issues by mapping the links between factors and actionable policies. Examples are the connection between genes and diseases for effective treatment,1 or the feasibility of upgrading products and exports for countries. An example of how proximate products and exports developed over 20 years is visualised in Chart 1, showing the Revealed Comparative Advantage (RCA) of Colombia (COL) and Malaysia (MYS) in production and exports from 1980 to 2000.
Chart 1: Revealed Comparative Advantage – Colombia and Malaysia
Source: Hidalgo et al: ‘The Product Space Conditions the Development of Nations – Science, 27 Jul 2007). https://science.sciencemag.org/content/317/5837/482
https://www.researchgate.net/publication/6181618_The_Product_Space_Conditions_the_Development_of_Nations
The premise is that most upscale products are from a densely connected core, while lower order products are in a less connected periphery. Countries tend to move to products close to those for which they have specialised skills.The lower chart is for Malaysia alone (it helps to view enlarged images in colour on a screen to trace the progression).
India’s manufacturing and export opportunities in its product space in 2017 are in Chart 2.
Chart 2: India - Export Opportunities Product Space - 2017 $292 billion
Hidalgo: https://atlas.media.mit.edu/en/visualize/network/hs92/export/ind/all/show/2017/
Such interactive charts are available and can help in planning for product areas such as automobile parts, chemicals, or electric motors.2
A great deal of appropriate regulation followed by planning and execution is needed, incorporating insights such as these in areas like governance, healthcare and industrial policy. Realpolitik and preoccupation with obscurantism, religiosity, and caste/tribe, require that changes be driven by unraveling the nexus between politics and funding, evolving a transparent, state-funded system. Is such a transformation possible? Recent developments that have overtaken earlier attempts at electoral reform such as the Goswami Committee (1990) and the Vohra Committee (1993) emphasise an urgent need. But can public opinion and opportunistic opposition interests converge to effect appropriate changes in political funding? And elicit enlightened government action in public interest projects for health, manufacturing and export policies, agriculture, finance, construction, and so on? A tall order. Perhaps the best hope is that reactions to phenomena such as Brexit help create more equitable practices.
1. For connections between diseases and genes, see Alex J. Cornish et al: https://genomemedicine.biomedcentral.com/articles/10.1186/s13073-015-0212-9
2. https://atlas.media.mit.edu/en/ AJG Simoes, CA Hidalgo. The Economic Complexity Observatory 'An Analytical Tool for Understanding the Dynamics of Economic Development.' Workshops at the Twenty-Fifth AAAI Conference on Artificial Intelligence. (2011)
Delayed Cash Flows and NPAs
The article by Shyam Ponappa was published in Business Standard on April 3, 2019 and in Organizing India Blogspot on April 4, 2019.
Many of us in India become inured to a laxity in standards and to the implementation of laws. There may be good reasons for targeting one of these for a start, and that is delayed payments. These are broadly tolerated by citizens, farmers, corporates, small businesses, and government agencies. Perhaps this is because payment delays are merely one among several instances we encounter of mediocre standards, indifferent quality, or shoddy performance. Delayed payments are the inception of process flow problems that lead to non-performing assets (NPAs). Perhaps delays in cash flows are a fundamental flaw in our processes that we need to fix as a root cause that drives much else, to begin to address a gamut of inadequacies.
To see why, consider delays in government payments. Central and state government payments are often delayed, apparently even more than in the private sector. Even government payments related to high priority IT systems, for instance, are notoriously delayed. Major IT companies complain of losing money on large projects for this reason. Nasscom estimated a couple of years ago that government dues to the IT industry could be more than Rs 5,000 crore.
Some factors that render domestic projects attractive to the IT industry are the large domestic IT market, projects of significant size from state and central governments, and slowing exports over the last several years. The disincentives, however, are lower margins, long lead times for government contracts, payment delays, and a history of disputed payments and litigation. Also, IT majors complain that government processes often don’t accommodate changes in the terms of contracts when there are changes in the scope of projects. This is why IT companies are averse to domestic government projects.
Quite apart from these opportunity costs, delayed payments create serious cash flow problems for the economy, with outstandings running typically for many months, and sometimes for years. While the instances above are about the IT industry, there are similar problems in other sectors as well. In the construction industry, for example, estimates of private contractors’ dues held up by delays including disputes range from Rs 1 trillion to Rs 3 trillion.
While some bank NPAs undoubtedly result from fraud and malfeasance (which are outside the scope of this article), disruptions in cash flows in commercially sound projects can result in the creation of NPAs. This aspect has to be addressed as a precursor to stressed assets in resolving NPAs, as is evident in considering the problems of power generating companies.
A Ministry of Power portal (http://www.praapti.in/) shows that overdue payments from electricity distributors to power generating companies at the end of January 2019 amounted to Rs 28,504 crore. Meanwhile, in the Supreme Court, 34 power generating companies with NPAs of Rs 1.4 trillion were battling an RI Circular of February 12, 2018, that consigned their entire investment of double the NPA amount (Rs 3 trillion) to bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC). The reason was that their dues had not been resolved within the RBI-mandated 180 days by August 2018. The RBI insisted on bankruptcy as a time-bound consequence, regardless of the cause of default. By contrast, the Ministry of Power and the supplicants objected to the RBI Circular, attributing loan stress in several cases to factors beyond the borrowers’ control. These factors included reasons such as payment delays by state distributors, problems in the supply of coal, or in some cases, because consortiums of lenders were close to restructuring loans, whereas declaring bankruptcy would not resolve the underlying causes. A number of bankers suggested that the 180-day rule for bankruptcy in the RBI Circular was impractical. Major banks consider restructuring as the appropriate solution when defaults are caused by factors outside the borrowers’ control, such as delayed payments from state electricity boards or by government agencies, state government overdues, or major adverse changes such as the unexpected imposition of duties by supplier countries on coal.
The Supreme Court quashed the RBI Circular of February 2018 on April 2, 2019. This will likely pave the way for more constructive outcomes for many of these projects, provided the RBI and the banks follow through with feasible restructuring. The alternative of selling stalled projects that were unworkable because of reasons such as there being no fuel supply or power purchase agreement, or overdue payments by customers (state or central agencies) were outstanding, if indeed buyers could be found, would hardly solve these problems. The projects would remain stalled or unproductive until the underlying inadequacies were made good, whether by providing fuel, power purchase agreements, collecting overdue payments, or enabling realistic tariffs to yield viable margins. Until these deficiencies are made good, the problems will remain.
Popular opinion, however, seems to favour “selling off bankrupt projects” regardless of extenuating circumstances, even when owners have no control over them, although selling them will not rectify the conditions that created the default. This approach of attempting to sell off projects to get rid of problems without addressing the underlying issues for otherwise sound projects is best abandoned. To be flip, it’s like an “Off with his head!” approach.
What's needed
Standards for on-time payments are the real requirement, with penalties, e.g., double the SBI rate, enforced strictly for non-performance. Central and state governments need to take the lead on this as an essential aspect of governance. These difficult steps will be a real bear, but are necessary if we are to eliminate NPAs. Is this a realistic expectation? As realistic as it is to expect to eliminate the resulting NPAs.
The RBI will need to provide regulatory oversight, instituting real-time monitoring and reporting systems, and taking prompt action as necessary. Properly designed and deployed, such systems would prevent one form of ever-greening of loans at inception. Separate systems for loan renewals could be designed and deployed to prevent other aspects of ever-greening. These coordinated steps could prevent good assets from turning into NPAs.
Recapturing the Commons
The article was published in Business Standard on March 7, 2019 and in Organizing India Blogspot on March 8, 2019.
Growth in the third quarter was disappointing, but there are signs of a cyclical recovery, with a Purchasing Managers Index for manufacturing at a 14-month high. For a significant upward shift of our growth curve, however, apart from lower interest rates, policy-makers have to be constructive. What might we wish for? Here are some suggestions.
Accept the reality that investible funds in India are insufficient for our needs. These include our stock and net inflow of capital, and profits available for investment. We can try to increase our productive capacity or choose business-as-usual, thereby staying below our potential. Why? Because our activities aren’t profitable enough to induce and sustain investment. We need investment —in hard infrastructure, such as transportation and logistics, electricity, water and sewerage, and communications, and in second-order infrastructure, such as security and law and order, health care, education and training, banking, finance and insurance. There’s also the need for reorganisation of markets and practices, e.g., in agriculture, infrastructure, and government procurement.
There’s little doubt that digital connectivity is invaluable for all these. While the imperative is clear, the question is how to orchestrate achieving the desired results.
The telecom operators, alas, have low profitability, inadequate network coverage, and too much debt. Continuing as before means subpar access and productivity for all. We are all hamstrung, and even more so in rural areas. Because of the expanse an7d scattered users there, connectivity entails much higher costs with lower revenue potential.
Self-Organising Infrastructure – A Conceptual Flaw Without Regulatory Support
Meanwhile, there are conceptual flaws in our approach. The National Optical Fibre Network (Bharat Broadband Network Limited or BharatNet) was conceived as a countrywide fibre backbone. The plan was for optical fibre links to 250,000 gram panchayat villages covering India’s approximately 600,000 inhabited villages. A major assumption, however, was that private operators would build access networks to villages and to users. This was unrealistic for a number of reasons. First, there’s the cost of covering sparse users over large expanses with low revenue potential. Second, the supportive regulations for wireless technologies to build the access networks were/are not in place. For example, even for the established 5 GHz WiFi range used globally for WiFi hotspots, restrictive policies meant that 5 GHz equipment could not be used effectively in India in urban or rural installations. This changed with new regulations for 5 GHz, but only four months ago in October 2018 (for details see https://organizing-india.blogspot.com/2018/11/a-great-start-on-wi-fi-reforms.html).
Other wireless technologies for intermediate- and last-mile links are still blocked, and need enabling regulations.
- The 700 MHz band: No operators bid for this given its high price, although it is very useful for covering distances of 5-10 km, and can penetrate walls and foliage. This band together with the 500 and 600 MHz bands could be used to connect gram panchayats to nearby villages. A study of inter-site distances in 14 states shows that most villages would be covered with this range (see Chart below).
Study of Inter Site Distances - Gram Panchayats and Villages
- The 500 and 600 MHz bands are allocated for TV, and therefore are part of the “tragedy of the unused commons”. Only a small fraction is used for broadcasting in India because of limited free-to-air TV and better alternatives. As they are earmarked for broadcasting, they are not used for telephony either.
- The 70-80 GHz band (E-band) is effective for short-range links covering more users at 3-4 km, but not permitted in India, although it is light-licensed in many countries with nominal fees, e.g., the USA, UK, Russia, and Australia. While ideally our regulations should align with global norms, there are exorbitant charges on operators (reportedly 37 per cent, plus corporate taxes), a debt overhang from spectrum auctions, huge investment needs, and relatively low revenue potential. Compelling arguments to let operators use the E-band with unlicensed access, with registry on a geo-location database to manage interference, to be reviewed after some years. The additional traffic will generate revenues from which government collections will increase.
- The 60 GHz (V-band for distances up to 1.6 km): the Cellular Operators Association of India (COAI) opposes making it licence-free as in most countries, and wants it assigned to operators for access and backhaul. For the same reasons as for E-band, operators could be allowed unlicensed access, with a review after some years.
Market Structure and Organisation
A larger problem is that legacy structural and organisational issues need concerted efforts to take requisite policy initiatives. This is perhaps a greater, more urgent need for ubiquitous connectivity.
Successive governments have struggled with revival plans for BSNL and MTNL, somewhat analogous to Air India and Indian Airlines in aviation. Governments have not provided sustained support for ambitious connectivity objectives. There is sometimes inadequate understanding of fast-changing, technically complex enterprises, and episodic attention is given to large enterprises that need timely capital- and skill-intensive decisions (and decision-makers in place), and the upgrading of skills and operating practices. BSNL and MTNL are declining, with bailouts, market disruption through price-cutting, and inability to deliver profits. This is a huge opportunity cost on citizens. However, it is conceivable that with appropriate leadership, and organisational and capital backing, these enterprises could contribute effectively to ubiquitous connectivity, rather than being a drag and/or a disruptive factor. This could happen, for instance, if an alliance were possible with private sector operators providing leadership, organisation and capital, while state ownership concentrates on safeguarding the public interest.
Bharti Enterprises’ Chairman Sunil Mittal has suggested an alliance with Vodafone for an optical fibre network. Bharti and Vodafone already have a joint venture, Indus Towers, providing passive infrastructure services to operators. If regulations enabled active infrastructure from a consortium including BSNL and MTNL, it would leverage the infrastructure while reducing the capital requirements, and increase delivery capability. The entire thrust of regulations could be oriented to facilitating service delivery, leveraging capital, equipment and human resources.
The regulatory approach should aim to facilitate access equitably to public resources that belong to citizens, and not to create obstacles.
A great start on Wi-Fi reforms
The article was published in the Business Standard on November 1, 2018 and mirrored in Organizing India Blogspot on the same day.
This item of detail is almost like magic. The MoC has done something splendid regarding Wi-Fi. Its 5 GHz spectrum regulations have everything we could wish for. But it’s a first step — only the first. Much more is needed to reap the benefits.
To put it in context, we now have a policy that enables effective broadband Wi-Fi hotspots, and profound changes in connectivity are feasible for the last mile in India, as in other countries. A high proportion of smartphone traffic abroad is over Wi-Fi. In the recent past, in the US it was around 70-75 per cent, while Japan was around 83 per cent, and Germany about 87 per cent.[1]
Traffic is offloaded from licensed spectrum, freeing it up for re-use. We have 605 MHz added in the 5 GHz band to the existing 380 MHz for Wi-Fi, and a removal of restrictions on external usage as in the US, so Wi-Fi will have much greater capacity.
The ramifications, however, are ironic. These regulations could lead to a surge in economic activity, and consequent benefits from connectivity. But this will increase imports, which are already overboard on account of oil prices and technology imports, an aspect discussed later in this article.
The increased activities in network installation and ensuing benefits will vary depending on supporting ecosystems of policies and practices. This applies within the communications sector as also at points of interface with other sectors, such as electricity and finance. To illustrate, in communications, consider an unlicensed band in most markets including the US, the UK, and Europe, namely the 60 GHz V-band. Whereas the Federal Communications Commission (FCC) in the US delicensed 14 GHz in this band for “wireless fibre” called WiGig, India hasn’t done so. Instead, another WPC[2] notification in October delicensed only 500 MHz (61-61.5 GHz) at very low power. Devices abroad that use this band for 400-metre and 700-metre connections have channels of 2,000-2,500 MHz acting as wireless fibre links over short distances. These can’t be used here. Short-distance connections to Wi-Fi and wired networks in offices and residential, commercial and industrial complexes will need fibre or cable.
This policy link is missing, perhaps because operators oppose it. The user network traffic bypasses operators to the extent that Wireless Internet Service Providers (ISPs) and other entrepreneurs set them up and collect charges, whereas operators have paid huge premiums for the spectrum required earlier. A solution that enables commercial deployment by licensed operators would solve this problem, although ISPs would have to go through operators as before. Another alternative could be to have unlicensed access to public wireless networks owned and operated by BSNL/BharatNet/CSC, or by operator consortiums, on payment of service charges by operators and users.
Equally essential are aspects of ecosystems that are adjuncts from sectors such as power supplies, finances, and local manufacturing, for substantial and stable growth. So for convergence resulting in significant benefits, these are the kinds of problems that will have to be resolved:
- The power situation, with a conscious shift towards more distributed, renewable (solar and, in some areas, wind) energy, with changes comparable to Wi-Fi/5 GHz in policies and practices.
- The financial system and non-performing assets (NPAs), including the steady revival of infrastructure projects. While dealing resolutely with malfeasance and fraud, nursing and reviving good infrastructure underlying the NPAs is crucial. A sorry plight, but if revivable infrastructure projects are allowed to fail, they end up as unproductive, wasted assets (a repeat of Dabhol), with negative multiplier effects.
- The imperative for the domestic manufacture of equipment to reduce imports. This is going to be an escalating compulsion because of our market size, unless we develop solutions that help balance imports, such as a compelling tourism strategy (but just think of the complexity of the ecosystem elements that need improvement) or communications equipment exports (equally complex).
Meanwhile, we are on a path committed to curbing demand to contain the deficit: Battening the hatches, tightening belts, and waiting for oil prices to fall /exports to rise, keeping a wary eye on the current account deficit (CAD) because of imports, and inflation. This pressure may persist for months, possibly even years, restricting growth. Aren’t there feasible, growth-oriented initiatives, tempered by not exceeding reasonable bounds, including the CAD?
The data on the CAD, capital formation, FPI inflows, and FDI are in the chart below.
CA: https://rbi.org.in/scripts/PublicationsView.aspx?id=18603 GFCF: https://data.gov.in/sites/default/files/datafile/Table3.10.xls
FPI Inflows: https://rbi.org.in/scripts/PublicationsView.aspx?id=13729 https://rbi.org.in/scripts/PublicationsView.aspx?id=18599
FDI Equity Inflows: http://dipp.nic.in/sites/default/files/FDI_FactSheet_29June2018.pdf
A study of data from 2001 to 2016 of how the capital account and its components, the current account, and gross fixed capital formation affect each other concluded that sustained capital formation requires more foreign direct investment (FDI) relative to other flows.[3] FDI was found to have an indirect effect on capital formation, which was found to affect the current account. Debt portfolio flows and nonresident deposits financed the current account, but did not contribute directly to capital formation.
In Indonesia, a study of how the CAD affects exchange rates found that when it exceeds about 2 per cent of the GDP, the exchange rate depreciates over 12 per cent after a four-month lag.[4] Tracking such relationships in India would be useful for policy making.
Meanwhile, India’s large growth sectors are plagued by unsustainable economics. For sustained growth, they have to be organised more rationally, to generate profits for productive enterprises. Promising domestic sectors include electricity, communications, and aviation. Bypass strategies as in software and IT-enabled services won’t work, because these services are for domestic markets. They must generate profits without labour arbitrage, while balancing imports and exports, unless growth continues to attract foreign capital. Genuine reform as for Wi-Fi and 5 GHz spectrum with collaboration involving the private sector and governments modelled on the automotive sector are a possible way forward.
[1]. Claus Hetting, October 2018: https://wifinowevents.com/news-and-blog/japan-83-of-smartphone-traffic-runs-on-wi-fi/; https://wifinowevents.com/news-and-blog/germany-wi-fi-carries-87-of-smartphone-traffic/
[2]. WPC: Wireless Planning and Coordination Wing, Department of Telecommunications
[3]. Ashima Goyal & Vaishnavi Sharma, September 2017: http://www.igidr.ac.in/pdf/publication/WP-2017-016.pdf
[4]. Nugroho et al, January 2014: http://bmeb-bi.org/index.php/BEMP/article/download/445/420/
Policies & the Public Interest
The article was published in Business Standard on October 4, 2018 and in Organizing India Blogspot the same day.
Everyone understands that users need high-speed broadband links for a countrywide transformation, through access to education, healthcare, and much else including opportunity. The lofty aspirations of the New Digital Communications Policy 2018 (NDCP) are 50 Mbps “to every citizen”, 5G, and so on, whereas the reality is a plan for two Wi-Fi hotspots per village. Surely, mere aspirational statements after inordinate delays cannot help attain high-speed “broadband for all”. Nor can a gutted market bereft of policies to induce the required capital for connectivity and network efficiencies.
The NDCP epitomises overstatement juxtaposed with the realities of poor services. Key reforms have been consigned to a future imperfect limbo: reducing additional taxes (from an exorbitant 32 per cent), achieving more efficient spectrum use, and the like. Our needs are staggering, but what we have so far are statements of intent without real policy changes in the public interest. A similar approach has played out in the manufacture of electronics and solar power. India’s mobile revolution depended entirely on imports of network equipment, software, and handsets.1 Likewise for solar power, India has relied on imports. Recent efforts to elicit interest in manufacturing solar equipment locally received lacklustre response, because of perceived inadequacies in policies and incentives. The crux of the matter is how public interest, which many of our politicians, administrators and analysts claim as their motivation, is construed. An additional wrinkle is of being “pro-poor”.
What does the “public interest” mean, and how does “pro-poor” fit in other than by perpetuating poverty? Some proponents regard the “aam aadmi” as being synonymous with the public interest, and others “the masses”, or “the poor”, or farmers. There is also segmentation by exclusion, such as “not those who own vehicles”. Exclusions also apply to manufacturing, such as cars or two-wheelers, because they add to pollution and congestion on roads. So also to air conditioners, refrigerators, and so on, perhaps from the confusion of conflating market principles with socialist ideas of “luxury goods” having a pejorative taint, whereas our need is for engines of growth, except in sin goods and services. In fact, the automotive sector provides a model for coordinated policies (except for fuel pricing).2
Our fuel pricing is puzzling, because while it affects the majority, it is treated as affecting only the affluent (many of whom are also likely to be very productive). Affluent consumers comprised around 27 per cent of India’s population in 2016, and may grow to 40 per cent by 2025.3 Constraining productivity and output is surely not beneficial except in containing imports, especially when productivity is declining (see Chart). Yet, this is the effect of high taxes on inputs. This is why there’s a genuine need for the evaluation of alternatives to demand compression and high taxes.
Labour Productivity in India - January 2010 to November 2017
Source: https://www.ceicdata.com/en/indicator/india/labour-productivity-growth What, indeed, is the definition of public interest? Here is a version: It is the welfare or well-being of the general public, by which the whole society has a stake that warrants recognition, promotion and protection of the government and its agencies. The overall public interest is about society as a whole, unalloyed by divisive or fractious special interests. It is not the welfare of any individual, group or company. In seeking to maximise overall welfare, however, there need to be trade-offs and selective regulations for justifiable subsets, such as the underprivileged, or in spatial planning for town and country, or sectoral regulations for energy, exports, or automotive products.
Yet, while the criterion should be public welfare, the arguments we encounter are mostly for special interest groups. Rarely is there a consideration for the welfare of society as a whole. How might a holistic approach to public interest alter the stance to policy making, administration, analysis and advocacy? Consider this example from Brazil after the global financial crisis of 2008. Brazil suffered decreasing exports, lower investment, and a credit crunch with deleveraging, resulting in lower incomes and tax collections, and higher unemployment. The government’s response in 2008-09 was a selective reduction in taxes, together with increased liquidity, and reduced interest rates to the most affected sectors.4 These policy changes reduced a tax component, initially in the automotive sector for a quarter, later continued for about a year. This was extended to consumer durables/electrical appliances, and to building materials, the latter for about 15 months. For some products such as stoves and small washing machines, this tax was reduced to zero. Meanwhile, taxes on cigarettes were increased. The result was an increase in tax revenues from higher production and consumption, after an initial fall in tax collections. Simulation is a useful way of evaluating alternative scenarios. Converted to cash flows, these inputs can be used to shape policies, because cash flows are an essential measure of reality.
A compelling reason for scenario planning is that coordinated policies could yield higher growth than foreign borrowings without systematic policy support. A policy framework with lower interest rates and good infrastructure (energy, logistics and communications) could accelerate growth, thereby attracting capital despite current account imbalances. Such alternatives deserve to be evaluated against the approach of higher interest rates to attract, then struggle to retain foreign capital (when there is a flight to quality, raising interest rates in emerging markets is usually ineffective), with lower growth. Lower rates would also facilitate redeeming NPAs, as banks could profit from rising bond prices.
It is in the public interest to analyse alternative approaches, including input costs and taxes. Areas such as the allocation and management of coal, automotive fuel pricing and automotive manufacturing, and spectrum allocation and management need such analyses. In finance, the alternatives are of inflation targeting, taxes to reduce the fiscal deficit, high interest rates to attract/retain foreign capital, and managing imports, against scenarios with lower taxes, interest rates, and coordinated policies as in the automotive sector for manufacturing and logistics in sectors such as electronics and solar power equipment.
Shyam Ponappa at gmail dot com
1: Sanjib Purohit, NCAER, March 14, 2018
2: http://www.siamindia.com/uploads/filemanager/47AUTOMOTIVEMISSIONPLAN.pdf
4: [Input-Output Matrix study of tax reductions-Brazil-2014]
The Problems That Should Occupy Our Electioneers
The article was published originally in Business Standard on July 5, 2018 and mirrored in Organizing India Blogspot the following day.
The preoccupation with state and Parliamentary elections that is now manifest may take away attention from the economy. Despite some encouraging developments, major structural problems such as the non-performing assets (NPAs) in banks and stalled projects await resolution. They need urgent attention beyond the din of politics.
First, the good news
- Gross fixed capital formation improved to an all-time high of Rs 111.85 billion in the last quarter of 2017-18 from Rs 102.40 billion in the previous quarter.
- There was some credit growth, with non-food credit increasing 11.1 per cent in May 2018, compared to 4.1 per cent a year ago. Credit to the services sector also increased by 21.9 per cent compared to 4.0 per cent in May 2017, and personal loans grew 18.6 per cent compared to 13.7 per cent in May 2017. However, areas such as infrastructure, basic metals and metal products, construction, gems and jewellery, and vehicles and transport actually declined.
- The Insolvency and Bankruptcy Code (IBC) is apparently being implemented more effectively than it might appear. A Brookings Institution report of a conference of financial experts, including a former Deputy Governor of the Reserve Bank of India, in Mumbai in February states: “50 per cent of all NPAs are currently being resolved through the Code, another 25 per cent will soon be. The judiciary has been following the (very tight) timelines prescribed by the Code.”1
- This week, a public sector bankers’ committee recommended potential solutions for NPAs to the finance ministry. These include an asset management company for stressed assets run by the banks, an asset trading platform for loans, an inter-creditor agreement between banks with the lead bank authorised to implement time-bound resolution, and finally, the IBC and sell off. Sceptics may mistrust these as being too cosy. Realistically, however, we have to accept that functioning together for mutual benefit requires trust, built around good organisation with checks and balances, and validation (observed in the breach in the complicit NPAs). In Ronald Reagan’s phrase (actually a Russian proverb), “Trust, but verify”.
So, is the glass half-full or half-empty? The bad news Here are just two examples of the looming problems.
- Stalled projects: An RBI circular of February 12, 2018, was like a guillotine on a number of private power projects with inadequate cash flows because of circumstances beyond their control. The circular directed banks to begin the resolution (sell off) process for all delayed projects, including those where debt restructuring was under way. There’s a school of thought embodied in this directive that uniform criteria must be applied to all defaulters. Another approach advocated by the power ministry is that there can be problems outside the developers’ control for which they are not responsible, such as a shortage of fuel, denial of access to captive mines, financial weakness of distribution companies, or delays in government or regulatory clearances. Developers cannot control these, and therefore such projects should be excluded from the purview of the RBI Circular. A Parliamentary Committee also recommended this in March.2 The Allahabad High Court, hearing a petition by the Independent Power Producers Association of India against insolvency proceedings, ordered that “no action be taken against the power sector under the revised framework, and directed the finance secretary to hold a meeting with his counterparts in the power and coal ministries, along with representatives of the RBI and the Insolvency and Bankruptcy Board of India in June to discuss ways to address the issues faced by stressed power plants.”3
While the RBI held firm at this meeting on June 21, 2018 (e.g., see: https://www.business-standard.com/article/opinion/why-ibc-must-be-sector-agnostic-118070100732_1.html), the finance secretary reportedly asked for written submissions by the stakeholders. A group of experts will review these to consider next steps. The Allahabad High Court may yet save us from the brink.
- Fettered policies: The Wi-Fi example
We have an odd juxtaposition, with the government eager to auction 5G spectrum for revenues, while making it available to operators. The industry wants the spectrum but is overburdened with debt, which it already has difficulty servicing because of hyper-competitive price cutting. In addition, there’s a vast, underserved rural and semi-urban market, which requires even more capital investment. Finally, there are the stressed banks, which have thus far been the major source of funding. Meanwhile, our fettered approach to 5 GHz for Wi-Fi is an example of policies that need unleashing. India’s National Frequency Allocation Plan (NFAP) has delicensed 380 MHz in the 5 GHz band. This is 200 MHz less than required by the standard, so users have less spectrum. Second, India permits only 50 MHz for outdoor use, and the remaining 330 MHz for indoor use. This severely constrains the use of this band and available devices in India, making it ineffectual for Wi-Fi hotspots in both urban and rural areas. We need an amendment in India's 5G policy to conform to international standards. There need be no indoor/outdoor restrictions and less restrictive power limitations, as in the USA. It could mean adopting policies in sync with global markets. For users, it means that any compatible device from any market can be used without customisation. This allows easier installation and maintenance because no customised set-up is required. For manufacturers, devices they make that conform to global or large-market standards can be used wherever these standards apply, which gives access to more markets. Both attributes facilitate higher volumes, which help result in lower prices, making devices more affordable. All users benefit from the full capacity of the device provided it is in a compatible system. Unfettering changes like this and for 60 GHz, as another example, will unleash Wi-Fi. This is the kind of policy change that is required to unfetter ourselves. What’s needed is an attitude of thinking constructively, instead of meanly or restrictively. Without such constructive changes, the way ahead will be hard regardless of who wins the next elections.
Shyam dot Ponappa at gmail dot com
- https://www.brookings.edu/blog/up-front/2018/03/01/how-to-solve-issue-of-rising-non-performing-assets-in-indian-public-sector-banks/
- 164.100.47.193/lsscommittee/Energy/16_Energy_37.pdf
- https://powerline.net.in/2018/06/30/seeking-a-reprieve/
India's Draft Telecom Policy Needs to Bridge the Gap Between Intent and Execution
The article originally published in the Wire on May 6, 2018 can be read here. Access the Draft National Digital Communications Policy 2018 here.
The three pillars of the draft policy are ‘Connect India’, ‘Propel India’ and ‘Secure India’, which primarily seek to improve broadband connectivity, accelerate development of next-generation technologies and services and institute measures for data sovereignty, security and safety, respectively.
Several strategies have been devised under each pillar – few carry on from previous national telecom policies, and some are new proposals.
The document is high on aspirations, a lot of which it seeks to fulfil by 2022. It also proposes several favourable institutional and regulatory changes and simplifies obtaining of permissions.
However, it remains quite open-ended in terms of how the details could evolve. For example, while it endeavours to develop a fair, flexible, simple and transparent method for spectrum assignments and allocations, by pricing spectrum at an ‘optimal price’ and linking spectrum usage charges (SUC) to reflect costs of regulation and administration of spectrum, it cannot be said if these measures will fully rejuvenate a debt-ridden telecom sector.
Ideally, the policy should have explicitly mentioned that revenue maximisation is not a goal for the government anymore, to reassure the industry that licence fees and SUC will not be astronomically priced – especially as it is in no mood to change the model of spectrum allocation from auction to revenue sharing (circa NTP-99). A clear commitment would have helped inspire more confidence in this strained sector. Regardless, these changes will also need approval from the finance ministry, where stiff resistance is expected.
Expanding both wireless and wired broadband is a clear priority of the government. It sets out four initiatives, encouraging public-private partnerships to serve both rural and urban centres (BharatNet, GramNet, NagarNet, JanWiFi), and several additional measures to accelerate laying of optical fibre, mobile towers and increase sharing of infrastructure.
Although the previous telecom policies (NTP-99, NTP-2012 and recommendations in ‘Fixing Broadband Quickly’ (TRAI, 2015)) determined the similar gaps and objectives, little has translated into concrete results so far. In 2017, ITU and UNESCO reported that India was the largest unconnected market, with 49.5% (approx. 660 million) of our population still unconnected. The report further noted that the penetration of mobile broadband was much higher than fixed-line broadband connections – and urban centres were better served than rural areas. One hopes that the new strategies and objectives will be better realised this time around.
The policy also seeks to boost domestic innovation in the field of standards in communications technologies. This is reflected in its aims to strengthen domestic IP portfolios by providing financial incentives for the development of standard-essential patents (SEPs) and promote them at standard setting organisations. It mandates access to critical, mostly foreign-owned SEPs on a fair, reasonable and non-discriminatory basis (FRAND basis). This is an approach to patent licensing that has been endorsed by courts and the Competition Commission of India in the context of mobile phone technologies, as well as in other jurisdictions.
However, it remains to be seen how this mandate will be implemented in TRAI’s forthcoming recommendations on promoting telecom equipment manufacturing in India. This is a real opportunity for the telecom regulator to help the low-cost smartphone manufacturing industry in India to overcome their disadvantage in terms of having to pay exorbitant royalties to foreign-SEP holders and getting sued for infringement in the process. Another strategy that should have found place was the creation of government-controlled patent pools for SEPs, which could have solved the issue of uncertainty for local manufacturers and ensured payments to SEP holders to a great extent.
Additionally, the policy proposes a few consumer-oriented changes such as establishing a ‘Telecom Ombudsman’ and a centralised web-based complaint redressal system. In the third pillar of ‘Secure India’, although the document does not reveal the DoT’s approach to net-neutrality nor data protection and privacy, it does say that the government will be amenable to changing the terms of license to fulfill their core principles.
Curiously, in order to ‘facilitate security and safety of citizens’ it proposes to set up ‘lawful interception agencies with state of the art lawful intercept and analysis systems for implementation of law and order and national security’. This measure did not exist in TRAI’s version of the draft policy.
On next-generation tech in the field of IoT and cloud, it retained TRAI’s suggestion of setting up ‘light-touch’ licensing frameworks. This may prove to be a barrier to innovation in the field.
While the policy is broad and forward-looking, the true intent and meaning of the listed steps will only be understood when complementary legislative and granular policy actions to support these strategies are crystallised. That will make all the difference.
The Huawei pointer
The article was published in the Business Standard on May 3, 2018 and in Organizing India Blogspot also on May 3, 2018
A Chinese communications company founded in 1987 in Shenzhen by a former army engineer, Ren Zhengfei, Huawei is now a legend. By 2012, it overtook industry leader Ericsson in global revenues. In 2017, its revenues were over $90 billion, two-thirds from outside China. It also has a significant and growing presence in India. How did they do it?
Part of Huawei’s mystique stems from its outstanding founder and its driven work culture. This may be unique and difficult to replicate, but it is a byword for hard-charging Chinese high-tech. A meme that epitomises the culture is “9-9-6” — that is, for 9:00 am to 9:00 pm, 6 days a week. Can factors driving its success to be adopted at the policy level and in enterprises in a democracy?
My previous column addressed the hollowing out of our manufacturing and other abilities. My suggestion is to replace obstructive policies with others that facilitate building infrastructure and local capacity, especially in growth areas. The example of Huawei provides a pointer. Perhaps some of what we learn can be applied at the governmental and the corporate levels.
Reports suggest these key factors in its success:
- Strong leadership with a sense of purpose: A customer-first attitude. There’s an anecdote of the founder being willing to meet any customer, but ignoring a potential investor by delegating to a colleague a meeting with a Morgan Stanley team, led by Chief Economist Stephen Roach.
- Broad employee ownership: In 2014, 84,000 employees out of 150,000 owned stock along with the founder, who owned only 1.4 per cent.2 They share an understanding that while an IPO would enrich some, the majority would lose their motivation. The essential requirements are hard work and dedication.
- Government support: Huawei grew revenues by building market share in China to become a national champion, then got support from the China Development Bank. Initially for $10 billion, it is now $30 billion.3 Building networks in Africa and Latin America, and low prices helped win deals in Europe. Mr Ren himself has said that without policy support, Huawei would not exist.
- Its unique culture and organisation: From inception, the founder was passionate about management, and about adapting methods and organisation. For instance, Huawei devised a top management model of a rotating CEO among three top executives, each of whom leads for six months, modelled on a flight of geese that change their order in arrowhead formation.4 Mr Ren is the mentor and coach. In March 2018 there was a change to a rotating Chairman position.
(The founder’s daughter, Meng Wanzhou (aka Sabrina Meng) is the Chief Financial Officer, and holds one of four vice-chair positions. His son Ren Ping works for a subsidiary providing reservations and trade show support.)
Another instance is Huawei’s Integrated Financial Services transformation program, which Ms Meng led since 2007. It was an eight-year partnership program between Huawei and IBM to develop data systems and resource allocation rules, operations, process optimisation, and internal controls.
- Huawei reportedly invests 10 per cent of annual revenues on Research & Development.
- Huawei also emphasises “the power of thinking”. Executives are urged to read beyond their domains, and books are everywhere.
These factors enable Huawei to solve problems for clients in diverse situations. Examples:
- In its early days, networks were at risk from rats gnawing through circuitry in desert and rural areas in China. Multinational vendors did not consider this their problem and left it to their customers. Huawei, by contrast, treated it as their own problem, and developed sturdier equipment and materials such as chew-proof wires. This experience later helped gain large accounts in the Middle East where customers faced similar problems.
- Other extreme environmental conditions have been addressed, such as base stations installed at high altitudes (at 6,500 metres on Mt Everest), or in the Arctic. These experiences helped a dedicated and committed workforce gain more clients. For instance, when expanding their 3G market in Europe, Huawei found that clients expected “base stations to be more compact, easier to install, greener, and more energy efficient, while offering wider coverage”. To cater to these needs, Huawei developed distributed base stations that could handle both large and small private networks, making them cheaper to deploy, which became popular with European carriers.
- The employee-ownership arrangement and associated dedication enable planning for the long term, as with the Chinese government. Huawei plans for 10 years, whereas competitors have to contend with quarterly financial considerations.
Carriers buying Huawei network equipment get significant discounts in smartphones. Focusing on new technology not controlled by the giants of 3G such as Qualcomm, Ericsson, and Nokia, enabled Huawei to develop 4G, which is much faster and ideally suited for updating-apps, to the point that it competes with Samsung and Apple. Undercutting competitors has enabled it to sell to carriers, and its depth of products and technology has enabled it to meet customer needs, displacing competitors.
Huawei’s R&D Centre in Bangalore established in 1999 is its largest outside China, and it has offshore Global Network Operating Centres in Gurgaon and Bangalore, besides Romania and Nigeria. These GNOCs run networks not only in India but across the globe for a number of operators, offering managed network services integrating a range of equipment at low cost. With its market strength, depth of products, and access to funds, Huawei is likely to control network services in India and much of the world from now on through the 5G evolution cycle.
The only way for competition other than in-house NOCs in India is if the Government of India develops end-to-end supportive policies, transcends election cycles, and sponsors a consortium comprising a major transnational anchor, a system integrator, and local design and production wherever technological opportunities arise.
References
NPAs & Bad Banks
The article was originally published in the Business Standard on February 28, 2018 and re-posted in Organizing India Blogspot on March 1, 2018.
Two features about non-performing assets (NPAs) deserve exploration. First, prevailing impressions about banks and NPAs, such as:
- Large borrowers are primarily responsible for non-performing loans;
- Small borrowers rarely default;
- Privatisation will prevent NPAs and frauds; and
- A bad bank for problem loans will help or it won’t.
Second, solutions for NPAs have been limited to providing some government funding, with hopes of muddling through.First, take the contention that large borrowers account for most bad loans. Of total NPAs of Rs 10,149.16 billion, the published Big 12 comprise 25 per cent (Rs 2,537.29 billion).1 Another 100 wilful defaulters of over Rs 2.5 million against whom suits were filed constitute 7.3 per cent (Rs 740.2 billion).2 While these constitute a third of NPAs, smaller accounts make up the other two-thirds.Among housing loans, NPAs are highest among small loans not exceeding Rs 200,000 (10.4 per cent, or Rs 1,361.26 billion of Rs 13,089 billion), more than double the rate for larger loans over the last five years.3 The lowest NPAs are in the over-Rs 2.5-million category at 0.9 per cent, decreasing with loan size.Housing loans contribute 13.4 per cent to total NPAs, i.e.:
- About half the top 12 defaulters (25 per cent), and
- Double the 100 wilful defaulters (7.3 per cent).
Therefore, the need is for a systemic fix across all levels, not only big defaults.Second, the context for NPAs is the economy. As last year’s Economic Survey (2016-17) pointed out:- A number of NPAs resulted from overleveraging after a high-growth period. Corporates used debt to invest heavily in long-gestation projects in infrastructure, such as power, mines and metals, and spectrum and coal auctions, encouraged by the government. From 2004-05 to 2007-08, the investment-gross domestic product (GDP) ratio rose from 27 per cent to 38 per cent, while bank credit doubled. Then, costs rose along with difficulties in acquiring land and environmental clearances, and oil prices. Import prices rose 2.4 times between 2010 and 2014. The rupee dropped sharply against the dollar, increasing foreign borrowing costs. Domestic borrowing costs also increased with interest rates (Chart 1) as growth fell.
Chart 1: Real Interest Rate: Lending Rate Minus GDP Deflator
https://tradingeconomics.com/india/real-interest-rate-percent-wb-data.html
- By 2013, nearly a third of Indian companies had interest cover less than 1 (EC1), i.e., annual earnings before interest and tax (Ebit) less than interest. By 2015, nearly 40 per cent were at this level. From 2012 through mid-2015, EC1 companies’ earnings were around Rs 250 billion per quarter. By end-2015, earnings had dropped to Rs 20,000 per quarter, and by September 2016, to Rs 15,000 per quarter. Cash flow was insufficient to service debt from 2014. The result was a sharp increase in NPAs (Chart 2), which could increase to 11.1 per cent by September 2018.
Chart 2: NPAs
https://tradingeconomics.com/india/bank-nonperfoming-loans-to-total-gross-loans-percent-wb-data.html
What’s difficult to understand is why and how systemic controls against inappropriate evergreening and fraud, such as integrating SWIFT, or Society for Worldwide Interbank Financial Telecommunication, with in-house systems, and avoiding underreporting of NPAs, have not been enforced until now. Systems have to be properly designed and implemented.However, while we dither over a bank for bad loans, NPAs need resolution. The most salutary model of banking reform, privatisation and recovery is from Sweden.
Sweden’s transformation after its banking crisis of 1991-1992 is remarkable. Their prior experience parallels ours in some ways, although our attributes are very different, i.e., small versus large, advanced/developing, highly skilled small population/underskilled large population, and so on. For years, Sweden was an underperforming economy with low real wage growth, high inflation and public debt. Then a period of rapid growth and credit expansion led to a real estate bubble and collapse, like ours.
Housing prices fell by 25 per cent and commercial real estate by 42 per cent between 1990 and 1995. NPAs went from 5 per cent to nearly 50 per cent among banks (all private), and bankruptcies soared. In this crisis, the entire political leadership decided to unite to resolve their problems. Then, despite fighting behind the scenes, they worked together to take quick action.4 The Swedish centre-right government and the Social Democratic opposition decided on (a) state ownership of troubled banks (b) while guaranteeing all depositors and creditors except bank shareholders.
This united approach restored confidence. A ‘bad bank’ was set up and NPAs evaluated and assigned to ‘good’ or ‘bad’ banks by an independent body disposing of bad assets. Sweden’s banking system recovered to support a sound economy with growth.In our case, undertakings untainted by greed or moral turpitude with cash flow problems deserve efforts at rehabilitation. Examples are where there’s a likelihood of improving cash flows, as in some of the power projects that have run aground for reasons such as lower demand, or exceptional input cost increases. An objective evaluation process by an expert group to triage the NPAs is needed, categorising the untainted and impaired, and where there is scope for revival. Also, rehabilitation measures need to be formulated. The rub is that India is ill-equipped by culture and customary practices to do this. Yet, we would benefit greatly if we could draw on Sweden’s experience in taking corrective action. Private asset reconstruction companies have not been effective. It is unlikely that partial measures will fare better.The primary requirement is political unity across all parties.
Without this, none of the rest can follow. Then, setting up an independent professional entity unencumbered with political considerations to do what is needed. This becomes evident in comparing the US crisis of 2008 (all private banks) with the Swedish experience. After Lehman Brothers collapsed, the Democrats agreed to the Treasury Secretary’s ad hoc $700-billion bailout package, then denounced it just before a vote. The Republicans rejected their own plan, leading to turmoil in the markets. The bill finally passed a week later, and although successful in cleaning impaired assets at a much lower than expected cost, led to a slow recovery and was hugely unpopular. Similarly, the Japanese approach has been slow and not a clear success. Can India’s political parties replicate Sweden’s example? Will they?
Shyam (no space) Ponappa at gmail dot com
1: http://www.business-standard.com/article/finance/steel-firms-dominate-list-of-rbi-s-12-defaulters-117061601393_1.html
2: https://suit.cibil.com/
3:https://rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=17314
4:http://www.slate.com/articles/news_and_politics/the_pivot/2012/10/sweden_when_its_banks_failed_the_scandinavian_country_made_a_miraculous.html
and
https://www.reuters.com/article/us-sweden-banks-analysis/swedish-banks-safe-bet-or-risky-business-idUSKBN1500ZX
Matching Realities and Aspirations
The article was published in the Business Standard on January 31, 2018 and in Organizing India Blogspot on February 1, 2018.
There’s an upbeat sense from the annual Economic Survey, and indicators such as soaring stocks and official statements.Yet, the ground realities don’t match because of gritty facts such as not being able to pay electronic tolls on a national highway near Delhi though the Bharatiya Janata Party (BJP) controls local administration1, Korean steel giant Posco abandoning a huge investment last year after struggling for over a decade, two public sector divestments, Bharat Aluminium Company and Hindustan Zinc, mired in difficulties2, or the hobbling state of services such as electricity and telecommunications despite short-term consumer benefits from lower prices, and so on. Another aspect is that so many college graduates, including engineers, law students and MBAs, compete for low-end government jobs such as peons in state governments. Clearly, something beyond talkfests and episodic discussions is needed. Leaving aside fixing the “mountains” — the land acquisition act, non-performing assets (NPAs), high component taxes — here are some thoughts on systemic focus and action.
Fix infrastructure
With rare exceptions, our governments do not appear to recognise a clear priority to fix infrastructural deficiencies. After national security and maintaining law and order, correcting critical deficiencies of infrastructure in all its forms needs to be an all-out priority. This is a basic requirement for citizens to function effectively and live well. Without infrastructure one cannot function anywhere near full capacity, because of having to spend time, energy and resources dealing with problems of living and hygiene arising from the non-availability of adequate water and sanitation, inefficient travel and logistics for employment, education or health care, communications, dysfunctional equipment because of power shortages, and so on.Instead, some misconceptions in policies and practices appear to be broadly accepted as driving factors not only in the government, but also to some extent in the public perception. One is that all foreign direct investment (FDI) is a panacea for our ills and aspirations. The second is the idea that for services such as water, electricity and communications, the public interest is best served by the lowest consumer prices for those who get such services, regardless of sustainability. Issues such as access to services for half the population living outside urban areas, high and consistent quality, sustainability, and minimising environmental impact appear to be less important criteria.
The Panacea of FDI?
There’s no question about the need for foreign investment, but uncontrolled FDI, particularly at our stage of development, is inadvisable. One wonders where these forms of the erstwhile East India Company and/or winner-take-all might lead. And does it matter, as long as consumers enjoy good living, defined as access to material comforts at low prices? To see why it does matter, consider these parodied scenarios, with apologies to Jonathan Swift’s satirical A Modest Proposal3.
A Modest Proposal for 100% FDI — A Parody
Imagine how well all consumers could do, this time without leaving the other half out, if we invite the likes of (indicative list, in alphabetic order) Amazon, Facebook, Google, and Microsoft (with guarantees of compensation if there are sudden policy reversals, which we are prone to) to use all unsold and unused spectrum to provide connectivity and digital services pronto. They could put in so much investment to get to year five on day one a couple of years or so out, even Reliance Jio might pale.Don’t want Americans? Why not invite the Chinese and Huawei? We might get even better deals in digital services from the world leader in 4G and beyond.Not to mention the attendant benefits from associated companies to keep consumers happy with smartphones, air conditioners, refrigerators, air purifiers, TV sets, cars, two-wheelers, and so on. There will also be power plants, aircraft, and trains, fixing all three sectors with one swipe. Some impediments would have to be removed of course, such as allowing power plants to come up, electricity lines to be laid out, spectrum to be used, land acquired, changes in labour laws, and so on. As for employment, there could be plenty of local assembly, manufacturing and distribution from all of the above, provided we willingly submit to some regimentation in our lives.
Alternative: Fix The Basics & Do It Ourselves
We have to fix the basics to help ourselves and make FDI succeed in our interests. We need priorities in objectives, as everything cannot have the highest priority. Even more difficult is getting experts and practitioners to work out detailed process plans, evaluating alternatives with realistic simulations, and so on. It takes time, energy, understanding and competence, and patience, to get beyond seat-of-pants discussions. Apply all these from a systems perspective, map the distilled ideas to action plans for each set of interrelated processes, and the upshot could be those process plans. We may get end-to-end strategies leading to convergent results to improve our infrastructure, which will enable agricultural and manufacturing production, services, and trade, with resulting jobs, while limiting negative environmental impact.Goals such as increasing jobs and farm income are desirable. To get on a higher long-term growth trajectory beyond a cyclical recovery, in addition to skilling, there need to be initiatives and investments that fit with the circumstances. An excellent example is the Automotive Mission Plan 2006-2016, now in its second 10-year cycle, which resulted in India becoming a preferred automobile assembly location with 32 million jobs in FY16. Similar approaches could be worked out for connectivity, electricity, and the rest, that address the needs/opportunities/markets, the products/services, how delivery will be organised, what the resources are and where they will be sourced from, how they will be organised and when, i.e., the detailed strategy, process plans and flow charts.Also, effective corporate practices such as facilitation for catalysing group decisions could be used if they are not already, to help administrators, experts, and practitioners arrive at sound, practical decisions.4 Another area is simulation and modelling of alternatives and scenarios. A third is overall strategy.
These steps will help improve our ability to achieve our aspirations.
Shyam (no space) Ponappa at gmail dot com1. ‘India’s road to digital highway’, Nivedita Mookerji, Business Standard: http://www.business-standard.com/article/opinion/india-s-road-to-digital-highway-118012401544_1.html
2. ‘India as a ‘business partner’, Kanika Datta, Business Standard: http://www.business-standard.com/article/opinion/india-as-a-business-partner-118012401599_1.html
3. https://en.wikipedia.org/wiki/A_Modest_Proposal;https://andromeda.rutgers.edu/~jlynch/Texts/modest.html4.https://www.centreforfacilitation.co.uk/files/public/What%20is%20process%20facilitation.pdf
Submission to TRAI Consultation on "Inputs for Formulation of National Telecom Policy - 2018"
Preliminary
We welcome the TRAI consultation on the National Telecom Policy 2018.
We believe these should be among the objectives of the next NTP.
- To enable inclusion through the provision of telecommunications infrastructure and services that are accessible to all, especially for the most marginalized.
- To maximize the utility of telecom networks by increasing their capacity and throughput.
- To maximize the socio-economic utility of of spectrum and rationalize the regulatory regime.
- To re-energize the telecom sector, and to bring about a shift to a revenue-sharing model of revenue-generation for the exchequer.
NTP-12 does not include any policy mandate for providing accessibility for person with disabilities. The Policy should mandate implementation of systems that would enable better accessibility for persons with disabilities. This could have included formulation of a Code of good practice for manufactures and service providers, conduct surveys and gather statistics on use of telecommunication services by persons with disabilities, etc.
Resource and infrastructure sharing
Resource- and infrastructure-sharing among telecommunications companies and applications is crucial to ensure both eiciency of usage of a limited resource (whether it is cabling in underground ducts, or spectrum, or telecom towers), as well as to lower telecommunications costs (especially capital expenditure cost) and lowering barriers to entry, reducing environmental costs, and to maximize the beneits for consumers.[1]
Eforts must be taken to enable greater sharing of resources and infrastructure, without there being a negative impact on competition.[2]
As a telecom scholar points out, “[O]perators will sometimes share the cost of digging or deploying passive infrastructure, but will lay their own iber lines, which allows them to engage in full, facility-based competition. In these cases, there is no risk of coordination, as networks based on multiple iber lines ensure that access seekers can obtain full control over them. Under such conditions, co-investment agreements are more likely to lead to timelier and more intense competition on the downstream market.”[3]
For this, the separation between infrastructure and service must be maintained, with focus of competition at the service end with infrastructure being largely common. This is managed differently in different countries.[4]
Keeping all this in mind, we suggest that Strategies E(b) and F(c) be reworded to say, "By promoting both passive and active sharing of telecom infrastructure and resources among telecom service providers, while ensuring that doesn’t lead to a decrease in competition, and where appropriate making certain forms of infrastructure sharing mandatory."
Among the resources that require sharing is spectrum. In 2015, DoT guidelines allowed liberalised spectrum to be shared among operators.
Modernizing spectrum management
We are happy to note that the strategy of “ensuring adequate availability of contiguous, broader and globally harmonised spectrum” is listed under Strategy D(u). There are many opportunities for harmonisation of spectrum usage in India vis-a-vis global usage. For instance, currently in India, only 50 MHz of spectrum has been earmarked for unlicenced use outdoors in the 5 GHz band (5.825 GHz to 5.875 GHz). There is no rationale for this distinction between indoor and outdoor use, and this limits the usage of Wi-Fi outdoors. The US has delicensed 580 MHz in the 5GHz band which allows for the IEEE 802.11ac standard to be used on it, whereas India has only delicensed 300 MHz, whereas 1280 MHz is what is dictated by needs.[5] At a minimum 580 MHz (3x160 MHz) ought to be made available for unlicensed used.
Additionally, delicensing the 60 GHz band would bring us in line with global regimes,[6] where at least 19 countries have delicensed the 60 Ghz band for both access as well as backhaul purposes.[7]
The 60GHz band is ideal for delicensing since it there is virtually no interference since due to oxygen absorption and narrow antenna beam width the transmission distances
are short. We also need to liberalize the 70 and 80 GHz bands to enabling lower cost access for these frequencies to extend ibre connectivity where necessary by using other means, including through aerial systems.
While under Strategy D(v), TRAI proposes the “earmarking [of] unlicensed frequency bands periodically for operation of low power devices for public use”, it should instead be “earmarking unused, underused, and unlicensed frequency bands periodically for public use, with licence-exemption and light-licensing where possible, with safeguards to prevent interference”.
Even bands that have been allocated under the NFAP and licensed may lie unused or underused as well. According to a study by IIT-Hyderabad, unused TV spectrum in India amounts to between 85%-95% of the total TV spectrum. A large swath of 115 MHz — from 470 to 585 MHz — lies unused, and is available for alternative uses. Waiting for an ecosystem to develop around the 470- 698 MHz band,[8] is harming the government’s vision of Digital India and an urgent course correction is needed. As we have argued in the past, “[w]hereas Digital India needs low-cost wireless broadband, especially for long-distance links in rural India, because of the high cost and diiculty of building and maintaining ibre or wired networks in diicult terrain, and/or in sparsely populated areas. Therefore, access to TVWS needs to be bundled with BharatNet, and other shared backbone networks like ERNET.
Policies should permit diferent network design scenarios including transmission power and purpose. Point-to-point links are needed over long distances in place of ibre or microwave, and broad coverage is needed for contiguous areas like industrial developments, campuses, commercial complexes, or rural communities … TVWS does need tight radio ilters (unlike Wi-Fi) to minimise interference, the underlying consideration that drives spectrum management. There's also need for varying power speciications depending on the network design and purpose as described above, and policies for unlicensed sharing using geolocation databases, as deined by the US FCC."[9]
Further, following the lead of the FCC in the USA, and Ofcom in the UK, we in India should exempt low-power usage across all spectrum bands. The approach followed by Ofcom (which allows for powers between -90 dBm/MHz to -41 dBm/MHz (and on a sloping gradient from 10.6 GHz onwards), may be recommended. To reflect this, a strategy statement to “explore greater exemptions from licensing requirements where possible, including for low-power spectrum usage”, would be helpful.
The NTP should also lead the way in encouraging the government and the regulator to look to new ways of managing licence-exempt use of spectrum, as has been done, for example, in the UK.[10]
This allows for a movement away from power-oriented regulations to regulation on the basis of interference. For instance, shared spectrum databases may allow for coordinated usage of higher power but without interference. Further, this allows for bands to be categorized not by usage, but by transmit powers and duty cycles.
Accessibility
One of the lacunae in the NTP-12 is its lack of any policy mandate for providing accessibility for person with disabilities.[11] NTP-18 should not make the same mistake. The NTP should mandate implementation of systems that would enable better accessibility for persons with disabilities. This should include formulation of a code of good practice for manufactures and service providers, conducting surveys and gathering statistics on use of telecommunication services by persons with disabilities, etc.
Revenue maximization
We believe that Strategy D(r) (“reviewing the objectives of spectrum management to maximise socio-economic gains”) should explicitly mention that revenue maximization should not itself be a goal, since that may harm the socio-economic gains to be had from optimal usage of spectrum. We believe that it should be made explict that “ensuring revenue maximization for the exchequer will not be the main aim of spectrum management policy”.
Auctions, which ind mention in TRAI’s recommendations, ne — to favour a model of revenue sharing[12] — and at the least they need to be structured in such a manner as to avoid the “winner’s curse”.[13] Revenue-sharing, which was followed after NTP-99, allows for a more sustainable form of revenue generation for the government, while having transparent allocation systems or auctions designed in a manner not oriented towards maximizing the generation of auction proceeds for the government.[14] Just as increasing the USO fund by itself cannot be a goal — ensuring universal service is the goal — similarly, the generation of tax revenue by itself cannot be a goal.
Patents pools, local manufacturing, and cost of devices
Under “Strategies to become net positive in international trade of telecommunication systems and services”, the consultation paper proposes inancial incentives for development of SEPs, as well as “incentivising local manufacturing of network equipment and devices” as strategies. One concrete strategy to incentivise local manufacturing of telecommunications equipment and devices is to create government-controlled patent pools,[15] which can be used to ensure that patent-holders are paid a royalty on SEPs while also lowering the transaction costs and legal uncertainty for local device manufacturers, and ultimately lowering the price of devices for customers.[16]
Private patent pools do not suiciently take care of the legal risks created to manufacturers. If government intervention is not done, then Indian manufacturers will end up embroiled in legal battles as we have seen with Micromax, and others. CIS has provided a very detailed submission on TRAI’s Consultation Paper on Promoting Local Telecom Equipment Manufacturing.[17]
Internet connection and data centres
While under “Strategies to establish India as a global hub for data communication systems and services”, the problem of Internet interconnection is brought up, but the strategies don’t mention what needs to be done. One of the problems facing India currently is a low level of peering interconnection agreements and a high cost of transit interconnection agreements. This results in a higher cost of Internet for everyone. This needn’t be so. The NTP could establish that there should be no licensing required for running an interconnection point. Currently, there is a lack of clarity on the matter, with contrary suggestions having been provided by Trai in the past. Further, the NTP and that existing interconnection exchanges like NIXI should not discriminate between licensed telecom operators and unlicensed content providers, since it is crucial that the latter also be present at interconnection exchanges, and interconnection exchanges will not lourish unless the hurdles put in place, which favour incumbents, are reduced.
It is worrying that TRAI has suggested establishing a “licensing and regulatory framework for cloud service providers” (Strategy H(a)). While cloud service providers are subject to the regulations provided in the IT Act, and other legislations in India, they currently are not subject to any licensing requirements. No rationale has been provided by TRAI for this suggestion, and it would kill innovation in the sector, and would inhibit the emergence of India as a global hub for data communications systems and services. Similarly, while an overarching data protection and security legislation needs to be in place, the suggestion of a “licensing and regulatory framework for IoT/ M2M service providers” (Strategy G(a)) is worrying, and there is no suitable rationale for having licensing in this space, which will only serve to curb innovation without any corresponding or suitable benefit accruing to the public.
Given that telecommunications isn’t an end in itself, but is a means to an end, one of the missions of the NTP could be:
- To enable inclusion through the provision of telecommunications infrastructure and services that is accessible for all, especially for the most marginalized, including those who are disabled, those who live in remote areas, those who are illiterate, scheduled castes and scheduled tribes, women, and transgender communities.
Once again, we are grateful to TRAI for having provided this opportunity to comment.
[]. GSMA, “Mobile Infrastructure Sharing,” 2008, https://www.gsma.com/publicpolicy/wpcontent/uploads/2012/09/Mobile-Infrastructure-sharing.pdf.
[]. José Carlos Laguna de Paz, “How Cooperation Between Telecom Firms Can Improve Efficiency,” The Regulatory Review, June 25, 2015, https://www.theregreview.org/2015/06/25/laguna-telecoms-cooperation/.
[]. Jan Markendahl, Amirhossein Ghanbari, and Bengt G. Mölleryd, “Network Cooperation between Mobile Operators : Why and How Competitors Cooperate?,” in DIVA, 2013, http://urn.kb.se/resolve? urn=urn:nbn:se:kth:diva-134358.
[]. Parag Kar, “Response to TRAI’s Consultation Paper on Proliferation of Broadband through Public Wi-Fi Networks” (Qualcomm, August 10, 2016), http://www.trai.gov.in/sites/default/files/201609011022542916621Qualcomm_india_pvt_ltd.pdf.
[]. See ITU-R Report “ITU-R M.2227 (11/2011)” and ITU-R Recommendation “ITU-R M.2003-1 (01/2015)” on “Multiple Gigabit Wireless Systems in frequencies around 60 GHz”.
[]. Broadband India Forum, “V Band - 60 GHz: The Key to Affordable Broadband in India” (Broadband India Forum, 2016), http://www.broadbandindiaforum.com/img/White%20Paper%20on%20V-BAND%20Revised%20Final.pdf.
[]. Varun Aggarwal, “DoT Says No to Releasing TV White Space Spectrum, Clarifies It Is for Experiments,” The Hindu Business Line, June 16, 2016, http://www.thehindubusinessline.com/info-tech/dot-says-no-to-releasing-tvwhite-space-spectrum-clarifies-it-is-for-experiments/article8737575.ece
[]. Shyam Ponappa, “The Buzz around TV White Space,” Business Standard, November 4, 2015, http://www.businessstandard.com/article/opinion/shyam-ponappa-the-buzz-around-tv-white-space-115110401618_1.html.
[]. “Better Managing Licence-Exempt Usage,” Ofcom, October 7, 2016, https://www.ofcom.org.uk/research-anddata/technology/radio-spectrum/exempt.
[]. Snehashish Ghosh, “National Telecom Policy 2012 — Issues and Concerns,” The Centre for Internet and Society, June 30, 2012, https://cis-india.org/telecom/national-telecom-policy-2012.
[]. David E. M. Sappington and Dennis L. Weisman, “Revenue Sharing in Incentive Regulation Plans,” Information Economics and Policy 8, no. 3 (September 1, 1996): 229–48, https://doi.org/10.1016/0167-6245(96)00010-8.
[]. Shyam Ponappa, “Richard Thaler’s Views on Auctions,” Business Standard, November 1, 2017, http://www.business-standard.com/article/opinion/richard-thaler-s-views-on-auctions-117110101558_1.html.
[]. Shyam Ponappa, “Breakthroughs Needed for Digital India,” Business Standard, April 6, 2016, http://www.businessstandard.com/article/opinion/shyam-ponappa-breakthroughs-needed-for-digital-india-116040601241_1.html.
[]. Sunil Abraham, “Letter for Establishment of Patent Pool for Low-Cost Access Devices through Compulsory Licenses,” The Centre for Internet and Society, accessed January 19, 2018, https://cis-india.org/a2k/blogs/letter-forestablishment-of-patent-pool-for-low-cost-access-devices
[]. Nehaa Chaudhari, “Pervasive Technologies: Patent Pools,” The Centre for Internet and Society, accessed January 19, 2018, https://cis-india.org/a2k/blogs/patent-pools
[]. Anubha Sinha, “Comments on TRAI’s Consultation Paper on Promoting Local Telecom Equipment Manufacturing” (Centre for Internet and Society, November 13, 2017), http://www.trai.gov.in/sites/default/files/CentreInternetSocietyIndia_CP_PLTEM.pdf.
The 2G Judgment of December 2017: What Was It About?
Originally published in Business Standard on January 3, 2018 and also published in Organizing India Blogspot on January 4, 2018.
The recent 2G judgment raises perplexing questions about the case, with pointers in the judgment to issues of concern that we need to address going forward. This preliminary analysis highlights questions that arise from select issues covered in the judgment of over a thousand pages: Can government policy itself be prosecuted as alleged wrongdoing, as the charge sheet apparently tried to do? The judgment states that the FIR alleged in item 1 that the licence fee in 2008 was Rs 16.58 billion as in 2001, and licences were issued on a first come, first served (FCFS) basis without competitive bidding.1
- These are factual statements in accord with prevailing policies, and licences could be applied for at the fee set in 2001. The charges question the appropriateness of the policies as there was no competitive bidding or auction.2 Arguments for changing the policy to adopt auctions, or to increase fees, appear unconnected with proving wrongdoing.
- Regarding the FCFS policy, the charges are twofold. One is whether or not there was in fact an established FCFS policy. Another is alleged malfeasance in policy implementation.
Was there an FCFS policy?
The judgment finds that the FCFS policy has been misrepresented in the claim that only one application was processed at a time.3 This is analysed and contradicted in detail. The judgment gives several contrary examples provided by the defence, such as later applicants being processed earlier when there was a problem with compliance by the earlier applicant, of successive applicants given letters of intent (LOIs) on the same day, and applicants with LOIs seeking repeated extensions before letting them lapse. The judgment states that no evidence was presented of a systematic FCFS process for the issue of LOIs and spectrum allocation/assignment in the case of 51 prior licences issued. The finding is that because there was a single applicant at a time earlier, a sequential process was followed, but that this was not a conscious policy. Also, that the evidence from the Wireless Planning and Coordination Wing (WPC) is that priority for spectrum allocation was from the date of application for spectrum, and not from the application for the unified access services (UAS) licence (LOI). The judgment concludes that there was no evidence to prove that there was an FCFS policy in the form as alleged in the charge sheet. The sense one has from the instances cited is that there was a loose policy with no standard operating procedure.
Possible malfeasance & evidence
Another allegation in the charge sheet is that the FCFS policy, such as it was, was implemented in a manner that resulted in wrongful gains. From press reports at the time, one expects that this statement of possible malfeasance is the sort for which evidence might be available and presented. So, was such evidence presented?
The FCFS process changed from the date of application for a licence in the order in which it was received to actual compliance with terms of LOI. This meant submitting all requisite information, documentation and clearances together with bank drafts and guarantees. Earlier, the FCFS criterion was the completed application (as in the instance of a later complete application being processed before an earlier incomplete application). The judgment records that consideration of the proposed change to LOI compliance was publicly known well beforehand and was even published in the press.
The counter is that because of a large number of applicants, the criterion was established for serious applicants who complied with the conditions of LOIs, including all clearances and payments. All applicants were apparently well informed of impending developments at the Department of Telecommunications (DoT). The judgment notes: “Everything was leaking in DoT. There was no secrecy or sanctity… In such a situation, no blame can be cast on any of the accused alone.” However, one is left with a sense that this area has not been conclusively explored.
Some questions remain
A broad question: Is there a way to deliver justice while avoiding the infructuous path of dealing with the several hundred thousand pages of documents over seven years and the opportunity cost so far for all involved in just this case? If so, how do we change course going forward? The charges appear to have conflated the questioning of policy with allegations of improper implementation and culpability. Might separating the questioning of policy from establishing wrongful implementation and culpability be more constructive? Could defining narrower culpable allegations, focused on evidentiary material, obtain conclusions beyond reasonable doubt?
- The judgment provides a scathing critique of how no proper evidence was presented on the existence of an FCFS policy. What is the explanation for a weak case by the prosecution?
- The charges sought to prove that there was a conspiracy of all the 17 accused, and that the first indication of it was the letter from the DoT to the solicitor general regarding LOIs for pending applications. Could the charges have targeted other events and activities based on likely availability of evidence, and if so, what might they have found? Examples: Bringing forward the deadline for applications from October 1, 2007 to September 25, 2007, or the lack of orderly standard operating procedures adopted in changing the priority of applicants from the date/time of application to LOI compliance.
- Regarding wrongful gains, there is no indication if forensic methods were used in tracking transactions and if so, what the methods and findings were.
- What explains the rough-and-tumble process that applicants had to go through in complying with LOIs related to the case?
For the New Telecom Policy in 2018, we must hope to learn from and avoid such adverse situations. One way is to facilitate collaborative and transparent implementation.
- Delhi District Court judgment: Cbi vs . (1) A. Raja (A1); on 21 December, 2017.pdf https://indiankanoon.org/doc/17920655/
- The Trai (Telecom Regulatory Authority of India) recommended auctions in August 2007 for all spectrum except “2G bands”, but not for licensing. Acceptance by the DoT would have made this the policy, but this recommendation was not accepted.
- (Ibid) Page 524, Paragraph 753
The tragedy of the unused commons
The article was published by Business Standard on December 6, 2017 and in the Organizing India Blogspot on the same day.
“The tragedy of the commons” as you may recall, refers in economics to the overexploitation of shared resources because of unregulated access. The tragedy results from shared resources being depleted or degraded because users pursue their own interests, contrary to the common good. This leads to unsustainable depletion or degradation. The atmosphere and oceans are examples of such shared resources.
There are also reverse situations, in which resources that are available for the benefit of society are unused, to the detriment of the common good. In such cases, there are opportunity costs from disuse that result in detriments, because the benefits of use are foregone. India’s abundant sunlight is a good example. Given its abundance, a reasonable expectation might be that extensive innovation and market organisation would be focused on harvesting this potential energy. Alas, India is a laggard in innovation relating to solar power.
Another resource that is neither depleted nor degraded by usage but underused is radio frequency spectrum. The opportunity cost for unused spectrum is therefore even greater than for a degradable mineral resource such as coal, resulting in an extreme tragedy of unused commons.
Some Issues Need Resolution
The situation today is that swathes of spectrum are unused because of our inability, perhaps unwillingness, to develop the appropriate regulations and organisation to benefit from them. This is true of all unused and underused radio frequency spectrum, although some of it is the most useful means for broadband connectivity for the majority of our rural and semi-urban population. It would also give more urban users less expensive access. For both sets, judicious use would enhance productivity and improve living conditions.
The entire thrust of the Digital India initiative requires these enabling policies and procedures, that is, the administrative rules and regulations that would enable the use of presently unused and therefore wasted spectrum. There are, of course, many other steps required than merely putting in place the regulations. The market structures and organisation have to be created under government leadership with other stakeholders in industry and civil society that would permit sustainable use of “the commons” — namely, the spectrum, if it were a shared resource instead of being apportioned in silos.
At present, private operators in this sector, except one, have too much debt, very low profitability, and insufficient network coverage. Services can be good in some locations, but countrywide, are spotty and not universally accessible. Yet, operators apparently want auctions, not now but at some time in the future (perhaps next year), for the essential resource that is the prerequisite for building the coverage that they don’t have although sorely needed, as it has been for years. While clearly impractical because of how auctions soak up capital, limiting subsequent investment in networks because of the deprivation of capital, operators reportedly want this in order to reduce competitive threats.
Another baffling aspect of our reality is that the administration and regulator took no effective action to prevent the destruction of existing market structures in the telecom sector when there was a disruptive new entrant. With overwhelming resources from unrelated activities, unsustainable strategies and tactics could be construed as jeopardising India’s current and future productivity. Meanwhile, the administration and the regulator dithered, debating theoretical concepts of what constitutes anticompetitive or predatory activity, and the judiciary remained on the sidelines.
Yet another aspect of puzzling inactivity is that there have been no steps to test certain promising technologies for permitting their use through appropriate policies in India, such as TV White Space or the development of MIMO — Multiple-Input-Multiple-Output — using arrays of antennas, yielding (a) greater throughput (b) over longer distances (c) to more users, thereby improving spectrum capacity for broadband. While initial tests for TV White Space, conducted after a delay of several years, have been promising (disclosure: the author was associated with some), proposals for larger follow-up trials have stalled. Without these, policymakers can’t even consider policies that would enable the development and use of TV White Space devices for extending optical fibre from gram panchayats to hundreds of thousands of village users.
In the press, confusing articles short on facts make policy formulation even more difficult and risky in this already technically and financially complex space. One instance is an article about Maharashtra’s Village Social Transformation initiative avoiding TV White Space because this technology has problems with security clearance, in addition to Foreign Contribution Regulation Act clearance for Microsoft’s sponsorship of the pilot. The fact that the problem in India is in getting permission to use TV White Space for purposes other than for Doordarshan’s broadcasts finds no mention. The security risk in these frequencies is the same as in other frequencies, and transmission in any band can be monitored.
Another article suggests the government is considering allocating a high-speed wireless frequency band of unused spectrum (V band or 60 GHz, which is like short-range wireless optic fibre) on a first come, first served basis “which is a gross violation of the Supreme Court order”. Somewhere down the page is a surmise that since the Broadband India Forum is advocating de-licencing of this band and foreign companies support it, this “means that it should be allocated without auction on first come, first served basis”. The Broadband India Forum in its white paper clearly recommends aligning with an international standard, the Harmonised European Standard.1
According to this, low power equipment within specified emission limits in this band doesn’t need a licence. Wi-Fi is de-licenced spectrum that is open access and not allocated. Other de-licenced spectrum would not need to be allocated either, although in India, bands such as 60 GHz could be restricted to authorised operators.
It needs government intervention to cut the Gordian knot and initiate discussions on pooling spectrum for networks and working out practicable, sustainable options. Here’s hoping good sense and guts will help to make a start.
Shyam (no-space) Ponappa at gmail dot com
1: "V band - 60 GHz: The Key to Affordable Broadband in India"
White Paper by Broadband India Forum, November 9, 2016http://www.broadbandindiaforum.com/img/White%20Paper%20on%20V-BAND%20Revised%20Final.pdf
CIS Comments on TRAI Consultation Paper on Promoting Local Telecom Equipment Manufacturing
Read TRAI's Consultation Paper on Promoting Local Telecom Equipment Manufacturing
Preliminary
- This submission presents comments by the Centre for Internet and Society, India ("CIS") on the Consultation Paper on Promoting Local Telecom Equipment Manufacturing dated 18.09. 2017, released by the Telecom Regulatory Authority of India (TRAI), under Department of Telecom, Ministry of Communications and Information Technologies (“the TRAI Consultation Paper”).
- We commend TRAI for its efforts at seeking inputs from various stakeholders on this important and timely issue and are thankful for the opportunity to put forth our views.
- We have addressed questions 3 and 5 of the TRAI Consultation Paper. Question numbers referred to in our submission correspond to those in the TRAI Consultation Paper.
- Further, the Department of Industrial Planning and Promotion (DIPP) invited comments on SEPs and their availability on FRAND terms on 01. 03. 2016.[1] CIS submitted a detailed response to the consultation, and our present submission will draw significantly from our earlier response[2], as well as new empirical research concluded in the since the time of the consultation.
About CIS
- CIS[3] is a non-profit organisation that undertakes interdisciplinary research on internet and digital technologies from policy and academic perspectives. Our areas of focus include IP rights, openness, internet governance, telecommunication reform, free speech, intermediary liability, digital privacy, cyber-security, and accessibility for persons with diverse abilities.
- We strive to maximise public benefit, useful innovation, vibrant competition and consumer welfare. This submission is consistent with our commitment to the domestic goals (as enumerated in Make in India and Digital India), and the protection of India's national interest at the international level.
Submission on the Issues for Resolution
“Q.3 Are the existing patent laws in India sufficient to address the issues of local manufacturers? If No, then suggest the measures to be adopted and amendments that need to be incorporated for supporting the local telecom manufacturing industry.”
We submit that amendments to the Patents Act, 1970 may not be preferred, presently. It may be noted that there have been no judgments concluded by Indian courts on disputes relating to licensing of SEPs, yet. Justice Bakhru’s landmark order in Telefonaktiebolaget LM Ericsson (Publ) v. Competition Commission of India (2016) provided valuable clarity on the issue of conflict between remedies under Patents Act, 1970 and Competition Act, 1970. As various other matters are yet to be conclusively decided, and given the complex legal questions involved around the interpretation of Patents Act, 1970 and Competition Act, 2002, and constitutional issues around the jurisdiction of regulators and the power of judicial review of the courts, we believe that it would be prudent to examine the ruling of the courts on these issues in some detail, before considering amendments.
However, to support the local telecom manufacturing industry the Government of India may adopt and implement the following measures:
- Develop Model Guidelines to improve the working of Indian Standard Setting Organisations (SSOs): Given the increasing complexity and time-consuming nature of SEP litigation in India, there is a tangible threat of the abuse of the FRAND process, it might be useful for the government to make suggestions on the working of Indian SSOs. The functioning of Indian SSOs has not been satisfactory and it is suggested that the government develop Model Guidelines that may be adopted by Indian SSOs, taking into account India specific requirements. The India specific requirements include a large and exponentially growing mobile device market which has made it possible for manufacturers, patent owners and implementers alike to achieve financial gains even with a low margin. We believe that this measure will also enable the fulfillment of the objectives of the Make in India and Digital India initiatives.
We recommend that various stakeholders, including IP holders, potential licensees and users of IP, civil society organizations, academics, and, government bodies, including the Indian Patent Office, the Department of Telecommunications, the DIPP, TRAI, and, the CCI be consulted in the creation of these Model Guidelines.
In our opinion, the Model Guidelines may cover (a) the composition of the SSO; (b) the process of admitting members; (c) the process of the determination of a standard or technical specification; (d) the process of declassification of a standard or technical specification; (e) the IPR Policy; (f) resolution of disputes; (g) applicable law. - Initiate the formation of a patent pool of critical mobile technologies and cap royalty payments: In light of the observed inadequacies in the IPR policies of various SSOs in India, as well the spate of ongoing patent infringement lawsuits around mobile technologies, we recommend that the government intervene in the setting of royalties and FRAND terms by setting up a patent pool of critical mobile technologies and apply a compulsory license with a five per cent royalty. Further, patent pools should be required to offer FRAND licenses on the same terms to both members and nonmembers of the pool.
Our motivations for this proposal are manifold. In our opinion, it is nearly impossible for potential licensees to avoid inadvertent patent infringement. As a part of our research on technical standards applicable to mobile phones sold in India, we have found nearly 322 standards so far.[4] It is submitted that carrying out patent searches for all the standards would be extremely expensive for potential licensees. Further, even if such searches were to be carried out, different patent owners, SSOs and potential licensees disagree on valuation, essentiality, enforceability, validity, and coverage of patents. In addition, some patent owners are non-practising entities and may not be members of SSOs. The patents held by them are not likely to be disclosed. More importantly, homegrown manufacturers that have no patents to leverage and may be new entrants in the market would be especially disadvantaged by such a scenario. Budget phone manufacturers, standing to incur losses either as a result of heavy licensing fees, or, potential litigation, may close down. Alternatively, they may pass on their losses to consumers, driving the now affordable phones out of their financial reach. With the objectives of Make in India and Digital India in sight, it is essential that Indian consumers continue to have access to devices within their purchasing power.
Further, how did we arrive at a cap of 5 percent? The rationale for this figure is the royalty cap imposed by India in the early 1990s. As part of regulating foreign technology agreements, the (former) Department of Industrial Development (later merged with DIPP) capped royalty rates in the early 1990s. Payment of royalties was capped at either a lump sum payment of $2 million, or, 5 percent on the royalty rates charged for domestic sale, and, 8 percent for export of goods pertaining to “high priority industries”.[5] Royalties higher than 5 percent or 8 percent, as the case may be, required securing approval from the government. While the early 1990s (specifically, 1991) was too early for the mobile device manufacturing industry to be listed among high priority industries, the public announcement by the government covered computer software, consumer electronics, and electrical and electronic appliances for home use. The cap on royalty rates was lifted by the DIPP in 2009.[6] It is submitted in the case of mobile device technology, we are witnessing a situation similar to that of the 1990s. In this sphere, most of the patent holders are multinational corporations which results in large royalty amounts leaving India. At the same time, litigation over patent infringement in India has limited the manufacture and sale of mobile devices of homegrown brands. While SEP litigation in India is indeed comparable to international SEP litigation on broader issues raised, specifically competition law concerns, but differs crucially where the parties are concerned. International SEP litigation is largely between multinational corporations with substantial patent portfolios, capable of engaging in long drawn out litigations, or engaging in other strategies including setting off against each other’s patent portfolios. Dynamics in the Indian market differ – with a larger SEP holder litigating against smaller manufacturers, many of whom are indigenous, homegrown.
In June, 2013, we had recommended to the erstwhile Hon’ble Minister for Human Resource Development[7] that a patent pool of essential technologies be established, with the compulsory licensing mechanism. Subsequently, in February, 2015, we reiterated this request to the Hon’ble Prime Minister.[8] We propose that the Government of India initiate the formation of a patent pool of critical mobile technologies and mandate a five percent compulsory license.[9] As we have stated in our request to the Hon’ble Prime Minister, we believe that such a pool would “possibly avert patent disputes by ensuring that the owners' rights are not infringed on, that budget manufacturers are not put out of business owing to patent feuds, and that consumers continue to get access to inexpensive mobile devices. Several countries including the United States issue compulsory licenses on patents in the pharmaceutical, medical, defence, software, and engineering domains for reasons of public policy, or to thwart or correct anticompetitive practices.”[10] We believe that such a measure will not be in breach of our international obligations under the TRIPS Agreement. - Increase transparency in the patent system by making patentees comply with the law: The Patents Act, 1970 requires patentees and licensees to submit a statement on commercial working of the invention to the Controller every year.[11] Form 27 under section 146(2) of the Act lists the details necessary to be disclosed for compliance of the requirement of “working”. A jurisprudential analysis reveals the rationale and objective behind this mandatory requirement. Undeniably, the scheme of the Indian patent regime makes it amply clear that “working” is a very important requirement, and the public as well as competitors have a right to access this information in a timely manner, without undue hurdles. Indeed, as the decision[12] in Natco Pharma v. Bayer Corporation[13] reveals, the disclosures in Form 27 were crucial to determining the imposition of a compulsory license on the patentee. Thus, broadly, Form 27 disclosures can critically enable willing licensees to access patent “working” information in a timely manner.
However, there has been little compliance of this requirement by the patentees, despite the Indian Patent Office (IPO) reiterating the importance of compliance through the issuance of multiple public notices[14] (suo motu and in response to a public interest litigation filed in 2011[15]), and, reminding the patentees that noncompliance is punishable with a heavy fine.[16] Findings of research submitted by one of the parties[17] in the writ of the 2011 public interest litigation Shamnad Basheer v. Union of India and others[18] reveal as follows. First, a large number of Form 27s are unavailable for download from the website of the IPO. This possibly indicates that the forms have either not been filed by the patentees with the IPO, or have not been uploaded (yet) by the IPO. Second, a large number of filings in the telecom sector remain incomplete.
In 2015, CIS queried the IPO website for Form 27s of mobile device patents to arrive at a similar conclusion. We obtained 4,916 valid Form 27s, corresponding to 3,126 mobile device patents from public online records. These represented only 20.1% of all Forms 27 that should have been filed and corresponded to only 72.5% of all mobile device patents for which Forms 27 should have been filed. Forms 27 were missing for almost all patentees, and even among Forms 27 that were obtained, almost none contained useful information regarding the working of the subject patents or fully complying with the informational requirements of the Indian Patent Rules.[19]
Further, in our study, we observed that patentees adopted drastically different positions regarding the definition of patent working, some arguing that importation of products into India or licensing of Indian suppliers constituted working, while others even went so far as to argue that the granting of a worldwide license to a non-Indian firm constituted working in India. Several significant patentees claimed that they or their patent portfolios were simply too large to enable the provision of information relating to individual patents, and instead provided gross revenue and product sale figures, together with historical anecdotes about their long histories in India.
The Indian government has made little or no effort to monitor or police compliance with Form 27 filings, undoubtedly leading to significant non-compliance. We also propose the alteration of the Form 27 template[20] to include more disclosures.[21] Presently, patentees are required to declare number of licensees and sub-licensees. We specifically propose that the format of Form 27 filings be modified to include patent pool licenses, with an explicit declaration of the names of the licensees and not just the number. - Require royalty rates to be decided on the basis of the Smallest Saleable Patent Practicing Component: Most modern telecommunication and IT devices are complex with numerous technologies working in tandem. Different studies indicate that the number of patents in the US applicable to smartphones is between 200,000 and 250,000.[22] A comprehensive patent landscape of mobile device technologies conducted by CIS reveals that nearly 4,000 patents are applicable to mobile phones sold in India.[23] It is thus extremely difficult to quantify the exact extent of interaction and interdependence between technologies in any device, in such a way that the exact contribution of the patented technology to the entire device can be determined. Thus, we submit that royalty rates for SEPs should be based on the smallest saleable patent practising component, and not on the net price of the downstream product.
The net cost of the device is almost always several times that of the chipset that implements the patented technology. Armstrong et al[24] have found that the cost of a 4G baseband chip costs up to $20 including royalties in a hypothetical $400 phone sold in the US. One of the litigating parties in the ongoing patent infringement lawsuits in India has stated that one of the reasons for preferring to leverage its patents as downstream as possible in the value chain is that it will earn the company more royalties.[25] In instances where patent exhaustion occurs much earlier in the value chain, such as in the case of the company’s cross-licenses with Qualcomm (another company that owns patents to chip technologies), the company does not try to obtain royalties from the selling prices of devices for the cross-licensed technologies. It is submitted that such market practices could be detrimental to the government’s objectives such as providing a mobile handset to every Indian by 2020 as a part of the Digital India programme.[26] It is also worth noting in this context that the mobile device is the first and only medium of access to the Internet and telecom services for a large number of Indians, and, consequently, the only gateway to access to knowledge, information and critical services, including banking.[27]
“Q.5 Please suggest a dispute resolution mechanism for determination of royalty distribution on FRAND (Fair Reasonable and Non Discriminatory) basis.”
The licensing of SEPs on FRAND terms requires the parties to negotiate “reasonable” royalty rates in good faith, and apply the terms uniformly to all willing licensees. It is our submission that if the parties cannot agree to FRAND terms, they may enter into binding arbitration. Further, if all efforts fail, there exist remedies under the Patents Act and the Competition Act, 2002 to address the issues.
Section 115 of the Patents Act empowers the court to appoint an independent scientific adviser “to assist the court or to inquire and report upon any such question of fact or of opinion (not involving a question of interpretation of law) as it may formulate for the purpose.”[28] Such an independent adviser may inform the court on the technical nuances of the matter.
Further, under the Patents Act, pending the decision of infringement proceedings the Court may provide interim relief, if the plaintiff proves first, a prima facie case of infringement; second, that the balance of convenience tilts in plaintiff’s favour; and, third, that if an injunction is not granted the plaintiff shall suffer irreparable damage. However, it is our suggestion that courts adopt a more cautious stance towards granting injunctions in the field of SEP litigation. First, in our opinion, injunctions may prove to be a deterrent to arrive at a FRAND commitment, in particular, egregiously harming the willing licensee. Second, especially in the Indian scenario, where litigating parties operate in vastly different price segments (thereby targeting consumers with different purchasing power), it is difficult to establish that “irreparable damage” has been caused to the patent owner on account of infringement. Third, we note the approach of the European Court of Justice, which prohibited the patent holder from enforcing an injunction provided a willing licensee makes an offer for the price it wishes to pay to use a patent under the condition that it deposited an amount in the bank as a security for the patent holder.[29] Fourth, we also note the approach of the Federal Trade Commission in the USA, which only authorizes patent holders to seek injunctive relief against potential licensees who have either stated that they will not license a patent on any terms, or refuse to enter into a license agreement on terms that have been set in the final ruling of a court or arbitrator.[30] Further, as Contreras (2015)[31] observes, that the precise boundaries of what constitutes as an unwilling licensee remains to be seen. We observe a similar ambiguity in Indian jurisprudence, and accordingly submit that courts should carefully examine the conduct of the licensee to injunct them from the alleged infringement.
Concluding Remarks
We are thankful to TRAI for the opportunity to make these submissions. It would be our pleasure and privilege to discuss these comments with the TRAI; and, supplement these with further submissions if necessary. We also offer our assistance on other matters aimed at developing a suitable policy framework for SEPs and FRAND in India, and, working towards the sustained innovation, manufacture and availability of mobile technologies in India.
[1] Department of Industrial Policy and Promotion Discussion Paper on Standard Essential Patents and their Availability on Frand Terms, available at https://cis-india.org/a2k/blogs/discussion-paper-on-standard-essential-patents-and-their-availability-on-frand-terms (last accessed November 13, 2017)
[2] Anubha Sinha, Nehaa Chaudhari and Rohini Lakshane, “CIS’ Comments on Department of Industrial Policy and Promotion Discussion Paper on Standard Essential Patents and their Availability on Frand Terms” (April 23, 2016); available at https://cis-india.org/a2k/blogs/comments-on-department-of-industrial-policy-and-promotion-discussion-paper-on-standard-essential-patents-and-their-availability-on-frand-terms
[4] Rohini Lakshané, CIS, List of Technical Standards and IP Types (Working document), available at https://drive.google.com/file/d/0B8SgjShAjhbtaml5eW50bS01d2s/view?usp=sharing (last accessed 13 November, 2017).
[5] Kumkum Sen, News on Royalty Payments Brings Cheer in New Year, available at http://www.businessstandard.com/article/economypolicy/newsonroyaltypaymentbringscheerinnewyear11001 0400044_1.html (last accessed 13 November, 2017).
[6] See Sanjana Govil, Putting a Lid on Royalty Outflows How the RBI Can Help Reduce India’s IP Costs , available at http://cisindia.org/a2k/blogs/lidonroyaltyoutflows (last accessed 13 November, 2017) for a discussion on the introduction of royalty caps in the early 1990s, and its success in reducing the flow of money out of India.
[7] Nehaa Chaudhari, Letter for Establishment of Patent Pool for Low cost Access Devices through Compulsory
Licenses, available at http://cisindia.org/a2k/blogs/letterforestablishmentofpatentpoolforlowcostaccessdevices (last accessed 13 November, 2017).
[8] See Rohini Lakshané, Open Letter to PM Modi, available at http://cisindia.org/a2k/blogs/openlettertoprimeministermodi (last accessed 13 November, 2017) for further details of CIS’ proposal.
[9] Rohini Lakshané, FAQ: CIS’ proposal to form a patent pool of critical mobile technology, September 2015, available at http://cisindia.org/a2k/blogs/faqcisproposalforcompulsorylicensingofcriticalmobiletechnologies (last accessed 13 November, 2017).
[10] Id.
[11] Section 146(2) of the Patents Act, 1970.
[12] Sai Vinod, Patent Office Finally Takes Form 27s Seriously, available at http://spicyip.com/2013/02/patentofficefinallytakesform27s.html (last accessed 13 November, 2017).
[13] Order No. 45/2013 (Intellectual Property Appellate Board, Chennai), available at http://www.ipab.tn.nic.in/0452013.htm (last accessed 13 November, 2017).
[14] Intellectual Property India, Public Notice, available at
http://www.ipindia.nic.in/iponew/publicNotice_Form27_12Feb2013.pdf ((last accessed 13 November, 2017) and Intellectual Property India, Public Notice, available at http://ipindia.nic.in/iponew/publicNotice_24December2009.pdf (last accessed 13 November, 2017).
[15] Supra note 11.
[16] Id.
[17] See research findings available at http://spicyip.com/wpcontent/uploads/2015/05/FORM27WP1Rcopy.pdf (last accessed 13 November, 2017).
[18] In the High Court of Delhi, W.P.(C) 5590/2015. This litigation is currently ongoing. See, illustratively, Mathews P. George, Patent Working in India: Delhi HC issues notice in Shamnad Basheer v. Union of India & Ors. – I , available at http://spicyip.com/2015/09/patentworkinginindiadelhihcissuesnoticeinshamnadbasheervunionofindiaorsi.html (last accessed 13 November, 2017).
[19] Contreras, Jorge L. and Lakshané, Rohini and Lewis, Paxton, Patent Working Requirements and Complex Products (October 1, 2017). NYU Journal of Intellectual Property & Entertainment Law, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3004283
[20] Form 27, The Patents Act, available at http://ipindia.nic.in/ipr/patent/manual/HTML%20AND%20PDF/Manual%20of%20Patent%20Office%20Practice%20and%20Procedure%20%20html/Forms/Form27.pdf (last accessed November 13, 10`7).
[21] However, we came across some complaints raised by patentees and industry observers regarding the structure of the Form 27 requirement - namely, patents covering complex, multi-component products that embody dozens of technical standards and thousands of patents are not necessarily amenable to the individual-level data requested by Form 27. See Contreras, Jorge L. and Lakshané, Rohini and Lewis, Paxton, Patent Working Requirements and Complex Products (October 1, 2017). NYU Journal of Intellectual Property & Entertainment Law, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3004283
[22] Mark Lemley and Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev. at 2015 ; See also, for e.g.,
RPX Corporation, Amendment No. 3 to Form Sl,11 Apr. 2011, at 59, available at http://www.sec.gov/Archives/edgar/data/1509432/000119312511101007/ds1a.htm (last accessed 22 April, 2016), quoting “Based on our research, we believe there are more than 250,000 active patents relevant to today’s
smartphones…” .; See further Steve Lohr, Apple Samsung Case Shows Smartphone as Legal Magnet, New York Times, 25 Aug. 2012, available at http://www.nytimes.com/2012/08/26/technology/applesamsungcaseshowssmartphoneaslawsuitmagnet.html (last accessed November13, 2017).
[23] Jorge L. Contreras and Rohini Lakshané, Patents and Mobile Devices in India: An Empirical Survey, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2756486 (last accessed 13 November, 2017).
[24] Ann Armstrong, Joseph J. Mueller and Timothy D. Syrett, The SmartphoneRoyalty Stack:Surveying Royalty Demands for the Components Within Modern Smartphones, available at https://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/TheSmartphoneRoyaltyStackArmstrongMuellerSyrett.pdf (last accessed 13 November, 2017)
[25] Florian Mueller, Ericsson Explained Publicly why it Collects Patent Royalties from Device (Not Chipset) Makers, available at http://www.fosspatents.com/2014/01/ericssonexplainedpubliclywhyits.Html (last accessed 13 November, 2017).
[26] Romit Guha and Anandita Singh Masinkotia, PM Modi’s Digital India Project:Government to Ensure that Every Indian has a Smartphone by 2019, available at http://articles.economictimes.indiatimes.com/20140825/news/53205445_1_digitalindiaindiatodayfinancialservices (last accessed 13 November, 2017).
[27] Nehaa Chaudhari, Standard Essential Patents on Low Cost Mobile Phones in India: A Case to Strengthen Competition Regulation? available at http://www.manupatra.co.in/newsline/articles/Upload/08483340C1B94BA4B6A9D6B6494391B8.pdf (last accessed 13 November, 2017).
[28] Section 115 of the Patents Act, 1970.
[29] Huawei Technologies Co. Ltd v. ZTE Corp. and ZTE Deutschland , Judgment of the Court (Fifth Chamber) of 16 July 2015 in GmbH C170/13.
[30] Third Party United States Fed. Trade Commission’s Statement on the Public Interest, In re Certain Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof, U.S. Int’l Trade Comm’n, Inv. No. 337TA745 (Jun. 6, 2012).
[31] Jorge L. Contreras, A Brief History of FRAND: Analyzing Current Debates in Standard Setting and Antitrust Through a Historical Lens , 80 Antitrust Law Journal 39 (2015), available at h ttp://ssrn.com/abstract=2374983 or http://dx.doi.org/10.2139/ssrn.2374983 (last accessed 13 November, 2017).
Response Submission on TRAI's Consultation Paper on Privacy, Security and Ownership of Data in Telecom Sector
The submission is divided in four parts. The first part introduces the document, the second part gives an overview of CIS and its work, the third part contains general comments on the consultation paper and the fourth part contains specific comments on questions posed in the consultation paper. Click to read the full submission made to the Telecom Regulatory Authority of India on November 6, 2017.
Nobel Laureate Richard Thaler's Views On Auctions
The article by Shyam Ponappa was published in Business Standard on November 1, 2017 and in Organizing India Blogspot on November 2, 2017
You may be surprised to learn that the central government has been applying ideas from this year’s Nobel Prize winner for economics, Richard Thaler, even before the award. According to press reports, a “Nudge” unit was set up last year (2016) by the Niti Aayog in association with the Bill & Melinda Gates Foundation. Its purpose is to apply behavioural insights in policymaking for initiatives such as Swachh Bharat, Jan-Dhan Yojana, and Digital India. There are issues about ethics and motivation in the use of “nudges”, of course, with the best nudges likened to effective GPS devices that make it easier for people to get where they want to go with enabling information, and without covert manipulation.
Recognise, however, that manipulation can cut both ways. It can be beneficial for those being influenced, as when we eat healthier, observe regulations, or manage waste better. It can also be detrimental, as when manipulators entice, persuade, or coerce us to act against our interests, whether it is the private sector, government or vote seekers. Examples are enticements or misleading consumer information, government pressure for compliance without appropriate regulatory bases, or populist measures for votes.
Incidentally, Mr Thaler also advises the $6-billion Undiscovered Managers Behavioral Value Fund, which reportedly does better than 97 per cent of its peers, with average annual returns of 16 percent.
Ironically, one of Mr Thaler’s powerful early insights has been ignored and is awaiting discovery and application especially in India. It is about the “winner’s curse” in auctions, the phenomenon that winners of highly contested auctions tend to overbid. This is because when there is strong contention for a desirable asset, the one who most overvalues the asset tends to bid the highest. Mr Thaler demonstrates that the curse occurs in two ways: Where the winning bid exceeds the value of the winnings, or where the gains are below expectations. Mr Thaler’s 1988 paper demonstrated these effects through examples including oil and gas leases, corporate takeovers, publishing rights for books, and bidding for baseball players.1 This is especially important for India because we need more effective resource management, whether of coal/fuel for power, or of spectrum for communications. We can ill-afford the high opportunity costs of bad policies.
To be fair to policymakers in India, findings by Mr Thaler and others on auctions have been ignored by other governments greedy for immediate revenue. The UK, Europe and the USA went through disastrous 3G auctions that bankrupted their telecommunications industries. The exceptions were the Scandinavian countries and others such as Japan, South Korea, and China, where circumstances were managed so that there were either no auctions, or less contentious auctions. Tomes have been written on the “success” of high bids that resulted in enormous government collections. The consequences for the operating companies, however, were devastating, because of the severe drain on their finances from the heavy up-front investments. This was aggravated by the collapse of the technology bubble in 2000.
All the following auctions had disastrous outcomes for services:2
1994: The first US auction netted huge bids. Soon after, a number of “successful” bidders declared bankruptcy.
In India, the 1994 auction was followed by chaos because of overbidding and default. The sector recovered only after the auction fees were set aside for revenue-sharing in 1999 through the New Telecom Policy (NTP 1999), and lower shares were set in 2003.
1995-1996: US “C”-Block auction — several “successful” bidders declared bankruptcy.
2000 UK and 2001 EU 3G auctions: Netted $35 billion in the UK. In Austria, Germany and Italy, bids netted over $100 billion, 10 times the expectation. Considered a huge success, but winners couldn’t repay their debts, and the markets took a decade to recover.
2010: India’s 3G and broadband wireless auction with over Rs 1 lakh crore bid was considered a great success. Having paid too much for spectrum, operators struggled thereafter and new systems are slow to roll-out.
Meanwhile, auction experts wrote disparagingly of “failures” (low fees) in countries such as the Netherlands, Switzerland, Sweden, and ignored countries such as South Korea, Japan and Finland where there were no auctions (until 2009). However, these “failures” had the best broadband services, according to a 2010 study by the Saïd Business School at Oxford.
After India’s 2015 auction, researchers at ICRIER observed that the anticipated growth dividend from telecom didn’t materialise. Their rhetorical question and answer: “Does this mean the much-needed mobile broadband ecosystem will be further pushed into the future? If so, this would be another case of lost opportunity in telecom.”3 And that’s what it has been so far.
Broadband is an essential aspect of infrastructure. For India to break out of its low-growth trajectory, our policies have to recognise the impediments caused by spectrum fragmentation and high-cost auctions, and create practicable alternatives such as shared networks including spectrum that is paid for only when it is used. Also, more open-access and light-licensed bands in line with global developments will help India reap the benefits of ecosystems of devices as they evolve, e.g., in 60 GHz and TV White Space bands (for which India is ideally positioned). Instead, these technologies are blocked as is the spectrum, which remains unused, creating more barriers for ourselves by having to devise high-cost workarounds. Our ministries – for communications, electronics and information technology, information and broadcasting, defence, and finance – need to address technology applications and policies collectively to induct and align our systems and practices with global developments now and for the future.
Shyam (no space) Ponappa at gmail dot com
1. Richard Thaler, “Anomalies: The Winner’s Curse,” Journal of Economic Perspectives 2, no. 1 (Winter 1988): 191-202
2. There was one successful auction in India in 2001 for a fourth mobile operator in each circle (state), when markets were depressed and competition was subdued. Other auctions in India and abroad hailed as successes because of high-auction bids resulted in constrained networks and services
NPAs & Structural Issues
The article was published in the Business Standard on October 4, 2017 and Organizing India Blogspot on October 5, 2017.
An aspect of financial services often overlooked is that they serve as second-order infrastructure, essential for commerce, industry, and daily living. A disruption in the financial sector slows everything by cutting productivity. Other reasons for decline, such as structural issues in power supply, telecom/broadband, and in farming, are accepted as part of the landscape. That is why devising corrective measures is not so simple. Setting aside political considerations, misattribution does not help in problem-solving. Resolution needs root causes to be identified and addressed.
Consider the example of the guillotine approach to non-performing assets (NPAs). Imagine if an inspection of water and sanitation in your locality were to result in the shutting off of the water supply because conditions are deemed unsanitary. There would be a scramble for sourcing water, while economic activity and productivity would tank. What if it were a metropolis, or the whole country?
This is what happened with the abrupt change in booking NPAs. From around 2.5 per cent between 2006 until 2011, they began to rise in 2012 (see Chart 1).
Public sector banks in particular responded to the government’s accommodative efforts after the 2008 crisis. As growth fell, NPAs rose, especially for long-gestation, regulation-dependent infrastructure loans. In 2015, the Reserve Bank of India (RBI) adopted a hard line as the economy was gaining momentum after slumping in 2014 to 6 per cent. Earlier, the RBI was faulted for allowing the ever-greening of loans. An abrupt change without a gradual coming to terms to manage cash flows resulted in a crisis.
Leaving aside malpractice/fraud, NPAs resulted from factors such as aggressive, unsustainable lending, regulatory delays, the domestic and global slowdown, and commodity price shocks, as when export duties were imposed in Australia and Indonesia on coal. Cash flows drive demand, and a weak economy can make or break a business.
Apart from crippling banking and financial services, the consequences of the NPA shock were enormous, especially for sectors such as iron and steel, construction, power, telecom, transport, and agriculture, with knock-on effects on MSMEs across sectors. Could a phased, more gradual, differentiated approach have yielded better results? Probably, just as when water supply fails, interim arrangements involving pipes, equipment and tankers have to be made to tide over the crisis. For stressed loans, the requirements were for a differentiated approach to the category of wrongdoing, including overreach, and support for stressed sectors undergoing a downturn. The need was and is to prevent disruption in cash flows from a systemic perspective, conserving employment and assets in untainted enterprises with the potential for recovery. This also retains momentum and market sentiment to the extent possible.
Ways Out?
- NPAs in the mid-90s were outrageously high. Yet, what followed especially after 2003 was high growth until the global financial crisis of 2008. The NPAs were reduced and ceased to be a problem (see Chart 1). One explanation is that banks did significant NPA provisioning from profits in bond trading, as interest rates on 10-year government bonds fell 8.1 per cent from 1997 to 2003. A booming economy from 2003 did the rest, although there were no changes in the underlying causes that led to the NPAs. Hence, bond trading could be a way out provided interest rates fall, and so could economic growth.
- Regarding interest rates, the dilemma is of high rates for domestic savings because people save with banks in India, and for foreign investors in bonds, against low rates for consumer demand and for capital investment. Given our acute need for growth and misaligned real interest rates, this needs rectification (see Chart 2).
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There’s a need to insulate banking from political influence, while ensuring rigorous procedures for evaluation and monitoring. Any system can be gamed, however, and to work well, players need competence, integrity, and the freedom to exercise both. Banks are not well suited for funding long-gestation infrastructure because their deposits are more short-term. This is an institutional and market deficiency that needs to be bridged through developing bond markets, and channeling long-duration funding from pensions and insurance.
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There are compounding effects from imposing the Aadhaar/UID without the requisite connectivity, processes and safeguards, likewise the hasty imposition of the goods and service tax (GST). There is little doubt of benefits when properly applied, but that needs time and support for thorough implementation; meanwhile, the immediate need is for relief. Rescue measures are needed to lighten the burden of the GST and its reporting requirements on MSMEs (up to a higher ceiling?) over a long period. Interim solutions could be flat rates for a larger set, augmented by support for implementation.
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Meanwhile, structural issues resulting in NPAs need to be fixed. Three obvious areas:
- Farming, with its large population, small holdings, outmoded practices, low productivity, and the issues around pricing. Pricing is an essential aspect, as are direct benefits, for example, subsidies through cash transfers depending on income. But simply increasing farm prices addresses only one aspect of a multifaceted problem. What’s needed is to change the way production and marketing are organised. Practicable strategies are needed for produce, perhaps like the approach in dairy farming for milk production and marketing. Systems need be designed (worked out) and implemented properly, with design elements to promote and safeguard honest, competent, disciplined behaviour.
- Telecom and broadband services need policies based on a complete change of mindset and market structure, such as shared networks and equipment including spectrum, protection from anti-competitive action, and revenue sharing instead of auctions.
- Electricity supply: Power generation and distribution are both stressed by low economic activity, while many states continue with lax practices of under-recoveries for electioneering.This cannot be resolved as long as profligacy and indiscipline continue.
Revamp Telecom Sector & Revive The Economy
The Op-ed was published in the Business Standard on September 7, 2017 and re-posted in Organizing India Blogspot the following day.
Apart from the present government’s doings or omissions, other legacies have also contributed to this, such as the complacency of previous governments, the scams, the obduracy of the then Opposition, resulting in the attrition of parliamentary processes, and so on. This, followed by the persistently divisive approach of the incumbent government has effectively scuppered any possibility of convergent societal efforts. There’s no point attributing blame for the purposes of redeeming the situation. Instead, we must try to pick up the pieces.
Some things need doing, and urgently, but we (and especially our governments) seem to be avoiding them. Basic infrastructure is our most urgent need, apart from unifying leadership and social institutions. Certain systemic bases simply must be built and made available to organise and channel energies into constructive, productive activities and well-being, although it will be time-consuming and far from easy on our continental scale.
In infrastructure, broadband can yield the quickest and highest rewards (e.g., http://organizing-india.blogspot.in/2010/10/broadband-for-education-training.html) by adopting policies that enable responsible access to existing resources, instead of continuing with self-imposed administrative restrictions. Everything else — energy, water and sewerage, and transportation — is more complex, and needs far more capital investment and organisation. What’s more, with good communications support, other infrastructure becomes easier to build and manage. On the face of it, the government seems to be addressing this. For example, an Inter-Ministerial Group (IMG) was formed three months ago to recommend solutions for the debt-laden telecom sector. Interim reports did not augur well, though, suggesting there was no need for major policy changes because of signs of recovery. Unfortunately, the IMG’s final recommendations are on the same lines: Deferring spectrum and licence fee payments from 10 years to 16 years, and reducing interest charges by about 2 per cent. However, there is no reduction in licence fees or spectrum charges nor easing of spectrum limits on consolidation; interconnection charges will be decided by the Telecom Regulatory Authority of India, and spectrum auctions will be after April 2018. But for an overleveraged, hypercompetitive sector, deferring the massive capital requirements for auctions by some months and other proposed measures doesn’t really change the game.
Will this enable the telecom sector to recover? Many operators and observers think not, including yours truly. The reasons below leave one wondering whether the IMG made their recommendations with full knowledge, or were not fully cognizant of the realities.
Why major changes are necessary
There are compelling reasons for radical policy interventions. A report by Strategy& (formerly Booz and Company, now part of PwC) suggests that telecom operators in developing countries have negative margins on data services (see chart).
Source: https://www.strategyand.pwc.com/reports/connecting-the-world-media-report
This is significant for India (a) because we need considerable growth in networks and delivery, (b) that is affordable, (c) yet sustainable, i.e., generates positive cash flows.
The reality is that the already troubled sector’s revenues fell steeply after Reliance Jio’s entry in 2016, and so did government revenues from licence and spectrum charges. Yet, having upended the sector’s finances, Jio paid only Rs 47.81 crore as licence fees and spectrum charges for the six months ending June 2017, or less than 1 per cent of total operator payments, since it had minimal revenues. By contrast, Bharti Airtel paid Rs 2,902.75 crore, Vodafone Rs 2,005.25 crore, and Idea Cellular Rs 1,677.67 crore. The sector is being severely weakened by this strategy as revenues and government collections collapse, resulting in deficient infrastructure.
While high government revenues alone are the wrong criterion for telecom policies, this shows how the sector’s finances were gutted, and the likely reality going forward. A recent report by Standard & Poor’s (S&P) expects revenues to fall up to 10 per cent for the year, with the sector settling down over 12-24 months. But that is merely one surmise; the certainty is of continuing damage to the market’s ability to sustain itself, as well as the reality of reduced operating revenues and government collections.
These disruptive practices are hollowing out industry capacity, whereas the country’s need is for more capacity to be built for broader and better access, given under 300 million data subscribers. Adequate network access needs to be built up in underserved areas, and appropriate content and linkages have to be built for the full range of user needs covering education, health, and entertainment through government and commercial services.
Only the government can develop appropriate policies and regulations, including levying no more than reasonable charges (high government charges have constrained India’s communications development). After the sector stalled in 1997-98, there was a partial remedy by the National Democratic Alliance through NTP-99, substituting a revenue-sharing arrangement for fees owed through auctions. The government’s share was initially too high, but as it was gradually reduced and as competition increased, mobile telephony grew explosively, as did government revenues (see: http://organizing-india.blogspot.in/2017/04/facts-not-beliefs-should-drive-policies.html).
For a similar explosive surge in broadband economic revival, we need policy decisions urgently that:
a) Adopt infrastructure sharing fully to reduce costs. Do this through two or three consortiums to have competition, with government entities anchoring each. For instance, 70 per cent of Sweden is covered by a shared network between Telenor and Hi3G, which is shared outside the major cities. For shared networks, equipment is readily available to support multiple operators; we need the enabling policies.
b) Approach spectrum as a shared public resource. For assigned spectrum, allow licensed operators and manufacturers/developers secondary access (primary holder retains priority), at reasonable revenue-sharing charges, without up-front fees. Start with unused or under-used frequencies such as TV White Space.
c) Allocate spectrum for Wi-Fi conforming to global standards to benefit from ecosystems, e.g., 5 GHz and 60 GHz.
This will enable maximum utilisation of spectrum and networks for the common good, instead of artificially restricting access as is the practice today. We will all benefit greatly from better networks and services, and government revenues will exceed any conceivable auction fees.
Shyam (no-space) Ponappa at gmail dot com
A New Telecom Policy That Works
First published in the Business Standard on August 2 and mirrored on Organizing India Blogspot on August 3, 2017.
The government finally announced in July that a new telecom policy (NTP-2018) in consultation with stakeholders would be in place by March 2018. There’s been some jockeying for one-up statements thereafter, suggesting the risk of being sidetracked. The need for competent, supportive policies in the public interest must be focussed and driven, and not be allowed to fall prey to being hijacked by bluster, nor be diverted towards maximising government revenues, crony interests, or electioneering tub-thumping.
A quick review of the sector and potential demand indicates what’s needed to fulfil our requirements. Telecom operators are saddled with Rs 4.6 lakh crore of high-interest debt. This has resulted from aggressive bids spurred on by spectrum auctions, aggravated by shrinking revenues and price wars. Meanwhile, urgent concurrent needs for network investment for greater reach and delivery, and for realising more of the potential for extensive and intensive usage, languish — for want of capital, enabling policies, and orderly markets. This has resulted in a crisis in what could have become the most successful communications market in the world. Instead, India’s communications sector is partly on the brink of collapse because of retrogressive policies and practices, unsustainable financial models, the fallout of scandal, and disruptive competition.
The best way forward is for all government agencies, not just the Department of Telecommunications, to define objectives jointly, and devise policies through consultations to enable an effective and robust sector. Here are suggestions for what to aim for and what to avoid in developing NTP-2018.
Objectives for NTP-2018
1. Networks: maximise capacity utilisation/throughput
Maximise the utilisation of networks by increasing throughput. This requires exploring alternative forms of organisation and management to exploit invested capital for public interest objectives, e.g., through consortiums, perhaps with government participation to ensure national security and the common good. Orderly markets are essential in communications (as in all infrastructure), and competition, while essential, is not constructive beyond a point, unlike in fast-moving consumer goods or non-capital intensive sectors.
2. Spectrum allocation and management: Maximise throughput
Maximise wireless throughput to facilitate connectivity, by: a) Making more spectrum available, (b) In large, contiguous bands, (c) At less cost. Explore pooled usage and secondary sharing of spectrum by operators/consortiums as appropriate (consult with operators and experts).
3. Financial approach: Use revenue sharing
Use revenue sharing to compensate for spectrum and network rights, usage, and all government charges, as was done with licence fees in NTP-99.
Pitfalls to avoid
1. Palliative “default solutions”
It is easier to tinker with policies as they are than to undertake major systemic change. An easy way out would be to fall back on the received wisdom of competition and free markets, hoping to muddle through. For instance, the government set up an inter-ministerial group (IMG) to reduce financial stress in telecom. This group has apparently recommended extending payment schedules from 10 to 16 years, and cutting interest rates from 12 to 8 per cent.1 These sops could become the basis of NTP-2018, leaving the market to shake out, hoping consolidation will remedy inadequate coverage and delivery.2 This will merely reschedule operators’ payments over a longer period. The structural problems will remain, with insufficient network coverage, barriers to technology, less likely benefits from innovation such as “wireless fibre” and small cells with lower radiation, with hyper-competitiveness still a drag.
2. Rely on consultations and avoid preconceived ideas
Statements such as that NTP-2018 will be app-directed and not connectivity-directed appear inappropriate or misinformed. This is because connectivity remains our most critical need for more effective delivery of services. Connectivity is deficient not only in rural and semi-urban areas, but even in dense urban areas. In fact, ignoring connectivity is typical of India’s approach to and failure in building networks and infrastructure (incomplete systems because of gaps, or with stranded assets, or that fail in end-to-end delivery). Simply put, our requirement is for more user-access and backhaul/networks to enable higher, more widely available access and throughput. This is India’s communications infrastructure need, whether it is broadband or Narrow Band Internet of Things (NB-IoT). Everything else follows. Otherwise, it’s like trying to deliver more water without a network of pipelines, or more electricity without adequate distribution networks.
3. Anti-competitive disruption
While disruption is a reality in our communications sector, its jurisdiction has become contentious between the Competition Commission of India (CCI) and the Telecom Regulatory Authority of India (TRAI). The CCI reportedly asserted that the Competition Act of 2002 defines “predatory price”, “dominant position”, and “relevant markets”, which fall in its domain, and that it has applied this framework over the last eight years across sectors including telecom.3
Turf issues are not unique to India, and have been resolved in many countries. Secretary General Pradeep Mehta of Consumer Unity & Trust Society (CUTS) points out that in 2011, a committee recommended amending the Competition Act to include mandatory consultation between the CCI and sector regulators where necessary.
A puzzling question if the telecom sector was in fact being monitored: Why was such disruption permitted? From press reports, it’s unclear whether there are no appropriate regulations, or whether the CCI’s and/or TRAI’s assessments of dominance and predatory pricing rely on precedents from developed economies without appropriate changes for our circumstances. To illustrate, consider the notion that market share is a key criterion for dominance, or Significant Market Power (European Commission). However, in a developing economy, a large conglomerate investing in a new sector could have SMP even with zero market share, simply because of its size and resources, and economic power (attributes in Section 19(4) of The Competition Act). The European Commission also mentions privileged access to financial resources, economies of scale and scope, and barriers to entry.
A sound NTP-2018 requires sustainable and integrated end-to-end policies for our realities, not academic or silo-based orthodoxies.
Shyam (no space) Ponappa at gmail dot com
1: “Govt panel for sops to ease financial stress in telecom sector”, BS, July 25, 2017: http://www.business-standard.com/article/economy-policy/img-readies-sops-to-ease-telecom-stress-117072401632_1.html
2: “Short-term turbulence”, BS, July 29, 2017: http://www.business-standard.com/article/economy-policy/short-term-turbulence-in-telecom-sector-117072900022_1.html
3. "CCI tells Trai to consult it on predatory pricing, market dominance issues", BS, July 28, 2017: http://www.business-standard.com/article/companies/pricing-market-dominance-its-remit-cci-tells-trai-117072800069_1.html
Broadband Reforms for Local Manufacturing
The article was published in the Business Standard on May 31, 2017 and in Organizing India Blogspot on June 5, 2017.
India’s markets are at the heart of what attracts investment and economic activity, with mobile phones and broadband services comprising a significant share. In exploring their magnitude and supply chains, an obvious need emerges for policies and incentives for local manufacturing of components and handsets to boost domestic supply and create employment. Another avenue for deriving local benefits is extending the coverage of digital platforms, expanding the market through policies and incentives facilitating broadband infrastructure. Policy support can help both to extend networks using fixed and wireless technologies, as well as to increase capacity utilisation.
Reforms affecting both supply and demand are needed to fully and equitably provide ubiquitous coverage and exploit digital platforms for public welfare. Such reforms would mitigate the lower revenue potential of rural populations. Enabling steps could include allowing active sharing of spectrum and networks, providing more unlicensed spectrum, financial incentives such as tax credits and spectrum charge rebates for rural infrastructure, and standardised right-of-way charges.
India’s Mobile Handset Market
"A billion smartphones will be sold in India in [the] next five years."
This estimate is from a report by IIM-Bangalore and CounterPoint Researchers.[1] The report notes that India became the second-largest global smartphone market in terms of number of users in early 2016, and still has enormous growth potential even as demand for smartphones elsewhere is waning. In the next five years, almost a billion smartphones and half a billion feature phones will require components worth $80 billion (Rs 5.2 lakh crore). These will have to be imported if they are not produced locally. The report estimates that in 2016, about 50 local units assembled over 180 million mobile phones valued at $9 billion (about Rs 59,000 crore), about 70 per cent of the $13 billion sold. However, the local value addition was only $650 million (Rs 4,225 crore, or 7.2 per cent). This underscores an urgent need for policy changes, considering that emerging manufacturers in these sectors such as Brazil and Vietnam have value added of nearly 20 per cent and over 30 per cent, respectively, while champions such as South Korea and Taiwan add above 50 per cent, and China has 70 per cent local value added.
In early 2016, India’s domestic smartphones had a 40 per cent market share, but by the quarter ending March 2017, Chinese brands dominated, with a share of over 51 per cent, while local brands dropped to under 14 per cent.[2]
According to the IIM-B/CounterPoint Researchers report, Indian manufacturers import most of their components, and there are few incentives for R&D or to attract component suppliers to form local ecosystems. Further, the existing incentives will become ineffective once the goods and services tax (GST) is introduced, because they will all be subsumed under GST. Accordingly, the Broadband India Forum in association with EY have suggested (a) refunding the GST to manufacturers for handsets and (b) extending this policy to components could provide an appropriate manufacturing incentive.[3] This needs to be done without delay.[4]
The report also proposes a phased approach to maximise local value added, aiming for 30 per cent by 2020, and more thereafter. Early phases suggested are moving from assembling chargers and other such accessories to high-value components such as printed circuit boards, cameras and display units. The researchers suggest that chargers, batteries and cameras can in fact be manufactured locally, contributing to components valued at an estimated $15 billion by 2020. If these proposals are adopted and executed, it will reduce imports and create jobs, deriving local benefits from India’s market opportunities. Moreover, it will help create an R&D capability in India for this sector, which can over time become a supplier to global markets.
The prerequisite for these improvements is policy reforms on matters such as duties on components (including the refund of GST) and incentives for suppliers to set up in India. The report also suggests that policies need to be framed for effectively funding institutions and corporations for research to build intellectual property and skilled professionals.
Extending Digital Infrastructure & Utilisation
There is a parallel need for policies supporting the extension and coverage of digital platforms, of the sort achieved in migrating from up-front auction fees to revenue sharing with the New Telecom Policy in 1999 (NTP-99). These require convergent action within the government and its multifarious departments and agencies, or in some cases by coordination and resolution among stakeholders, i.e., in addition to the agencies of government, the judiciary, the operators and vendors of equipment, the press and media, and the public.
There are some issues that relate to the Telecom Regulatory Authority of India’s (Trai) recommendations over the years that need decisions on implementation. An example is access to broadband services through cable networks. The government’s position on additional charges as a share of revenues conflicts with cable operators’ unwillingness to pay additional charges, and perhaps the cost of the devices for conversion. The effect of this deadlock is that the entire set of cable network users have to use another means for broadband connectivity. As this policy change will affect the competitive dynamics of wireless service providers, it is a candidate for coordinated, participative resolution. Some Trai recommendations may benefit from review, such as open access (like Wi-Fi) on 60 GHz.
Other examples are:
- Enabling additional bands of unused spectrum such as 60 GHz and 70/80 GHz for wireless gigabit links, and
- Enabling the sharing of entire networks, including the radio access network (and therefore spectrum) among operators.
The promise of digital platforms is immense, and both these streams of reforms need to be taken up and completed for India’s digital platforms and markets to deliver on their considerable potential.
[1]. “Mobile Phone Manufacturing: A Practical Phased Approach,” by Pathak, Chatterjee and Shah: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2874689
[2]. http://www.idc.com/getdoc.jsp?containerId=prAP42557317
[3]. http://www.communicationstoday.co.in/index.php/daily-news/6710-broadband-india-forum-with-ey-releases-the-research-paper-on-incentivizing-domestic-handset-manfacturing-under-gst Added after publication - June 6, 2017
[4]. For a detailed exposition of the GST question and why raising customs duties on imported equipment/components is not feasible because of the terms of the Information Technology Agreement 1997 under the WTO, see: https://www.linkedin.com/pulse/incentivising-manufacturing-mobile-phones-india-parag-kar
Policies to Sustain India's Market
The article published in the Business Standard on May 3, 2017 was also mirrored on Organizing India Blogspot on May 4, 2017.
Probably because of (a) India’s market size and (b) growth, despite all its inconsistencies and difficulties. Are higher price-earnings multiples desirable? Yes if they are sustained, because more capital is available for equivalent productivity; otherwise, no. The question is whether policies can be better framed to harness the market potential.
India’s large market with its headroom for prosperity seems propelled partly by its own momentum, and its stocks partly by liquidity. The net investment in mutual funds in 2016-17 of Rs 3.43 lakh crore was reportedly double the previous year, the highest in the last decade. Domestic investment in pure equity funds in the last two years exceeded foreign portfolio investment (FPI), because of lower FPI and higher domestic investment. Retail investors grew in the last three years from 28.6 million to 39.3 million. Other positive factors were a government with a strong mandate and falling oil prices.
Now, reasonable earnings from some large companies and rising global markets augur well, although earnings must improve broadly and a number of caveats remain. These relate to non-performing assets/loans (NPAs/NPLs), structural problems in sectors such as iron and steel, construction, power, telecom, transport, agriculture, continuing deficiencies in infrastructure and institutions, and in productivity. There are social pressures from divisive electioneering, a disturbing rise of exclusionary tendencies echoed globally, and government overreach. There are also self-induced crises because of inappropriate policies, as in telecom, unviable situations created by populism, or by judicial orders, as seen in telecom, coal and power. There could also be failure to improve productivity (by a third to 9 per cent, as during the growth years), or adverse external developments.
The room for improvement is epitomised by low per capita productivity. According to Bloomberg, the International Labour Organization’s output per worker for India in 2017 is 20 times lower than for Germany. Yet, expectations run high for India in reports from sources such as Euromonitor, the International Monetary Fund, London’s Centre for Economic and Business Research (CEBR), and PricewaterhouseCoopers (PwC). Euromonitor predicts India’s consumer market will be the third largest by 2030, ahead of Japan and Germany. Growth will be for products such as smartphones, automobiles, and durables such as TV sets, refrigerators and air conditioners. For instance, India is the third largest market for smartphones after China and the US. In automobiles, India is the fifth largest market with over 3.3 million cars sold in 2016 and continues to attract global manufacturers.
However, Euromonitor cautions against rising inequality with the Gini index rising from 39.9 per cent in 2011 to 41.6 per cent in 2016 and estimated at 43.4 per cent by 2030. The CEBR estimates that by 2028, India’s gross domestic product will be the third largest after China and the US. PwC forecasts that in 2050, India will be the second largest economy (in purchasing power parity) after China, the US being third and Indonesia fourth, with a caveat: “Emerging economies need to enhance their institutions and their infrastructure significantly if they are to realise their long-term growth potential.”
Can our policies better contribute to realising this market potential? Consider the options. One approach is open exploitation, unmindful of whether the ownership and distribution of profits is domestic or foreign. Prices are determined solely by supply and demand, without government regulation or any other authority. Another extreme is that the government decides everything, which has been seen to fail. A third option is a mix, with open-market principles in areas that can sustain them, such as in consumer goods, tempered with appropriate regulation, e.g., against harmful substances. Ideally, policies should be for the long-term common good with sustainable levels of equitable access. Regulation is essential where network economics apply with few players, as in electricity and communications. Our mix is not ideal because realpolitik and populism overwhelm the need for deep understanding followed by the objective and convergent deliberation needed to frame beneficial policies (through sound institutions, also lacking).
Our policies are often indifferent to where ownership lies, and sometimes, this is a problem. For example, heavy industries or electronics majors abroad often have government backing. Indian enterprises start with a disadvantage, because of restricted access to capital, and at higher cost. Another aspect is when the ownership of major local corporates with privileged access to markets changes to being majority foreign-owned, because the profits are sent abroad. Yet another is that we do not have ecosystems for manufacturing start-ups through commercialisation and scaling up, in terms of financing, production and procurement. Attention seems confined to early-stage start-ups or to small-and-medium enterprises, with no ecosystem to see them through to establishing scale, comparable, for instance, to the building up of Huawei through consistent procurement.
Our greatest deficiency, however, remains lack of good infrastructure. Correcting this requires a long view, capital, slow payback and long lead times for results, usually beyond election cycles. Easily sidelined for populist measures for immediate gains, this area needs concerted, bipartisan, societal convergence. A case in point is telecom and broadband, where spectrum auctions loom again, even as operators struggle with low revenues and high debt from previous auctions. Another is the recent Supreme Court ruling against compensatory tariffs for two ultra-mega power projects at Mundra, of 4,000 Megawatt (Mw) (Tata) and 4,620 Mw (Adani), based on whether a “change in law” applies only to Indian laws. If the tariffs were upheld, five buyer states would get a lower than average price paid, substantially below the current market price. If these projects become unviable, they will add to the deadweight of NPAs. The banks they owe will also suffer, and there will be the opportunity cost of benefits foregone from the lower-priced electricity.
There may be a case for prioritising infrastructure, beginning with defining our objectives and then framing policies to achieve them. For power projects, it’s reasonably priced electricity; for telecom, it’s reasonably priced services. Until these are made possible through appropriate policies, there’s little likelihood of realising our full potential.
Organisational Hurdles in Telecom
The article published in the Business Standard on March 1, 2017 was mirrored on Organizing India Blogspot on March 2, 2017.
The irony is that this inflection point comes when there’s been much ballyhooing about a vigorous push for Digital India, whereas the reality in telecommunications is that conditions are more difficult, with easy markets saturated and average revenues per user dropping, while the need for capital expenditure is higher.
The organisational issues are of a broad social and political nature: (a) An uncoordinated, disunited way of functioning, including our approach to infrastructure in general, and broadband and communications in particular, (b) a divisive political process that rewards opportunistic disunity while discouraging unity, (c) a demoralised and disgruntled administration and technocracy, resulting in an erosion in the standing of civil servants, technocrats and other professionals, made worse by attempts to manage by coercion. It is best to acknowledge and accept these as problems to be overcome, instead of being in denial. Consider these in more detail to appreciate the nature of what we’re up against.
Government departments in India have functioned in silos barring rare exceptions, without an active work culture and processes for coordination and convergence. While central and state government procedures enable the Cabinet secretary and chief secretaries of states as heads of administration to exercise interdepartmental coordination, ministries and departments have tended to be turf-conscious and maintain an inward focus, either consciously or by default. Episodic instances at coordination have been the exception. Yet, what is often essential for practical solutions to complex interdepartmental issues is a collaborative approach.
Consider the example of spectrum, of which every country has the same amount: The relative shortage for commercial use in India as shown in the table below, and the multiple agencies that need to coordinate and converge on spectrum policies.
https://www.brookings.edu/wp-content/uploads/2016/06/Spectrum-Policy-in-India8515.pdf
The Telecom Regulatory Authority of India is responsible for recommending spectrum use; the Wireless Planning and Coordination Wing in the Department of Telecommunications, the Ministry of Communications, is responsible for spectrum allocation and licensing; and agencies such as Doordarshan under the Ministry of Information and Broadcasting, the Indian Space Research Organisation in the Department of Space, and the Ministry of Defence, are assigned certain bands of spectrum. Finally, the Ministry of Finance is responsible for all government levies and collections. The turf issues are such that they need the active intervention of the Prime Minister for resolution.
There is also an irrational yet widely held opinion that aligns with an interpretation of the Supreme Court (SC) verdict on the 2G scam, that is viewed as favouring auctions and maximising upfront government revenues. Whereas the judgment allows government to formulate other policies and act on them, and despite the detrimental effect of auctions on services, and that the consequences are not in the public interest.
For beneficial policies, the constituents have to analyse and understand the causes of the problems and possible mitigating steps, to converge on policies in the public interest. Too much to hope for? Perhaps, yet this is only one aspect of a multidimensional requirement.
Another major aspect is that our political processes favour dissonance and disintegration over order and convergence. It pays to create factions, run down the opposition — in this age of crassness, the more viciously the better — and to control the swing vote to opportunistic self-interest. The way our political systems are structured, divisive and disruptive tactics that exploit populism are easier and more effective than building consensus, because funding is more easily available to breakaway politicians serving factional interests, than to those trying to work together seeking common ground. This highlights the problem of political funding, and the need to rationalise this to align with societal benefits, instead of as it is currently, to society’s detriment.
A third prerequisite for developing constructive solutions is the need to promote professionalism and merit, and to remedy the absence of it across the board. Instead, there’s a prevalence of feudal approaches, cliques and attempts at browbeating and strong-arming people. This makes it difficult for administrators and professionals to make objective analyses and recommendations, especially where change is required. It is a lot easier to just go along with customary practices, however deficient. A clear example is the auctioning of public resources, compared with the straightforward acceptance of the need to build revenue-generation capacity in enterprises (through allocations that are fair and transparent), before attempting to collect taxes or levy government charges. Often, auctions are patently inferior to other alternatives to ensure transparency, such as production- and revenue-sharing, as has been proven in the instance of telecom licences. These have yielded nearly 10 times the auction revenues foregone, perhaps highlighting that government’s “take” is too high. The SC upheld the principle negating auctions in its ruling on the Presidential reference in 2012 on mining franchises. However, because auctions are expedient, we indulge in them. It is instructive to review the SC judgment, excerpts of which follow: “...there can be no doubt about the conclusion recorded in the 'main opinion' that auction which is just one of the several price recovery mechanisms, cannot be held to be the only constitutionally recognised method for alienation of natural resources…”
“Each bit of natural resource expended must bring back a reciprocal consideration. The consideration may be in the nature of earning revenue or may be to ‘best subserve the common good’” (http://www.supremecourtofindia.nic.in/outtoday/op27092012.pdf).
Politicians and administrators construe this to mean that it is safer to resort to auctions, ignoring the fact that in the case of spectrum, the resource is not expended because it is reusable, and there’s no excuse for not subserving the common good.
A Pathfinding Approach for Digital India
The article was published in the Business Standard on January 31, 2017 and reproduced on Organizing India Blogspot on February 1, 2017.
Most people believe an optical fibre cable (OFC) connection is necessary for broadband. While largely true, this is often financially viable only in urban agglomerations. What is less known is that trading companies use wireless links between New York and Chicago for high-speed electronic trades.[1] For people outside urban clusters, wireless is a less expensive alternative to fibre. They get only a few megabits per second, but realistically, ubiquitous broadband at 2 Mbps would be great.
Three factors are driving internet access and usage in India. An overriding factor is the growth of wireless devices and traffic as a global phenomenon. Cisco estimated in June 2016 that in 2015, wired access comprised 52 per cent of IP traffic, but would reduce to one-third by 2020, while wireless access would increase to two-thirds. This trend is reinforced by another factor: Innovation that lowers costs and improves performance in mobile wireless (Chart 1).
Chart 1: Mobile Innovation Lowers Costs and Improves Performance
Sources: Cisco Visual Networking Index; International Telecommunication Union; IE Market Research; Motorola, Deutsche Bank; Qualcomm
Note: Data speed indicated the maximum downlink speed, not average observed speeds. The average observed speeds depend on many factors, including infra, subscriber density and device harware and software
The third factor is the combination of the geographic spread of our population, the concentration of broadband penetration (Chart 2), and the limited coverage of OFC networks. While major cities and their connecting links are covered by OFC, less populated and less commercially attractive areas between them are not. In hilly terrain, there is considerable difficulty in laying OFC, which extends far beyond cost. In urban areas, cost can be a deterrent because we lack reasonable, uniform charges for rights-of-way. Such procedures and practices are difficult to institute and enforce, but are essential for robust, viable OFC networks.
Chart 2: Broadband Penetration
Source: http://www.thehindu.com/sci-tech/technology/internet/The-India-wide-web/article14588938.ece
It's not only the installation of the OFC, but of ensuring quality and reliability. OFC networks in India apparently suffer from 12 to 14 cuts per km per month, whereas the international benchmark is 0.7 cuts per km km per month. Apart from more frequent repairs, the capital expenditure in India is nearly three times as high as in Australia or the US.[2]
Estimates for installing OFC using standard procedures vary from about Rs 1 lakh to Rs 4 lakh per km. However, there have been attempts at getting costs down by radical changes in approach. For example, Andhra Pradesh considered an OFC installation of 22,500 km estimated Rs 4,700 crore. By stringing fibre overhead along electric cables, however, the estimate was cut to Rs 333 crore, reducing costs from Rs 21 lakh to under Rs 1.5 lakh per km. It remains to be seen how this network will perform in terms of quality and reliability. Also, wireless technology is needed to extend connectivity from the fibre to villages, and cellular network costs rise with less bandwidth. For instance, one estimate is that excluding spectrum costs, a network using 5 MHz costs nearly 70 percent more than using 20 MHz.
For all these reasons, we need concerted action to redesign our approach to broadband, covering the fundamentals of infrastructure, spectrum and market design. The exponential growth in mobile services has reached a plateau, and is complicated by the taint of the 2G spectrum scams. This has resulted in a mindset combining witch-hunting and paranoia in the press, the public, government departments, and the judiciary. This is not conducive for the coordinated, collective strategy and action that is required to extricate ourselves. Several proven wireless technologies are not permitted in India, although the Telecom Regulatory Authority of India has recommended their use. Methods to increase connectivity like those listed below are urgently needed, with requisite environmental safeguards such as the use of renewable energy.
- 60 GHz (V band) wireless gigabit for short-haul;
- 70 and 80 GHz (E band) for multi-gigabit backhaul up to 5 km;
- TV White Space for the middle mile from the fibre to users in villages up to 8-10 km away in a single hop;
Additional steps, e.g.:
- Increasing unlicensed spectrum in the 5.8 GHz band from 50 MHz to 80 MHz to enable 866 Mbps per channel, or more for gigabit capacity;
- Enabling secondary sharing of spectrum bands such as TV White Space, which has the possibility of existing Indian IPR establishing domestic manufacturing and dominating this niche;
It is evident that despite intense efforts by the people involved, our existing approach is simply not getting us to where we need to be. This has been repeated by government and private sector representatives many times. There’s no substitute for developing a sound approach, collectively and participatively, with professional facilitation, cutting across government, industry (operators and equipment providers), users, and the judiciary, to devise whatever solutions will deliver better results. We have to move away from adversarial deadlock.
A good way to begin is by accepting facts, and considering the evidence before dismissing points of view. For licensing, we know that government collections from revenue sharing far exceed the auction fees foregone (“Breakthroughs Needed for Digital India”). We have the experience of building other infrastructure such as roads and airports on revenue-sharing principles. We have to take a similar systematic, phased approach to designing and implementing broadband networks. Policies on infrastructure resource use including spectrum need to be rationalised, and the sector organised through participative path-finding and problem solving. We have to build national champions in manufacturing to keep costs affordable, for instance, using TV White Space. India could set the standard with its IPR and products where OFC is infeasible or unviable for connectivity to villages and rural clusters. Both the administrative and political leadership need to do this, working with all stakeholders, and not treating any of them as adversaries, or cronies.
[1]. ‘Information Transmission between Financial Markets in Chicago and New York’, Gregory Laughlin, Anthony Aguirre, and Joseph Grundfest, Cornell University Library, arXiv.org
[2]. Conference presentation, Sterlite, http://www.trai.gov.in/sites/default/files/Sterlite-Badri.pdf
Cashlessness Needs Connectivity
The article was published by Business Standard on January 4, 2017 and mirrored in Organizing India Blogspot on January 5, 2017.
Cashless transactions need ubiquitous connectivity, which we don’t have. Without it, the goal is simply unfeasible. Better to recognise this now, rather than act out elaborate charades, resulting in avoidable economic hardship and social ructions. Connectivity needs effective, efficient communication links at a reasonable cost. These call for realistic objectives and solid implementation, not bluster and unrealistic goals or plans, such as fibre-optic networks everywhere, payment systems on a hastily assembled database riddled with imposters, or insufficient security and privacy.
What is required?
The need is for internet connectivity using fibre backbones, extending to users through aggregation networks that are mostly wireless. The chances of establishing these networks increase if political parties and government agencies take concerted action on how to do so. This is necessary for two reasons. One is that our present network development and spectrum policies do not facilitate achieving universal broadband, especially in areas with lower commercial potential than prosperous urban clusters. The second is the legacy of network development with entrenched rivalries and perceived ways of managing spectrum, and the aftermath of the spectrum scam. These constrain society’s collective ability to configure solutions for connectivity, as opposed to the biased or limited perceptions of stakeholder groups such as the government, the judiciary, the citizenry, and industry (comprising service providers and equipment suppliers). Government agencies also have divergent agenda, e.g., the Telecom Regulatory Authority of India (Trai) is responsible for recommending spectrum use, the Department of Telecommunications/Ministry of Communications has licensing authority and runs the state-owned operators, the Ministry of Information and Broadcasting holds certain spectrum bands, the Ministry of Defence and government agencies hold other bands, and the Ministry of Electronics and Information Technology is responsible (without the authority) for providing broadband. Hence, the need for a convergent approach, as effected partially for electricity supply, from coal mining through transportation to distribution (although other sectors – hydel, hydrocarbons and nuclear – are yet to be similarly linked).
What needs doing
Radical changes such as pooling and sharing network infrastructure have to be considered for widespread connectivity. Such changes can’t happen with confrontation and mistrust, but only with trust and cooperation. This may seem naïve, but the ruling party leadership sets the tone for cooperation, as does the administrative leadership. Their pitch has to be sufficiently persuasive to induce diverse stakeholders – other political leaders, the judiciary, the citizenry who want industry to pay their pound of flesh while getting good services that are priced very low, and the operators, who have huge investments in networks and spectrum rights – to consider sharing equipment, and to work out worthwhile terms for everyone.
Currently, contending political parties pursuing selfish objectives as antagonists settle at the lowest achievable equilibrium. To understand why, consider two parties, A and B, with objectives along the horizontal X axis for A and the vertical Y axis for B in the chart.
When parties pursue conflicting interests confrontationally, they end up at N or Nash Equilibrium, where neither can improve their position without the other’s concurrence. Assume A has the objective of maximising a majoritarian agenda, while B seeks to maximise dynastic control of its leadership positions. This holds for any objectives that are unrelated (orthogonal). If their objectives are along the same dimension — say, control of the Centre or of the same states, there can be no accommodation: one wins what the other loses. This has happened so far, as parties are periodically voted in and then out by a disenchanted electorate. But if they accommodate, their equilibrium could move up to S, the “Best Feasible Equilibrium” point, where the acceptable limits of their respective objectives meet. (For more details, see: “Tata’s Corus Buy: A Game Theory Analysis”, organizing-india.blogspot.in, November 2, 2006, and "India’s Access To Nuclear Fuel & Technology", April 3, 2008.)
Imagine waking up to find that instead of the usual confrontation and vitriol, a different and gracious protocol awaits you. One of harmonious interaction marked by accommodation and courtesy, despite nature being red in tooth and claw. Utopian? Perhaps. But not if the powers that be realise that the way out of the cashless crisis is to seek benefits for everyone, instead of self-destructing by chasing chimera such as pure cashlessness or other unrealistic goals. Instead, they could give people what they need but don’t have: ubiquitous communications infrastructure that facilitates all activities (not just cashless transactions), and a more secure, well-ordered environment for pursuing their livelihoods and well-being. Policy decisions to share network infrastructure would be the start of this journey.
We can then break out of the impasse created by legacy communications policies and posturing, e.g., which party was responsible for what scam, the popular obsession with high auction prices for spectrum while wanting cheaper services, and operators committed to cornering spectrum.
Once the leadership collaborates, they’ll find that communications services delivery will be much improved by sharing capacity and coordination. This would enable other stakeholders – private sector operators, the citizenry, the judiciary – to accept that everyone gains from cooperative access to and delivery of communications services, provided adequate profits are generated and shared equitably. This will help in accepting a more rational, pay-for-use policy on the lines of highways, metro rail, or oil pipeline usage, and recognise the financial infeasibility of having auctions as well as funds for investments in networks for countrywide broadband access.
Government and stakeholders can then work together to develop solutions that are fair and practical. For instance, one or more consortium/s of operators with the government as a co-investor in each (on the lines of Singapore’s OpenNet) can co-own the network and coordinate for most effective and efficient service delivery. Earnings from spectrum usage can be collected by the government once the networks are commercially viable, as for developing any other infrastructure. Such collections are likely to exceed the auction fees foregone, as with revenue sharing from licence fees.
CIS Submission to TRAI Consultation Note on Model for Nation-wide Interoperable and Scalable Public Wi-Fi Networks
The comments were authored by Japreet Grewal, Pranesh Prakash, Sharath Chandra, Sumandro Chattapadhyay, Sunil Abraham, and Udbhav Tiwari, with expert comments from Amelia Andersdotter.
1. Preliminary
1.1. This submission presents responses by the Centre for Internet and Society (“CIS”) [1] on the Consultation Note on Model for Nation-wide Interoperable and Scalable Public Wi-Fi Networks (“the Note”) published by the Telecom Regulatory Authority of India (“TRAI”) on November 15, 2016 [2].
1.2. The CIS welcomes the effort undertaken by TRAI to map regulatory and other barriers to deployment of public Wi-Fi in India. We especially appreciate that TRAI has recognised [3] two key barriers to provision of public Wi-Fi networks identified and highlighted in our earlier response to the Consultation Paper on Proliferation of Broadband through Public WiFi [4]: 1) over regulation (including, licensing requirements, data retention, and Know Your Customer policy), and 2) paucity of spectrum [5].
2. General Responses
2.1. Before responding to the specific questions posed by the Note, we would like to make the following observations.
2.2. There is no need of a solution for non-existing interoperability problem for authentication and payment services for accessing public Wi-Fi networks. The proposed solution in this Note only adds to over-regulation in this sector. The proposed solution does not incentivise new investment in the sector, but only establishes UIDAI and NPCI as the monopoly service providers for authentication and payment services.
2.3. As the TRAI has consulted widely with industry and other stakeholders before it settled on the list of priority issues contained in Section C.6 of the Note, we are surprised to find that this Note aims to address only the problem of lack of “seamless interoperable payment system for Wi-Fi networks” (Section C.6.d. Of the Note), and does not discuss and propose solutions for any other key barriers identified by the Note.
2.4. The Note fails to clarify the “interoperability” problem in the payment system for usage of public Wi-Fi networks that it is attempting to solve. The Note identifies that lack of “single standard” for “authentication and payment mechanisms” for accessing public Wi-Fi networks as a key impediment to provide scalable and interoperable public Wi-Fi networks across the country [6]. By conceptualising the problem in this manner, TRAI has bundled together two completely different concerns - authentication and payment - into one and this is at the root of the problems emanating from the proposed solution in this Note.
2.5. Lack of standard process for authentication is created by over-regulation via Know Your Customer (“KYC”) policies, and selection of eKYC service provided by UIDAI as the only acceptable authentication mechanism for all users of public Wi-Fi networks across India, creating further economic and legal challenges for smaller would-be providers of public Wi-Fi networks as they assess their liabilities and start-up costs. Additionally, since this would amount to making UID/Aadhaar enrolment mandatory for any user of public wi-fi networks, it seems to create a contradiction with previously communicated policy from the UIDAI and the Government that no such obligation should arise. Supreme Court has also mandated over successive Orders that enrolment for UID/Aadhaar number should remain optional for the citizens and residents.
2.6. As was observed by the respondents to the TRAI Consultation concluded earlier this year, there is no interoperability problem that needs to be solved regarding payments for accessing public Wi-Fi networks. Payment services continue to be evolved and payment aggregator services provided by existing companies may be expected to resolve many of the outstanding issues of service proliferation in the upcoming years, at least in the absence of additional mandatory technical measures imposed by the government. Bundling of payment with authentication will only undermine the already existing independent market for payment aggregators, and further enforce mandatoriness of UID/Aadhaar number.
2.7. Further, the payment mechanism proposed would seem to worsen difficulties for tourists and foreigners in accessing public Wi-Fi in India, as well adds an additional layer of authentication in a system already identified (even in the Note itself) to be overburdened by regulations regarding KYC and data retention. Section C.6.b of the Note highlights the problems faced by foreigners and tourists when the authentication mechanism is premised upon use of One Time Password (OTP) that requires a functioning local mobile phone number. It contradicts itself later by proposing an authentication method that requires the user to not only download an application onto their mobile/desktop device, but also to enrol for UID/Aadhaar number and/or to use their existing UID/Aadhaar number. Instead of reducing the existing barriers to provision of and access to public Wi-Fi, which the Note is supposed to achieve, it creates significant new barriers.
2.8. The technological architecture advanced by the Note upholds support of governance and surveillance projects that, in addition to being costly in their implementation and thereby slowing down the objective of getting India connected, are also of questionable value to the security of the Indian polity. UID, UPI, and related projects risk undermining cyber-security through their reliance on centralised architectures and interfere with healthy competitive market dynamics between commercial and non-commercial actors.
2.9. The Note continues to only consider and enable commercial models for the provision of public Wi-Fi networks. We have identified this as a problematic assumption in our last submission [7]. It is most crucial that TRAI does not ignore and fail to promote and facilitate the possibility of not-for-profit models that involve grassroot communities, academia, and civil society.
2.10. Last but not the least, the term “Wi-Fi” refers to a particular technology for establishing wireless local area networks. Further, the term is a trademark of the Wi-Fi Alliance [8]. It is this not a neutral term, and it must not be used as a general and universal synonym for wireless local area networks. We recommend that TRAI may consider using a technology-neutral term, say “public wireless services” or “public networking services”, to describe the sector. Following the terminology used in the Note, we have decided to continue using the term “Wi-Fi” in this response. This does not reflect our agreement about the appropriateness of this term. Important: The recommendation for technology-neutral regulation also comes with the qualification that safeguards like regulations on Listen Before Talk and Cycle Time are required to prevent technologies like LTE-U from squatting on spectrum and interfering with connections based on other standards.
3. Specific Responses
Q1. Is the architecture suggested in the consultation note for creating unified authentication and payment infrastructure will enable nationwide standard for authentication and payment interoperability?
3.1. No. The proposed infrastructure is likely to be costly for a large number of actors to implement and undermine some of the ongoing innovation in the Indian digital payment services industry. Rather than being helpful, it risks introducing additional requirements on an industry that TRAI has already identified as facing a number of large challenges.
3.2. There is no need for a unified architecture that provides nationwide standard for authentication and payment interoperability. It does not offer any incentive towards provision of public Wi-Fi networks. Neither is there an interoperability problem at the physical or data link layers that has been pointed out, nor is government mandated interoperability required at the payment or ID layer since there are private entities that provide such interoperability (like, payment aggregators). Additionally, we believe it is inappropriate that the TRAI is trying to predict the most suitable business/technological model for digital payments to be used for accessing commercial Wi-Fi networks. India has a booming online payments industry, and it must be allowed to evolve in an enabling regulatory environment that allow for competition and ensures responsible practices.
3.3. The Note identifies several structural impediments to expansion of public Wi-Fi networks in India, namely paucity of backhaul connectivity infrastructure (Section C.6.a), Inadequate associated infrastructure to offer carrier grade Wi-Fi network (Section C.6.c), dependency of authentication mechanism on pre-existing (Indian) mobile phone connection (Section C.6.b), and limited availability of spectrum to be used for public Wi-Fi networks (Section C.6.e). All these are crucial concerns and none of them have been addressed by the architecture suggested in the Note.
Q2. Would you like to suggest any alternate model?
3.4. Yes. The model proposed in the Note is likely to exclude several types of potential users (say, foreigners and tourists), and impose a single authentication and payment service provider for accessing public Wi-Fi networks, which may undermine both competition and security in the market for these services.
3.5. Internationally, there are cities and regions (say, the city of Barcelona and the Catalonia region in Spain) where public Wi-Fi networks have been provided in a pervasive and efficient manner by taking a light regulatory approach that enables opportunities for potential providers to set up their own infrastructures and additionally have access to backhaul. Further, reducing legal requirements on authentication should be considered in place of government mandated technical architectures for authentication and payment. In particular, allowing for anonymous access to Public Wi-Fi or wireless connectivity would reduce both the administrative and the technical burden on potential providers at the hyper-local level, especially for providers whose main activity it is not, and cannot be, to provide internet services (say, event venues, malls, and shops).
3.6. The CIS suggests the following steps towards conceptualising an “alternative model”:
- remove existing regulatory disincentives,
- urgently explore policies to promote deployment of wired infrastructures in general, and to enable a larger range of actors, including local authorities, to invest in and deploy local infrastructures by reducing licensing requirements in particular,
- examine spectrum requirements for provision of public Wi-Fi, and
- provide incentives, such as allowing telecom service providers to share backhaul traffic over public Wi-Fi, and ways for telecom service providers to lower their costs if they also make Internet access available for free.
Q3. Can Public Wi-Fi access providers resell capacity and bandwidth to retail users? Is “light touch regulation” using methods such as “registration” instead of “licensing” preferred for them?
3.7. CIS holds that capacity and bandwidth are neither comparable to tangible goods nor to digital currency. They are a utility, and the provider of the utility has to accept that their customers use the utility in the way they see fit, even if that use entails sharing said capacity and bandwidth with downstream private persons or customers. Wi-Fi capabilities are currently a built-in standardised feature of all consumer routers. Any individual, community, or store with access to an internet connection and a consumer router could become a public Wi-Fi access provider at no additional cost to themselves, furthering the goals of the Indian government in its Digital India strategy to ensure public and universal access to the internet.
3.8. In order to exploit the opportunities awarded by a large amount of entities in the Indian society potentially becoming Public Wi-Fi providers, TRAI should require neither registration nor licensing of these actors. Imposing administrative burdens on potential public Wi-Fi access providers creates legal uncertainty and will cause a lot of actors, who may otherwise contribute to the goals of Digital India, not to do so. This is particularly true for community organisers and citizens, who may not have access to legal assistance and therefore may avoid contributing to the goals of the government.
3.9. Light touch regulation when it comes to both granting license to public Wi-Fi access providers as well as authentication of retail users, however, are needed not only as an exceptional practice for such instances but as a general practice in case of entities offering public Wi-Fi services, either commercially or otherwise. Further, additional laxity in administrative responsibilities is needed to incentivise provision of free, that is non-commercial, public Wi-Fi networks.
Q4. What should be the regulatory guidelines on “unbundling” Wi-Fi at access and backhaul level?
3.10. The Note refers to unbundling of activities related to provision of Wi-Fi but it does not define the term. It is neither explained which specific activities at access and backhaul levels must be considered for unbundling.
3.11. While unbundling should clearly be allowed and any regulatory hurdles to unbundling should be removed, any such decision must be taken with a focus on urgently addressing the stagnated growth in landline and backhaul, as identified in Section C.6.a of the Note. Relying only on spectrum intensive infrastructures, such as mobile base stations, for providing connectivity, creates a heavy regulatory burden for the TRAI, while simultaneously not ensuring optimal connectivity for business and private users. The CIS is concerned that the focus of the Note on standardising a government-mediated authentication and payment mechanism detracts attention from this urgent obstacle to the fulfillment of the Digital India plans of accelerated provision of broadband highways, universal access, and public, especially free, access to internet services.
3.12. From the example of European telecommunications legislations, implementation of policy measures to ensure that vertical integration between infrastructure (say, cables, switches, and hubs) providers and service (say, providing a subscriber with a household modem or a SIM card) providers in the telecommunications sector does not become a barrier to new market entrants has yielded much success in countries that have pursued it, like Sweden and Great Britain.
3.13. Further, there should be no default assumption of bundling by the TRAI. In particular, the TRAI should consider reviewing all regulations that may cause bundling to occur when this is not necessary, and put in place in a monitoring mechanism for ensuring that bundled practises (especially in electronic networks, base station infrastructures, backhaul and similar) do not cause competitive problems or raise market entry barriers [9]. In most EU countries, especially where the corporate structure of incumbent(s) is not highly vertically integrated, interconnection requirements for electronic network providers of wired networks in the backhaul or backbone (effectively price regulated interconnection), and a conscious effort to ensure that new market players can enter the field, have ensured a competitive telecommunications environment. TRAI may consider reviewing the European regulation on local loop unbundling (1999) and discussions on functional separation (especially by the British regulatory authority Ofcom), within an Indian context.
Q5. Whether reselling of bandwidth should be allowed to venue owners such as shop keepers through Wi-Fi at premise? In such a scenario please suggest the mechanism for security compliance.
3.14. Yes. Venue owners should be allowed to provide public Wi-Fi service both on a commercial and non-commercial basis.
3.15. It is not clear from the Note and the question what type of security concerns the TRAI is seeking to address. In terms of payment security, the payment industry already has a large range of verification and testing mechanisms. The CIS objects to the mandatory introduction of the proposed payment system so as to ensure greater security for Wi-Fi access providers and the users.
3.16. As far as hardware-related security issues are concerned, it is again unclear why consumer equipment compliant with existing Wi-Fi standards would not be sufficiently secure in the Indian context. Wi-Fi has proven to be a sturdy technical standard, its adoption is high in multiple jurisdictions around the world, and it also enjoys great technical stability. Similar security assessments could easily be made for alternative wireless technologies, such as WiMaX.
3.17. The CIS foresees problems is in the allocation of risk and liability by law. The already existing legal obligation to verify the identity of each user, for instance, is likely to introduce a large administrative burden on potential Public Wi-Fi providers, which may lead to such potential providers abstaining from entering the market. Should the identification requirement be removed, however, other concerns pertaining to legal obligations may arise. These include liability for user activities on the web or on the internet (cf. copyright infringement, libel, hate speech). We propose a “safe harbour” mechanism in these cases, limiting the liability of the potential public Wi-Fi provider.
Q6. What should be the guidelines regarding sharing of costs and revenue across all entities in the public Wi-Fi value chain? Is regulatory intervention required or it should be left to forbearance and individual contracting?
3.18. The market segments identified by the TRAI in Section F.18 of the Note should normally all be competitive markets themselves, and so do not require regulatory assistance in sharing of costs and revenues. The more elaborate the requirements imposed on each actor of each market segment identified by the TRAI in Section F.18, the more costly the roll-out of public Wi-Fi is going to be for the market actors. Such a cost is not avoided by price regulation.
3.19. The TRAI may instead consider introducing public funding for backhaul roll-out in remote areas, where the market is unlikely to engage in such roll-out on its own. Presently, some Indian states (such as Karnataka) are committing to public funding for wireless access in remote areas. The Union Government can assist such endeavours.
Endnotes
[1] See: http://cis-india.org/.
[2] See: http://trai.gov.in/Content/ConDis/20801_0.aspx.
[3] See Section C.6 of the Note.
[4] See: http://trai.gov.in/Content/ConDis/20782_0.aspx.
[6] See Section E.11. of the Note.
[8] See: https://www.wi-fi.org/.
[9] See: Monitoring bundled products in the telecommunications sector is also recommended by the OECD: http://oecdinsights.org/2015/06/22/triple-and-quadruple-play-bundles-of-communication-services-towards-all-in-one-packages/.
A Market Structure for Digital India
The article originally published in the Business Standard on October 5, 2016 was mirrored in Organizing India Blogspot on October 9, 2016.
In March 2010 before the auction, the capitalisation was Rs 1.84 lakh crore; in March 2016, it was Rs 1.71 lakh crore, with the BSE Sensex up nearly 60 per cent. A larger share of earnings has gone to government rather than shareholders, and also to banks as interest (Rs 2.08 lakh crore). The irony is that no operator has bid so far for the most useful spectrum bands on auction, 700 and 900 MHz. Uncertainties abound, and there are several questions.
Reliance Jio's entry, although expected, is a jolt. Will voice calls priced below mandatory interconnect charges be treated as being predatory or anticompetitive? The technicality is that Jio doesn't have high market share, apparently a criterion under competition law. Will this hold, given that Jio's entry has reduced total market capitalisation? Will delivery capability in terms of network size and/or market power from associated businesses be relevant criteria for dominance? What happens when Jio does have sizeable market share?
- On the face of it, lower prices seem better for users. Look more closely and it's not so simple, especially when you consider other services in India offered for free or at highly subsidised rates. One issue is the structure of a market that supports delivery below cost, and its quality of services/products. Another is the criterion that maximises social welfare that should drive government's policies. Is consumer surplus in the short term a reasonable criterion? As it happens, we have experienced markets with constrained consumer surplus for years. For example, in the category of infrastructure and essential inputs/utilities, we've had this approach towards fertilisers, electricity, petroleum products like kerosene, cooking gas and diesel until recently, water, and sewerage. We've also experienced this in our entire range of manufactured products earlier, when we had exorbitant import barriers. These experiences have been less than sanguine. The misuse of kerosene and gas, and the effects of diesel subsidies are prominent examples. The distortions that have set in, such as overuse of ground water and fertilisers, and the vicious circle with electricity and diesel generators, will be difficult to correct.
- Aren't there similar deleterious effects in communications from spectrum auctions and government charges that inflate input costs, and price wars that degrade investment capacity for network extension and delivery? As it is, the quality of services for voice and data is very poor. An essential resource for better connectivity is spectrum, yet government's approach to its management has been and remains inimical to its stated objective of achieving ubiquitous access of good quality. Governments make it difficult for operators to extend networks simply by not setting the right administrative policies. To quote Google Vice-President Caesar Sengupta: India is "a very large country with very little spectrum". It does not seem clear to our governments that broadband access through fixed lines for everyone is infeasible in the foreseeable future. Also, that unless radical changes are made, it is inconceivable that broadband servcies can be made available at prices and quality comparable to TV.
The Triad of Interests
Even if the criterion for public welfare is user benefits/consumer surplus, judging by price alone is simplistic, because it misses other aspects of service delivery that contribute to the cost-benefit package. One essential aspect is ubiquitous access. Another is effective, consistent service delivery, which requires quality, and stability. A third is the period or life cycle. It doesn't help if you have an inexpensive product or service today, and nothing tomorrow. The definition of long term also varies, depending on one's perception of the life-cycle cost of the product/service. For a user, it may be several years, or his/her life cycle. For a society, it may mean generations.
In addition to consumer benefits, other factors need to be considered from the perspectives of pragmatism and realpolitik. Realistically, a triad of stakeholder interests has to be balanced for a sustainable beneficial outcome. These are: consumer and producer surplus, and what might be termed "government interests" in the broadest sense defined below. The latter has been manifest in many global spectrum auctions, and although detrimental to the sector, is an aspect of reality that cannot be wished away. For example, our governments preferred rationing and auctions to more constructive approaches such as sharing infrastructure, and when the Supreme Court ruled that resources need not be auctioned, spectrum was excluded, which seems logically indefensible. For sustainable, consistent services, champions of all three criteria must partner to adopt mutually acceptable solutions.
Assumptions about Enabling Policies
Certain basic amenities comprise the essential infrastructure that everyone needs to be productive and have reasonable well-being. To some extent, this is linked to reasonably high per capita income. Without it, broad access to good infrastructure is infeasible. It takes that level of organisation, institutions and investment, including its implications for developing and organising human capital, to build such capabilities, as in Organisation for Economic Cooperation and Development (OECD) countries. Emerging economies have to manage with lower order platforms, or a subset of higher order services combined with others of lower order. Prioritisation then becomes the key, and areas of emphasis have to be chosen. This is where the priority accorded to Digital India comes in. If digital systems are crucial facilitators for development and productivity, they need to be accorded that level of importance and effort, with substantive changes to policies.
The government sets the policies and incentives. Government here means not just the central government and the states' executives, but the gamut of regulatory and government agencies: the legislature, the regulators, and the judiciary. These agencies must converge and persuade public opinion to support action in the public interest. Ultimately, society has to pay. If delivery is priced below cost in communications, the services will be as unsustainable and ineffective as in other distorted sectors with freebies.
Reference: Krishna Kant: http://www.business-standard.com/article/economy-policy/spectrum-fees-leave-no-money-in-shareholders-pockets-116092701398_1.html, Business Standard, September 28, 2016. The author can be contacted at [email protected]
Digital India Needs These Policy Changes
The article originally published in the Business Standard on August 31, 2016 was mirrored in Organizing India Blogspot on September 1, 2016.
There's a "List of 10 Things" for realising India's potential that Prime Minister Narendra Modi received as the chief minister of Gujarat from Jim O'Neill, the originator of the "BRIC" concept. Many items on that list are greatly facilitated by information and communications technology (ICT): effective governance; primary, secondary, and tertiary education; improved infrastructure; and sustainable approaches that minimise negative environmental impact. While there's agreement on ICT's importance for India, there's difficulty getting it in place to best effect. This is because policy changes are needed to make Digital India a reality. These are the kinds of decisions that will turn the rhetoric about connectivity into reality.
Some changes are relatively easy, such as enabling 60 GHz Wi-Fi, while others require more effort, as explained below. These include better terms for satellite communications, enabling broadband on the 500-600 MHz bands, and spectrum and network sharing.
In our land of such range and contradictions, so much needs improvement that everything clamours for immediate attention. Attempts to address them all together are misplaced, however, because achieving results requires goal orientation, prioritisation and systematic action, to direct a convergent investment of time, effort and capital. Also, projects must be done with the realisation that the acid test is end-to-end delivery, even if it is initially to a small segment of the market. Only then can the rest of the iceberg be addressed: consistent, ongoing operation and maintenance, and scaling up. Think of the years of effort, capital and human resources invested without that first delivery in the National Optic Fibre Network. While defining objectives appropriately and setting priorities are difficult, both are imperative.
A recent report on The Networked Society City Index for 2016 by Ericsson reaffirms ICT's critical role in productivity and living standards.1 The report also shows that better-developed cities are on more sustainable paths to the goal of the desirable triple bottom line (TBL) of social, economic and environmental betterment. ICT facilitates not only sustainable development of cities and often their surroundings, but extends through the networked society far beyond their geographical environs. Even our metros need attention, with Mumbai and Delhi ranking at 36 and 38 out of 41.
The Wireless Imperative
Efforts at setting up Digital India have to contend with the reality that most non-urban communications have to be wireless, as does a significant proportion of urban access. This is because the cost and practical difficulties in laying and maintaining fibre everywhere is far greater than building wireless networks. The accompanying chart, showing the spread of broadband in India at the end of March 2016, illustrates this point.
The clusters are around major cities, with broadband penetration in Delhi/NCR highest at 58.2 per cent. Except along their major connecting links, the spaces between clusters are more difficult to connect and aggregate, as habitations are not densely clustered. Also, potential revenues are generally lower in less dense areas. Such areas urgently need lower-cost wireless coverage.
Policy Changes Required - from Easy to Difficult
Of the many constraints to building more accessible ICT in India, a major set lies within the control of government and stakeholders, provided they act together and are not adversarial about policies governing access technologies:
- There are unused frequencies in the 60 GHz band for which inexpensive equipment is available abroad with a capacity of several gigabits. Press reports years ago mentioned the de-licensing of this band in India. Last November, the Telecom Regulatory Authority of India (TRAI) recommended de-licensing Wi-Fi use, and light licensing backhaul with minimal charges. Yet, this asset is wasted because there's no policy permitting its use. It costs nothing to de-license in line with global norms. Apart from additional Wi-Fi capacity, service providers could use it for backhaul from small cells. Revenues are likely to rise, and the government would collect increased taxes. Domestic manufacturers could possibly develop products for what should be a huge market.
- Another proven technology is satellite communications. This is priced too high in India, as explained in "Satellite communications can drive the broadband revolution", Business Standard, 23 April 2016.2 Satcom tariffs are apparently nearly 300 times higher than in the US, while private sector applications for manufacturing satellites are languishing. Also, there is considerable potential for manufacturing associated equipment, such as VSATs, end-user terminals, and so on.
- A third area is unused or underutilised government spectrum. The most-useful and least-controversial, except for turf considerations, is unused broadcast spectrum in the sub-700 MHz bands. Government departments, namely, the department of telecommunications (DoT), the Ministry of Information and Broadcasting (I&B), the Department of Electronics and Information Technology (DeITY), and the Trai, could coordinate their approach, so that I&B and Doordarshan retain the spectrum, while allowing common access to shared spectrum and infrastructure for paid use by service providers. Doordarshan could increase its reach by providing programming and content over these links.
These frequencies would be most effective in extending rural broadband, because of the distances that could be covered inexpensively. There is an issue with equipment, as there are no large, established markets anywhere yet for TV White Space devices, and there is insufficient support for local manufacturing even with Indian intellectual property rights. In fact, we have a Catch-22 situation here: such devices are likely to have massive deployment in India, but we don't have policies that allow these frequencies for broadband. The irony is that developers who manufacture prototypes in India have no access to spectrum even for testing their products, and will have to rely on markets abroad for testing as well as sales.
Other Frequencies
Rules restricting usage of other frequencies could also be amended through a coordinated process. The result could be policies that treat spectrum usage as part of a shared infrastructure solution for Digital India. Using a shared access for payment approach with secondary sharing, primary holders of spectrum can retain usage rights, while government revenues accrue from swathes of spectrum that now remain unused, and holders of spectrum earn from common access.
CIS Submission to TRAI Consultation on Proliferation of Broadband through Public WiFi Networks
Preliminary Comments
Even in the early to mid-seventies, many Indians who wanted to own a radio receiver were expected to get a license from the government. If not then they were in violation of the law and there was nothing the government could do to enforce policies for their benefit. The deregulation of radio ownership has been key to its unfettered adoption and popularity today. Similarly, Wi-Fi, a radio transceiver must be deregulated further to bridge India's digital divide.
Before addressing specific questions posed by the Paper, we would like to make the following observations:
- The Paper considers only commercial models for the provision of public Wi-Fi networks. This is a problematic assumption as it ignores the potential of not-for-profit models that involve grassroots communities, academia and civil society.
- The Paper is infused with a vision and philosophy that is reminiscent of a colonial, license raj, centralized, top-down, command and control based, state monopoly paradigm. This is diametrically opposed to the foundational ethos of the Internet.
- The Paper assumes that more regulation is required in order to ensure mass adoption of public Wi-Fi. In fact, the exact opposite is true - the rapid proliferation of broadband through public Wi-Fi networks will only be accomplished by aggressive deregulation.
- The technological architecture being advanced by the Paper signals support of governance cum surveillance projects such as Aadhaar aka UID, India Stack, UPI and related projects which only undermine cyber-security and interferes with healthy competitive market dynamics between commercial and non-commercial actors. Again this is diametrically opposed to the foundational ethos of the Internet and a modern democratic information society.
Q1. Are there any regulatory issues, licensing restrictions or other factors that are hampering the growth of public Wi-Fi services in the country?
The most pressing issue which is hampering the growth of public Wi-Fi services in the country is that of over regulation. Under the current regulatory framework, public Wi-Fi is subject to licensing requirements, data retention, and Know-Your-Customer ("KYC") policies. The next issue is paucity of spectrum. So far the approach has been to assign exclusive property rights to certain frequencies and also raise billions of US Dollars through spectrum auctions based on the Supreme Court's understanding of spectrum as a national resource. Given the advancements in transceiver technologies, such as cognitive radios, it is possible for us to transcend the grid-lock of property rights and embrace paradigms like shared and unlicensed spectrum. Innovative technologies and neutral allocation of unlicensed spectrum will result in the growth of public and community wireless networks including those built on the Wi-Fi standard.
Q2. What regulatory/licensing or policy measures are required to encourage the deployment of commercial models for ubiquitous city-wide Wi-Fi networks as well as expansion of Wi-Fi networks in remote or rural areas?
The regulatory approach should be to deregulate the radio transceiver as much as possible so as to encourage innovation with lower barriers for participation.
The question falsely assumes that only commercial players can provide public Wi-Fi, Para 1.9 of the Paper only identifies scenarios where Unified License (UL) holders can take advantage of unlicensed spectrum to provide public Wi-Fi services. It fails to recognize that civil society, academia, and grassroots communities can also bring about ubiquitous city-wide Wi-Fi networks and expansion to remote and rural areas. For example, Village Telco and mesh networks are community-driven Wi-Fi models that are allowing a large number of individuals to gain access to Internet services using a public spirited or peer-to-peer philosophy.[1]
In terms of regulatory measures, CIS would recommend minimal and proportionate regulation, i.e. the regulation of entities involved in the provision of public Wi-Fi networks based on their capacity to harm the public interest and/or individual rights. By this we mean that only public Wi-Fi networks that have a large number of users (say, more than 5,000 individual users) should be subject to any regulation. Small-scale public Wi-Fi network providers, like public Wi-Fi networks in small villages or apartment complexes, should be left to self-regulation. Regulatory burdens which serve no purpose only deter these providers from providing such services at all.
Regulation must be technology-neutral, and should focus on the entities using these technologies who are capable of unlocking good or causing harm. This neutrality should be reflected in the name of the policy: "community-networking policy" and not "community Wi-Fi policy". The necessary changes must also be incorporated in the Paper and the draft policy to make this clear. The current definition of Wi-Fi is closely coupled with certain frequencies, and public wireless networks should be promoted regardless of technology and specific frequency bands.
In cases where private data services, (such as mobile telephony/ other private application specific data infrastructures) which may have been granted permission to deploy on an open-unlicensed or delicensed part of the spectrum, experience interference from a Public Wi-Fi setup. On the same frequency band, we call for the Public Wi-Fi to be given priority. This will prevent spectrum squatting.
Q3. What measures are required to encourage interoperability between the Wi-Fi networks of different service providers, both within the country and internationally?
This is a requirement for elite parts of society only but not a deal breaker for the provision of public Wi-Fi in India. There are a variety of existing market-based approaches. The further deregulation of Wi-Fi will result in the rise of public, community and non-commercial players which in turn will lead to further innovation and competition when it comes to interoperability across disparate Wi-Fi networks and providers.
Q4. What measures are required to encourage interoperability between cellular and Wi-Fi networks?
No measures are required. Millions of consumers in India already are able to interoperate between cellular networks and their home and office networks as they are in charge of the authentication or they have left these networks open. The reason they are unable to operate more easily with other networks is due to data retention, and KYC policies. Even in countries with much more challenging national security concerns, the data retention and KYC policies are not so strict. We are paying a terrible price in terms of broadband adoption because of our flawed approach to surveillance and cyber security. The answer here lies in deregulation of existing requirements, especially for community based organisations, NGOs, research institutions, educational institutions, galleries, museums, archives and public libraries. This will address the needs of those who cannot pay and are vulnerable. For those who can pay - commercial actors will innovate and provide the high-quality interoperability that they seek - this will not require any action on the part of the government.
Q5. Apart from frequency bands already recommended by TRAI to DoT, are there additional bands which need to be de-licensed in order to expedite the penetration of broadband using Wi-Fi technology? Please provide international examples, if any, in support of your answer.
In a 2012 policy brief on unlicensed spectrum[2], CIS recommended the changes, listed below [in italics]. Since then, more modern approaches may have emerged which merit revisiting this question. These advances also merit delicensing bands more aggressively as the proprietary approach becomes more and more dated. This approach should also be technology neutral and must find a balance between proprietary, unlicensed, and shared spectrum.[3]
- Frequencies in the 6, 11, 18, 23, 24, 60, 70, and 80 GHz bands, to facilitate replicating examples like Webpass (USA) which has radios capable of delivering up to 2Gbps both upstream and downstream.[4]
- Frequencies in the 5.15 GHz-5.35 GHz bands, as well as 5.725-5.775 GHz bands are unlicensed for indoor use only. These bands should be unlicensed for outdoor use as well in order to facilitate the creation of wider wireless communication networks and the use of innovative technologies.
- There should be more unlicensed spectrum in the 2.4 GHz range, beyond what is already unlicensed, for the expansion of wireless communication networks.
- The 1800-1890 MHz band, which is earmarked for the operations of low power cordless communication in India, should be unlicensed in line with international practices. Many bands for this use have already been unlicensed in Europe and the United States. [5]
- 50 Mhz in the 700Mhz - 900Mhz band, earmarked for broadcast should be made available to better utilize available spectrum, almost 100Mhz is currently unused in most parts of the country.
Q6. Are there any challenges being faced in the login/authentication procedure for access to Wi-Fi hotspots? In what ways can the process be simplified to provide frictionless access to public Wi-Fi hotspots, for domestic users as well as foreign tourists?
The challenge here is that of over regulation and the belief that elaborate KYC requirements will solve problems of national security. What these requirements achieve is a lot of inconvenience for the general population while criminals are able to evade detection through fake IDs, burner phones, etc. as KYC requirements only create barriers without security payoffs. The fact that jurisdictions such as the UK, and other countries in Europe allow for purchase of SIM cards without KYC norms goes to show that there are effective ways of gathering intelligence that do not involve a KYC regime.
In terms of authentication, a healthy ecosystem will allow for both anonymous access to Wi-Fi hotspots as well as access through authentication.
There is a need for deregulation in order to allow anonymous access. For access through authentication, some providers may wish to have light KYC norms whereas others may choose to have rigorous KYC norms that are integrated with Aadhaar, India Stack, etc. The decision should ultimately be taken by the provider and thus deregulation is the key. The most frictionless model is the unauthenticated model that allows anonymous access, followed by a light KYC regime, and the model with the most friction is that with intensive KYC requirements.
The existing customer log-in procedure requirements that have been laid down by the Department of Telecommunications (DoT), Ministry of Communications, Government of India, which necessitate a user to provide a photo ID or to avail a one-time password (OTP) through SMS should be done away with for two reasons. First, it does not allow for a user to access the public Wi-Fi network without authentication and this leads to a loss of anonymity over that network when the user accesses any Internet-based services. Secondly, it assumes that all people will have access to mobile phones/smartphones. So far as the Indian scenario is concerned, this is certainly not the case in many households where only the head of the family, who is more often than not a male member, has access to such devices. Many individuals also use much simpler devices which may not be able to receive OTPs (see Raspberry Pi models, for example). Such a requirement would, in effect, deprive a large number of individuals from accessing public Wi-Fi services and would defeat the purpose of even setting up such networks.
Q7. Are there any challenges being faced in making payments for access to Wi-Fi hotspots? Please elaborate and suggest a payment arrangement which will offer frictionless and secured payment for the access of Wi-Fi services.
This question is backed by three assumptions. First, it assumes that only commercial provision of Wi-Fi is possible. Second, it assumes that "a (singular) payment arrangement" is the preferred approach. Third, it assumes that it is possible for regulators to predict the most appropriate business / technological model for payments online. This is best left to competition between commercial and noncommercial players in the market. The existing regulations from the RBI and laws that govern electronic transactions are sufficient. No specific regulations are required for access to Wi-Fi hotspots.
Q8. Is there a need to adopt a hub-based model along the lines suggested by the WBA, where a central third party AAA (Authentication, Authorization and Accounting) hub will facilitate interconnection, authentication and payments? Who should own and control the hub? Should the hub operator be subject to any regulations to ensure service standards, data protection, etc.?
"A central third party AAA (Authentication, Authorization and Accounting) hub" is antithetical to the foundational ethos of the Internet. Any attempt to foist that on Indian citizens will lead to a slowing down of wireless broadband adoption. From a cyber-security perspective this can only lead to large-scale and irreversible disasters and on the contrary policy measures should be taken to prevent centralization. For Indian cyberspace to be a resilient and free market, competition amongst both commercial and noncommercial players must be enabled for Authentication, Authorization and Accounting.
Q9. Is there a need for ISPs/ the proposed hub operator to adopt the Unified Payment Interface (UPI) or other similar payment platforms for easy subscription of Wi-Fi access? Who should own and control such payment platforms? Please give full details in support of your answer.
As we submitted in response to the earlier question: "a central third party AAA (Authentication, Authorization and Accounting) hub" is antithetical to the foundational ethos of the Internet. Aadhaar aka UID, India Stack and the Unified Payment Interface (UPI) are similar state sanctioned monopolies that only increase fragility and interfere with the functioning of markets. Also this question assumes that citizens will have to pay for access to WiFi. Therefore, we recommend that the government does not regulate payments beyond the existing measures in Banking Law.
Q10. Is it feasible to have an architecture wherein a common grid can be created through which any small entity can become a data service provider and able to share its available data to any consumer or user?
The government or the regulator should not be making recommendations on technical architectures. All that is required to the lift all limits on reselling or sharing data via law.
Q11. What regulatory/licensing measures are required to develop such architecture? Is this a right time to allow such reselling of data to ensure affordable data tariff to public, ensure ubiquitous presence of Wi-Fi Network and allow innovation in the market?
CIS would ask for forbearance in this regard, as anything else will be a case of over regulation.
Q12. What measures are required to promote hosting of data of community interest at local level to reduce cost of data to the consumers?
There are two measures that can be taken. The first is to change the public procurement policy to promote openness in the form of free and open source software, open standards, open content, open access, open educational resources and open data.
The second is to use public funds to shape the market and create publicly licensed material, or material available under exceptions and limitations of copyright law. To promote hosting data of community interest at a local level, public funds must be used to create intellectual property that can be freely licensed to the public. India already has a progressive copyright law, and the exceptions available under it should be seeded by the government through public funding. These exceptions include the statutory exception of copyright cess/ levy to broadband bills, exceptions for the disabled, libraries and archives and also education.
Q13. Any other issue related to the matter of Consultation.
Figure 2.2 of the Paper depicts Wi-Fi Monetization Pyramid based on Cisco's Wi-Fi Opportunity Pyramid.[2] As pointed out earlier, this ignores the possibility of non-commercial models. To quote Bruce Schneier, "surveillance is the business model of the Internet" [6] and this business model is one that should not be encouraged. The pyramid only allows for a for-profit model and it is inherently based on needless surveillance of users. While monetization may be one of the main incentives, it is by no means the only way to sustain such public Wi-Fi networks and for this reason, CIS recommends that such a depiction be discarded.
The balancing of this monetization pyramid is one of the requirements to put in place an effective public Wi-Fi network structure. Another issue arises with respect to the definition of Wi-Fi. Currently, spectrum is limited to the 2.4 GHz or the 5 GHz bands but this has been expanded upon to encompass the LTE (4G) Core during the GSMA, Wireless Broadband Alliance and Wi-Fi Alliance 3GPP following the Mobile World Congress in 2013. Such a set-up would allow for frequency hopping between bands and to prevent (or allow) this, the definition of Wi-Fi in the context of public Wi-Fi networks must be clarified.
[1] See Centre for Internet and Society, Unlicensed Spectrum Brief for the Government of India, June 2012; Available at http://cis-india.org/telecom/unlicensed-spectrum-brief.pdf
[2] Supra note 1.
[3] Example of shared spectrum being advanced in the US: " Specifically, the FCC adopted rules for CBRS, opening 150 MHz of spectrum in the 3550-3700 MHz band for commercial use. A Spectrum Access System (SAS), which is now in the process of being hammered out at the FCC with prospective coordinators, will make it possible to share spectrum where it hasn't been done before ." See, Monica Alleven, "Google, Intel, Nokia and more partner to advance U.S. 3.5 GHz CBRS", Fierce Wireless, (February 18, 2016) available at http://www.fiercewireless.com/tech/google-intel-nokia-and-more-partner-to-advance-u-s-3-5-ghz-cbrs .
[4] " Webpass buildings have radios capable of delivering up to 2Gbps both upstream and downstream… Anything beyond 5,000 meters will still work but you lose bandwidth… Webpass radios operate in many different frequencies, including the unlicensed 2.4GHz and 5GHz bands used by Wi-Fi, Barr said. Webpass also uses the 6, 11, 18, 23, 24, 60, 70, and 80GHz bands. These include a mix of licensed and unlicensed frequencies…" See, Jon Brodkin, "500 Mbps broadband for $55 a month offered by wireless ISP", arsTECHNICA, (June 18, 2015), available at: http://arstechnica.com/information-technology/2015/06/500mbps-broadband-for-55-a-month-offered-by-wireless-isp/
[5] Supra note 1, at 17.
[6] See Bruce Schneier, 'Stalker economy' here to stay, CNN, (Nov. 26, 2013, 17:53 GMT), available at http://edition.cnn.com/2013/11/20/opinion/schneier-stalker-economy/index.html
Airtel Open Network
Airtel also reportedly promises that its call centres and physical stores have been upgraded with tools based on the new interface to allow for easy reporting of network coverage issues.[1] Users can report issues or request new cell towers directly through the platform.
This is part of Airtel’s wider ‘Project Leap’, a Rs. 60,000 crore overhaul of the operator’s network, which claims to include a bevy of technological solutions aimed at improving service. Airtel claims that these include smaller cells, indoor solutions, Wi-Fi hotspots and upgraded base stations.
This is a praiseworthy move on Airtel’s part. No other major telecoms company has undertaken a similar initiative. There exist private alternatives such as OpenSignal[2][3] that provide cell coverage map, among others. However, these services make use of crowdsourced data collection from users to create their maps.
While the portal is very convenient, it is worth pointing out that the website itself contains no links to any open data -- merely the visualization of data. At the time of writing, there was no indication of any way to request access to raw data on network coverage. While OpenSignal and other alternatives provide APIs[4] or direct access to their database, we saw no similar services on the Open Network website. Without access to raw data the Open Network initiative isn’t really open, as citizens cannot make use of data in any way other than what is provided in the visualization. Raw network coverage data would be immensely valuable to public and private actors, researchers, and the general public alike.
Furthermore, while the portal indicates the quality of coverage in an area (including separate indicators for voice and data quality) it gives no indications as to how these categories were arrived at, or what a ‘Moderate’ level of data quality means empirically. It is also unclear how often the visualization is refreshed, or how old the data currently on display are.
In addition, the provisions for reporting issues through the platform seem to be lacking, and it is unclear how open Airtel will be with these. Expressing interest in hosting a cell tower takes you to an online form and a promise that ‘we will get in touch with you.’ By contrast, trying to report an issue takes you to a ‘network troubleshooting guide’ with some basic tech support information and a number to call an advisor.
The Open Network website promises that “the more open questions you ask, the more open answers we can give.” But the platform contains no fundamentally new or different mechanisms for reporting issues which take advantage of the crowdsourced ethos that Airtel lays claim to. While this is a very promising first step for the company, we hope that they continue to refine their website and display a meaningful commitment to the principles they have espoused here.Furthermore, while the portal indicates the quality of coverage in an area (including separate indicators for voice and data quality) it gives no indications as to how these categories were arrived at, or what a ‘Moderate’ level of data quality means empirically. It is also unclear how often the visualization is refreshed, or how old the data currently on display are. In addition, the provisions for reporting issues through the platform seem to be lacking, and it is unclear how open Airtel will be with these.
http://gadgets.ndtv.com/telecom/news/airtels-open-network-launched-on-app-to-show-coverage-quality-across-india-849280
Breakthroughs Needed For Digital India
The article originally published in the Business Standard on April 6, 2016 was also mirrored on Organizing India BlogSpot on April 7, 2016.
It helps to remind oneself of the scale of Digital India, its magnitude and sweep: to provide e-governance and other e-services everywhere, including 250,000 gram panchayats serving another 400,000 villages. That includes all the backbone and aggregation networks, and institutional processes to get there. The links indigitalindia.gov.in, such as http://www.bbnl.nic.in/, illustrate what's involved - and because many users are from households, the demand is for even more extensive networks.
The menu of services through Internet access is ambitious, and includes government services, health care, education, market information, financial services and so on. But it's the lack of basic access, of the "pipes" and "plumbing" for connectivity, that's the first, most difficult, yet essential step. Until this aspect is in place, getting results in areas such as efficient delivery of electricity, e-governance - including subsidies, education and skills, health care, manufacturing, and so on - is very much more difficult.
These services make up a robust wishlist, although their commercial underpinnings have yet to be designed and spelt out. As regards delivery, significant policy developments were reported last week. The Telecom Commission approved the operation of virtual network operators, allowing for operators who don't own networks or spectrum. They also recommended lowering spectrum usage charges from five per cent to three per cent of Adjusted Gross Revenues, while the exception of one per cent for Broadband Wireless Access spectrum continues. The bad news was in the Budget for 2016: service tax of 14.5 per cent on spectrum acquisitions, including through auctions.
But these are simply not enough. It's time the government accepts that Digital India is too distant, and they'd better formulate corrective measures. For example, even after 10 years with some success in setting up Common Services Centres (CSCs) in parts of the country, there doesn't seem to be a replicable template with sufficient momentum for ubiquitous connectivity. Worse, urban services remain constrained by too little spectrum that costs too much, with many impediments to augmenting capacity.
Consider factors affecting execution and delivery.
First, there's the telecommunications industry in its current beleaguered state. Its constituents have their backs to the wall for various reasons:
- Low revenues and high costs.
- Constrained access because of shortages - of networks; or of the means to build them, such as inexpensive rights-of-way, where laying fibre is feasible and viable; and where that isn't, shortage of inexpensive spectrum, and other cost-impediments such as local government charges for towers.
- Below-par services for current demand.
- Loads of debt, much of it incurred to pay for spectrum.
- Banks with little appetite for further lending to this sector, and
- Uncertain market sentiment.
For the government, there's an overriding imperative for revenue collection. The motivation is an unrelenting need for (legitimate) expenditure on infrastructure, governance, and basic welfare in a developing economy. This is compounded by execution on a massive scale that also involves changes in user behaviour, for instance, village institutions like CSCs that have yet to take root. Another level of complexity is because two-thirds of users are from non-urban areas requiring extensive wireless broadband, untested for rural delivery except for satellite television.
With the public and media suspicious of government and industry, resolving these aspects is more difficult because of their skepticism and opposition. There's a disinclination to evaluate policies objectively because of recent scams. It is increasingly obvious that plugging away at legacy plans with their failure rate won't do, and more effective ways must be framed to achieve connectivity. For solutions acceptable to the government, to service providers, and the public, essential criteria are transparency and fairness. Next, the approach must be practicable, yield reasonable government revenues, and have reasonable profit potential. All these elements are required for sustainable initiatives. Every step has to be thought through, with all government departments working together (another big ask) and with industry, from the basic strands: connective links, sustainable equipment at reasonable cost, and revenue streams (whether from user payments or partly from subsidies) for services and content to more than cover those costs.
TRAI Consultation on Differential Pricing for Data Services - Post-Open House Discussion Submission
Download the submission document: PDF.
Post-Open House Discussion Submission to TRAI
Dear Ms. Kotwal,
This is to heartily congratulate TRAI once again for taking several steps, including the Open House Discussion, to ensure that various opinions about the topic of ‘differential pricing for data services’ are presented and are responded to - and are all in full public view.
This brief note is to a) add to the positions and arguments submitted previously by the Centre for Internet and Society (CIS), India, b) put in writing our comments during the Open House Discussion (January 21, 2016), and c) respond to other comments shared at the same event. We have six points to share in this note:
- Forbearance is not an option: We are of the opinion that though the data services market has thus far been kept un-monitored and unregulated, and there are several reasons why this situation should not continue any more. Although the reality of differential pricing (that is data packets originating from different sources being priced differently by ISPs) was highlighted with the recent offering of zero rated packs, it is a general practice in the sector, as illustrated by widely available special/curated content packs for the user to consume data from a specified web-based source. It is not surprising that most such special/curated content packs involve an arrangement between the ISP and a prominent leader in the web-content/platform sector, such as Facebook and Twitter. Serious market distorting impacts of such arrangements are imminent if they are allowed to continue without any monitoring, enforced public disclosure, and regulatory actions by a public authority.
- Address differential treatment of data, and not only differential pricing: Pricing is only of the three ways in which data services can be treated differently by the ISPs depending upon the source of the data packets concerned. The other two ways are: a) differential speed, or throttling of some data packets and prioritisation of the others, and b) differential treatment of data protocols, for example, the blocking of peer-to-peer or voice-over-IP traffic by an ISP. If the public authority decides to only regulate differential pricing of data service, it is highly probable that ISPs may shift to other forms of discrimination between data packets - either in terms of prioritising some data packets over others based upon their origin, or blocking of specific protocols such as voice-over-IP to prevent the functioning of certain web-based services - and continue the market distorting impacts through these other means.
- Allow and define reasonable network management practices: Reasonable network management has to be allowed to enable the ISPs to manage performance on their network. However, ISPs may not indulge in acts that are harmful to users in the name of reasonable network management. Below is a set of potential guidelines to identify cases when discrimination against classes of data traffic in the name of reasonable network management can be considered justified and permissible:
- there is an intelligible differentia between the classes which are to be treated differently,
- there is a rational nexus between the differential treatment and the aim of such differentiation,
- the aim sought to be furthered is legitimate, and is related to the security, stability, or efficient functioning of the network, or is a technical limitation outside the control of the ISP, and
- the network management practice is the least harmful technical means that is reasonably available to achieve the aim.
- Establish an effective enforcement mechanism: TRAI must establish an enforcement mechanism that is open to users [and groups of users] and private sector actors as current forums are insufficient. Clear and simple rules must be established ex-ante, if they are violated - ex-post regulation must be undertaken on the basis of principles listed in the TRAI consultation paper, that is “non-discrimination, transparency, affordable internet access, competition and market entry, and innovation” [1]
- Take regulatory decisions now, but also conduct and commission further research to review and refine the decisions over a defined period of time
- Need for better collection and proactive disclosure of statistics: TRAI publishes quarterly performance indicators statistics collected from the telecom companies about telephone, mobile, and internet sectors in India [2]. It will be very useful for researchers and analysts, and allow for a much more informed public debate on the matter, if the content and form of such data are improved in the following ways:
Content:-
Please start collection (unless already done) and publication of not only data of average incoming and outgoing MOUs, average of total outgoing SMSs, Average Revenue Per User, and average data usage per GSM and CDMA subscriber, but distributions of the same in terms of user deciles (that is in terms of representative figures for each 10% section of users in ascending order of usage),
-
Provide granular data about data usage across service areas and service providers (the numbers on ‘average data usage’ and total ‘revenue from data usage’ provided at present are very insufficient for the state of public debate),
-
Provide data about internet subscriber base according to network technologies (for both wired and wireless) and the service providers concerned,
-
Provide data about IP-based telephony across service areas and service providers,
-
Provide data separately for the North Eastern states, and
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Provide granular data (separated from the corresponding state data) for all tier-1 cities.
Form:
-
Please do not publish the data only as part of the quarterly reports available in PDF format, but also as independent machine-readable spreadsheet file (preferably in CSV format),
-
Do not only publish quarterly data in separate files, but also provide a combined (all quarters together) dataset that would make it much easier for researchers and analysts to use the data,
-
In some exceptional cases, the data is not provided in the report directly but a diagram containing the data is published [3], which should be kindly avoided, and
-
Please publish these statistics as open data, that is in open standards and under open licenses.
-
Further, we request TRAI to explore possibilities of distributed sourcing of data, perhaps from the users themselves, about the actual network usage experiences, including but not limited to signal strength, data transfer speed (incoming and outgoing), frequency of switches between mobile (GSM and CDMA) and wi-fi connectivity, etc.
References
[1]. http://trai.gov.in/WriteReaddata/ConsultationPaper/Document/CP-Differential-Pricing-09122015.pdf.
[2]. http://www.trai.gov.in/Content/PerformanceIndicatorsReports/1_1_PerformanceIndicatorsReports.aspx.
[3]. http://www.trai.gov.in/WriteReadData/PIRReport/Documents/Performance_Indicator_Report_Jun_2015.pdf , sections 1.43 and 1.44 (pp. 31-32).
Connectivity: Let's Apply What We Know
The Op-ed was published in Business Standard on March 2 and cross-posted on Organizing India BlogSpot on March 3.
Past decisions deserve scrutiny when we can learn from them. The Budget expects about Rs 75,000 crore from spectrum auctions. What will be gained and lost? A study by the Telecom Regulatory Authority of India (TRAI) in 2005 has some pointers for policies going forward. These relate to decisions that enabled the proliferation of mobile telephony between 2003 and 2011. Other decisions had less salutary outcomes, which we would do well to recognise and avoid. Reviewing some of these could influence supportive policies, resulting in industry growth with enhanced user benefits and government revenues.
1. Reasonable fees increase govt revenues
The TRAI report cited below states that as a consequence of the New Telecom Policy 1999's (NTP-99's) shift to revenue sharing for licence fees and spectrum usage charges, government revenues soared. Collections through March 2007 greatly exceeded the auction payment commitments of Rs 19,314 that were given up.
The NTP-99 stirred controversy because of this opportunity loss, as a suspected sellout to the private sector. However, government collections actually turned out to be much higher through revenue sharing. Operators did indeed benefit, but for a good reason: explosive growth in mobile services. Users also benefited immensely through the rapid spread of widely accessible services at relatively low cost, as did government revenues.
In the chart below, the second column shows the auction fees foregone through March 2007 after adopting the NTP-99, amounting to Rs 19,314 crore. The third column shows annual government revenues collected, while the fourth column shows cumulative government collections. Compared to the opportunity cost of auction revenues foregone of Rs 19,314 crore, government collections by March 2007 amounted to over Rs 40,000 crore, more than double the "loss". With revenue sharing, collections did not stop in March 2007, and by March 2010 were nearly Rs 80,000 crore, or four times the "loss". By March 2015, the "loss" had been made up by more than eight times, by collecting over Rs 1.6 lakh crore.
Sources
Column 1 - 1999-00 to 2006-07:Indicators for Telecom Growth, Study Paper No. 2/2005,TRAI:http://trai.gov.in/Content/StudyPaperDescription/ShowPDF.aspx?LNK_PATH=WriteReaddata/StudyPaper/Document/ir30june.pdfColumns 2 & 3 – 2002-03 to 2009-10:Peformance Audit Report on the Issue of Licences and Allocation of 2G Spectrum by the Department of Telecommunications, CAG:http://www.performance.gov.in/sites/default/files/departments/telecom/CAG Report 2009-10.pdfColumns 2 & 3 – 2010-11 to 2014-15 are from the TRAI web site:http://www.trai.gov.in/Content/PerformanceIndicatorsReports/1_1_PerformanceIndicatorsReports.aspx
In hindsight, a combination of policies, market structure/competition, and technology resulted in enormous growth, much higher government collections, and tremendous user benefits. A key impetus was the adoption of the high-volume-low-margin approach of Henry Ford's "Model-T" strategy. This principle is an essential ingredient for achieving Digital India.
2. Unenforced regulations lead to chaos
In our conditions of deficit infrastructure with constrained capital, the need for collaborative access to capital-intensive resources cannot be sufficiently emphasised. It's either that or do without the connectivity, as we've had to so far.
Until around 1999-2000, only GSM technology was permitted in India for mobile telephony (Global System for Mobile Communications, originally Groupe Special Mobile). Thereafter, CDMA (Code Division Multiple Access) technology was introduced for wireless last-mile connections. While CDMA was supposedly restricted to the so-called Wireless-Local-Loop or WLL in place of fixed-lines for basic telephony, ambivalence/laxity in the enforcement of stated policies and the extension of this technology to mobile services led to unending contention and protracted legal battles between GSM and CDMA operators. While users benefited from price wars resulting from overly intense competition, both industry and users suffered considerable opportunity losses, as broadband development was constrained by a hypercompetitive environment roiled by unrelenting conflict. The marketplace was simply not conducive to the extension and evolution of broadband networks, particularly for less dense rural markets, so connectivity and services suffered.
Although several operators negotiated a degree of resource-sharing among themselves that was permitted, the industry couldn't converge on collaborative approaches to highly capital-intensive network building and service delivery, nor did the government devise supportive policies. Those in favour of unbridled market forces may approve of such intense competition. However, the cost of creating capacity and expanding networks is so prohibitive that, as a study on EU networks suggests, "as market conditions appear to be insufficient in most countries so far to trigger broad-scale NGA [Next Generation Access (Networks)] roll-outs in view of high investment requirements… and risks, identifying the right policy measures becomes crucial." It concludes, "public subsidies are the dominant policy alternative in white [unprofitable] areas, whereas access regulations can be the preferred policy in white or "grey" areas, where only monopoly structure or co-investment models lead to private investment."1 And this is for the Organisation for Economic Co-operation and Development.
The takeaway: good policies are essential, but are meaningful only if they are enforced. Otherwise, we all suffer the opportunity loss.
3. Global developments in sharing infrastructure
A major change globally has been a move towards sharing infrastructure. One motivator is broadband usage needs for greater capacity including for wireless delivery. The US pioneered a solution for better spectrum utilisation by permitting secondary sharing while primary holders retain rights of priority access. The FCC permitted commercial access to 150 megahertz in the 3550-3700 MHz band (3.5 GHz Band) in its ruling of April 17, 2015.2 Work is under way in Europe on Licenced Shared Access, eg, in 2300-2400 MHz.
Another motivator for sharing infrastructure has been the financial challenge of providing rural and suburban coverage. Shared networks enable more effective and efficient coverage through multiple operators in such markets. Operators save on capital and operating expenses, while gaining access and higher profit potential. For users, better services improve financial prospects, convenience, and access to services that are otherwise inaccessible, including in areas like health care, education and skills development, and government services. Network sharing equipment is now available to support multiple operators and technologies to make sharing a reality.
We need to stop obstructing ourselves with our own rules. Our regulations must instead enable us to make the most of our capital and potential.
1 "The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure - A Survey", Briglauer et al: http://ftp.zew.de/pub/zew-docs/dp/dp15003.pdf
2 Amendment of the Commission’s Rules with Regard to Commercial Operations in the 3550-
3650 MHz Band: https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-47A1.pdf
Bottled-Up National Assets
The article was published in the Business Standard on February 3, 2016 and also mirrored on Organizing India BlogSpot on February 4, 2016.
The productivity bottled up in assets in this country is mind boggling. The catch is that to be unleashed, the systems in which these assets are embedded must function effectively.
Take the road network. A study of Delhi-Mumbai truck traffic by Indian Institute of Management, Calcutta (IIM-C) and Transport Corporation of India in 2012 reported an average speed of just over 21 km per hour. Of 18 stops, 16 were to pay tolls manually with average delays of 10 minutes, constituting 80 per cent of total stoppage time. The study estimated that delays cost the economy Rs 27,000 crore ($5.5 billion at the time), with the additional fuel consumption estimated at Rs 60,000 crore ($12 billion at the time).
The Indian Highways Management Company Limited, set up in 2012, was tasked with implementing electronic toll collection (ETC) systems. It began with ICICI Bank, then added Axis Bank. ETC was introduced on the Delhi-Mumbai expressway in 2014. A dedicated ETC lane across the country was to have been completed by 2014, then 2015; perhaps it will be ready in some months. But, for full efficiency gains, the entire traffic flow needs ETC, not just a small segment. Also, anomalies such as the unwillingness of sections of the populace to pay tolls, or for political parties to exploit these tendencies, will need to be "sorted out". In effect, similar criteria will operate as in electricity distribution networks: Users must either pay for services - directly or with the help of subsidies, or forego infrastructure services of reasonable quality. If there is no enforcement of rules (quality service-supply and payment-collection), there will be a shoddy mess.
The underlying expressways already exist, but installing these systems require effort and investment. Imagine the productivity gains and reduced pollution if vehicles going through over 370 toll plazas in India don't have to stop, wait for 10 minutes on average to pay tolls, then accelerate back to cruising speed.
Inter-City Road Network Organisation
An important feature of the way road networks are organised and managed is the concept of common-pool resources, i.e., all public roads that do not require special tolls are part of a common pool, and are accessible to anyone who pays road taxes for the vehicle used. Another strength is that controlled-access roads with tolls connect to the rest of the road network. (There are negative aspects such as state registration, whereby states collect high fees for re-registering a vehicle on a change of domicile, but our focus here is on strengths).
Extending Similar Concepts to Communications
Now consider the infrastructure network of the communications system. Why don't we apply these beneficial aspects of operating our roads, namely, common-pool resources with access charges, to communications? There are several reasons, since transportation and communications have evolved in different ways. While they are customarily treated differently, these legacy issues can be resolved.
In communications, spectrum bands were separated into one lot for broadcasting and another for telecommunications, which began with voice and now extends to data. Concerns about anticompetitive dominance in the US led to spectrum auctions in the 1990s, initially to prevent concentration of power in the hands of press barons-cum-broadcasters. The emphasis changed, however, to embellishing government treasuries, barring exceptions as in the public-spirited Nordic countries, Japan,1 and China. In India, events following the 2G scam and a war-of-attrition death spiral in politics have resulted in a paroxysm of righteous inability to take a long-term view, which is a prerequisite for making constructive policy choices. But, as the economy stalls and dark days loom, perhaps the political and administrative leaders will muster the courage to understand our predicament and find a way to get off the beaten track leading to a morass.
We have economic uncertainty, a burgeoning working-age population that could either contribute to supply-and-demand or to disorder, high interest rates, and a heavily over-leveraged communications sector. The indebtedness is aggravated by previous spectrum auctions and constrained reach. Inadequate connectivity limits not only opportunity, but service provision and revenue potential.
The sector's urgent need is for more spectrum at less cost. More countries are pooling communications infrastructure including spectrum. Australia, Denmark, Spain, the UK, Sweden, and latterly, Brazil, Colombia and Mexico have different levels of shared infrastructure including spectrum (see chart below).2 Mexico is deploying a countrywide wholesale network using 700 MHz (megahertz). In India, restrictive regulations hinder effective spectrum sharing.
“In Latin America passive sharing has been the preferred approach, with Tower Cos. playing a key role…”
Source: Daniel Leza-TMGTelecom-12 March 2014: https://www.itu.int/en/ITU-D/Regulatory-Market/Documents/CostaRica/Presentations/Session8_Daniel%20Leza%20-%20Mobile%20Infrastructure%20Sharing%20-%2012%20March%202014.pdf
Studies by Columbia University and the Indian Institute of Science affirm that pooling infrastructure can maximise total returns as well as for individual operators, while users gain enormous benefits.3,4 The studies' apprehensions, regarding trust, willingness to cooperate, and transparency, would not arise if there were mandated pooling through consortiums of operators and the government, and charges based on metering.
A change in regulations alone could mandate that all existing spectrum and networks be freely shared for roaming, depending on capacity and efficiency. Second, unused spectrum, for example, in the 500-800 MHz band, could be made available for secondary sharing to operators paying for metered use. Shared control in consortiums, including the government, would ensure transparency. Similarly, government spectrum could be secondarily shared. Tax collections would increase with additional revenues, as they did dramatically after 2003, when reasonable revenue-sharing rates were introduced for licence fees. USO funds could subsidise rural delivery where necessary for ubiquitous access.
Instead, if we continue with auctions, the 700 MHz band where range and penetration could reduce costs by 70 per cent may remain untouched, because a countrywide five MHz block could cost Rs 55,000 crore, almost a third of industry revenues.
- "Spectrum Auction Strategy - Canada vs Japan", Lars Cosh-Ishii, August 7, 2013: http://wirelesswatch.jp/2013/08/07/spectrum-auction-strategy-canada-vs-japan/; [Added later: Japan telecommunications market, February 2016
http://www.eurotechnology.com/insights/telecom/] - "Mobile Infrastructure Sharing": https://www.itu.int/en /ITU-D/Regulatory-Market/Documents/CostaRica/ Presentations/Session8_Daniel Leza - Mobile Infrastructure Sharing - 12 March 2014.pdf
- "A coalitional game model for spectrum pooling in wireless data access networks", Saswati Sarkar, Chandramani Singh, Anurag Kumar, 2008: http://repository.upenn.edu/ese _papers /490
- "Cooperative Profit Sharing in Coalition Based Resource Allocation in Wireless Networks", Chandramani Singh, Saswati Sarkar, Alireza Aram, Anurag Kumar, 2012: http://www.ece.iisc.ernet.in/Rs anurag/papers/anurag/singh-etal11cooperative-resource-allocation.pdf
Millions of Indians Slam Facebook's ‘Free Basics’ App
This was published in Global Voices on December 29, 2015.
But the app has already been suspended, at least temporarily, as the Telecommunications Regulatory Authority considers new rules governing network neutrality. Depending on how they're written, the rules could render Free Basics a violation of the policy.
Free Basics, which has been deployed in 30 developing countries across the globe, gives users free access to websites that meet Facebook's technical standards for the application. The application does not give users access to the Internet at large. For open Internet advocates, this undercuts consumer choice and violates the principle of network neutrality, under which Internet providers are to treat all Internet traffic equally. Net neutrality allows users equal access to any website they want to visit, and gives website operators equal opportunities to attract visitors.
Facebook has responded to the pending regulation with an aggressive ad campaign both online and off. Over the last week, Facebook users across India (and some in the US) upon logging into the site have been greeted with notifications urging them to take action. The Free Basics page on Facebook now leads to a pleading form that asks users to contact the Telecom Regulatory Authority of India (TRAI) and voice their support for making Free Basics available in India. The company has also purchased a smattering of billboard advertisements across the country and taken out numerous two-page ads in leading national newspapers, as seen above.
The Indian Internet bites back
Indian netizens and activists have spoken out against the company's actions en masse, protesting heavily on social media, blogs and newspapers.
The grassroots open Internet group, SavetheInternet.in, that has been advocating for net neutrality in India throughout 2015, has launched an email campaign asking users to send letters to TRAI explaining how Free Basics violates net neutrality principles and propagates an inaccurate picture of the Internet for new users by placing it inside the confines of Facebook's application.
Multiple stand-up comedy groups have created videos explaining the regulatory debate and supporting net neutrality, which have gone viral:
Above, the third in a series of videos created by All India Bakchod, in partnership with SavetheInternet.in. Below, a video by East India Comedy.
The issue has also been hotly debated on Twitter, with technology and law experts leading the way.
Internet policy expert and lead staff member of the Center for Internet and Society in Bengaluru Pranesh Prakash tweeted:
New Delhi-based technology lawyer Mishi Choudhary, who leads the legal team at the Software Freedom Law Center, tweeted:
The Free Software Movement of India, a non-profit promoting use of free software and its philosophy in India via their local chapters, also has taken the campaign to the streets where the volunteers raised public awareness about Free Basic's adverse side.
Apart from local experts and activists, companies like Reddit, Truecaller and Indian e-commerce platform Paytm have publicly shared their opposition to Facebook's actions.
Facebook targets open Web activists
Facebook is paying close attention to civil society opposition to its activities in India. Across the globe, the company's Free Basics page now opens to a plea for users to contact TRAI, and includes a statement that directly targets open Internet advocates, suggesting that their motives are somehow driven by financial incentives:
…Free Basics is in danger in India. A small, vocal group of critics are lobbying to have Free Basics banned on the basis of net neutrality. Instead of giving people access to some basic internet services for free, they demand that people pay equally to access all internet services – even if that means 1 billion people can't afford to access any services.
SavetheInternet.in explicitly states in their About page that they are entirely volunteer-run and have no affiliation with any political party in India or elsewhere.
Users also have tweeted screenshots alleging that Facebook is restricting access for individuals sending messages opposing Free Basics. This has not been confirmed, but the tweets have only further stoked public frustration with the company.
Zuckerberg vs. SavetheInternet
On December 28, Facebook CEO Mark Zuckerberg penned a piece in the Times of India arguing that Free Basics will help “achieve digital equality for India,” and claiming that the initiative “isn’t about Facebook’s commercial interests.” India represents the world's largest market of Internet users after the US and China, where Facebook remains blocked.
In response, Nikhil Pawa, founder of online portal MediaNama and a volunteer with Savetheinternet.in, authored a critical opinion piece in the same newspaper:
[…] Why hasn’t Facebook chosen the options that do not violate Net Neutrality? For example, in India, Aircel has begun providing full internet access for free at 64 kbps download speed for the first three months….In Bangladesh, Grameenphone users get free data in exchange for watching an advertisement. In Africa, Orange users get 500 MB of free access on buying a $37 handset…
[…]
Facebook is being disingenuous — as disingenuous as the company’s promotional programmes for Free Basics to its Indian users — when it says that Free Basics is in conformity with Net Neutrality.
Pawa also quoted Naveen Patnaik, Chief Minister of Indian state of Odisha, who wrote to TRAI supporting net neutrality. “If you dictate what the poor should get, you take away their right to choose what they think is best for them,” he wrote.
“If you dictate what the poor should get, you take away their right to choose what they think is best for them.”
Writing for Quartz, technology critic Alice Truong expressed similar sentiment: “Zuckerberg almost portrays net neutrality as a first-world problem that doesn’t apply to India because having some service is better than no service.”
For Mahesh Murthy, an Indian venture capitalist and self-described net neutrality activist, it all comes down to revenue. On the Wire, Murthy offered untempered criticism of Facebook and Zuckerberg's efforts to appease the country's leaders:
[..] Unlike Facebook, who tried to silently slime this thing through last year when it was called Internet.org, and then are spending about Rs. 100 crores on ads – a third of its India revenue? – to try and con us Indians this year again. This is after we’d worked hard to ban these kind of products, technically called “zero rating apps” last year.[..] This Facebook ad [spread] doesn’t include the full-on Mark Zuckerberg love event put up for our Prime Minister when he visited the US, aimed again at greasing the way for this Free Basics thing through our government.
The Free Basics debate: Trai has a point in imposing temporary ban on net neutrality
The article was published in FirstPost on December 24, 2015.
But net neutrality regardless of your preferred definition is a very complex regulatory question and there is no global or even national consensus on what counts as relevant evidence. To demonstrate the chain of causality between network neutrality violations and a variety of potential harms - expertise in a wide variety of fields such as economics, competition law, telecom policy, spectrum allocation, communications engineering and traffic management is required. Even with a very large research budget and a multidisciplinary team it would be impossible to predict with confidence what the impact of a particular regulatory option will be on the digital divide or innovation. And therefore the advocates of forbearance say that the Indian telecom regulator — Trai — should not regulate unprecedented technical and business model innovations like Facebook's Free Basics since we don't understand them.
Till recently I agreed with this empirical line of argument. But increasingly I am less convinced that scientific experiment and evidence is the only basis for regulation. Perhaps there is a small but necessary role for principles or ideology. Like the subtitle of Nassim Nicholas Taleb's book, we need to ask: How to Live in a World We Don't Understand. Let us take another area of technological regulation – cyber security. Do we really need to build a centralised database containing the passwords of all netizens and perform scientific experiments on it to establish that it can be compromised? A 100 percent centralised system has a single point of failure and therefore from a security perspective centralisation is almost always a bad idea. How are we so sure that such a system will be compromised at some date? To quote Sherlock Holmes: “Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.” Decentralisation eliminates the possibility of a single point of failure thereby growing resilience. The Internet is perhaps the most famous example. It is not necessarily true that all decentralized systems are more secure than all centralised system of a decentralized network but it is usually the case. In other words, the principle of decentralisation in cyber security does not require repeated experimental confirmation across
markets and technologies.
To complicate matters, the most optimal solutions developed using economics and engineering may not be acceptable to most stakeholders. Professor Vishal Misra has provided a Shapley Value solution using cooperative game theory in the multi-sided market to determine how surplus should be divided between three types of ISPs [eyeball, transit and content] and Internet companies using transparent paid transit arrangements. But a migration from the current opaque arrangement to the Misra solution may never happen because Internet companies will resist such proposals and are increasingly getting into access provision themselves through projects like Google Fibre and Loom. Walter Brown from South African Communications Forum proposes that billing by minutes for phone calls and billing by message for SMSes should be prohibited because on 4G networks voice and text messages are carried as data and price is the best signal to consumers to ensure optimum use of network resources. This according to Walter Brown will eliminate the incentive for telcos to throttle or block or charge differently for VOIP traffic. Again this solution will not be adopted by any regulator because regulators prefer incremental changes with the least amount of disruption.
So given that we only have numbers that we can't trust - what should be some of the principles that form the bedrock of our net neutrality policy? To begin with there is the obvious principle of non-discrimination. The premise is simple – anyone who has gate-keeping powers might abuse it. Therefore we need to eliminate the possibility through regulation. Non-exclusivity is the result of non-discrimination and transparency is its precondition. That can also be considered as a principle and now we have three core principles to work with. Maybe that is sufficient since we should keep principles to the bare minimum to keep regulation and compliance with regulation simple. Some net
neutrality experts have also identified fairness and proportionality as additional principles. How do we settle this? Through transparent and participatory policy development as has been the case so far. Once we have principles articulated in law - how can we apply them to a specific case such as Facebook's Free Basics? Through the office of the appropriate regulator. As Chris Marsden advocates, net neutrality regulations should ideally be positive and forward looking. Positive in the sense that there should be more positive obligations and incentives than prohibitions and punitive measures. Forward looking in the sense that that the regulations should not retard or block technological and business model innovations. For example zero-rated walled gardens could be regulated by requiring that promoters such as Facebook also provide 50Mb of data per day to all users of Free Basics and also by requiring that Reliance provides the very same free service to other parties that want to compete with Facebook with similar offerings. Alternatively, users of Free Basics should get access to the whole Internet every other hour. All these proposal ensure that Facebook and it business partners have a incentive to innovate but at the same time ensures that resultant harms are mitigated.
Just to be absolutely clear, my defense of principle based regulation does not mean that I see no role for evidence and research. As regulation gets under way – further regulation or forbearance should be informed by evidence. But lack of evidence of harm is not an excuse for regulatory forbearance. India is the last market on the planet where the walled garden can be bigger than the Internet – and Facebook is sure giving it its very best shot. Fortunately for us Trai has acted and acted appropriately by issuing a temporary prohibition till regulation has been finalised. Like the US, coming up with stable regulation may take 10 years and we cannot let Facebook shape the market till then.
Gauging Users' Reactions Towards Zero Rating
I would like to thank Amba Kak, on whose research the survey was conducted.
Zero-rating is the practice of not counting (aka “zero-rating”) certain traffic towards a subscriber’s regular Internet usage. There are different types of zero-rating that exist in the market.[1] For example, Facebook Free Basics or Internet.org as it was formerly known is a platform which provides limited content to subscribers, free of cost.[2] Airtel Zero is another such platform that provides free content to subscribers. Instead of charging these subscribers, the providers who choose to get on the platform are charged.[3]
Social media packs offered by major telecom companies are another variation of zero-rating. For a fraction of the price of regular data plans, users have access to apps like Facebook and Whatsapp. As per the Airtel website, a Whatsapp pack that allows 200 MB of Whatsapp for a month costs INR 46 in Karnataka.[4]
I conducted a small survey in Bangalore to determine the effects these limited social media packs have on users. I conducted interviews that were spread over five days in three different localities in Bangalore. I interviewed eight people and five recharge shops about their take on these limited packs.
I targeted two groups of users: new users of the Internet, and early adopters. The group of interviewees comprised of three university students, two shopkeepers, and three watchmen. I also talked to recharge shops in the neighbourhoods of the interviewees.
Through my research, I wanted to understand how users reacted to these social media packs, and gauge the popularity of these packs. This is where feedback from recharge shops would have been useful, however, what was surprising was that none of the shops I talked to offered these plans. Two out of the five shops had not even heard of Facebook or Whatsapp packs.
The fact that recharge shops did not offer these services made it difficult to identify subscribers of limited packs. I instead decided to talk to users of mobile internet, and discern their interest towards such packs. My questions followed a specific format: I’d find out which service provider the user subscribed to, their billing structure, their internet browsing patterns, whether they had heard of limited packs, and their interest towards such packs. Out of the people I interviewed, only three expressed interest towards these packs, Whatsapp in particular. For two of them, Whatsapp was the only service they used on their phones, and a Whatsapp pack seemed more useful to them than a regular data pack.
I also wanted to find out how much of an effect price played on the users while they chose a data plan. Even though a limited pack is substantially cheaper than a regular[5] data plan, six out of the eight users said they would choose an all-access data pack. Three of these six users expressed wariness towards such plans as they found the billing structures confusing. They were nervous about the possibility of being charged unfairly high rates in the accidental case of accessing services that were not provided by the limited packs. Further, three of the others were of the opinion than a regular data pack with full access to the internet was preferable to the limited access services provided by these packs.
From these interviews, one can assume that knowledge of these limited packs is low among both users and recharge shops, and the takers for the same are minimal. It would be hasty to jump to the conclusions from this admittedly anecdotal evidence, keeping in mind the small pool of interviewees, but it raises interesting questions with no easy answers: how great a factor is price for the users while choosing limited packs over regular internet packs? Perhaps more importantly, do these packs confine users to the walled garden, or will they venture out of it in order to access the whole Internet? [6]
My findings explore a tiny proportion of what users think about these plans. However, there is a long way to go for policy and regulation decisions.
[1]. The Background Paper to CIS Submission for TRAI Consultation on Regulatory Framework for OTT Services which can be found here: http://trai.gov.in/comments/24-April/Attachments-75/2015-04-24_CIS-background-paper_Net-neutrality.pdf
[2]. Facebook, Reliance Communications launch Internet.org in India by Nimish Sawant for Firstpost
[3]. Airtel Offers Customers Free Access to Select Apps With 'Airtel Zero'
[4]. The tariff rates can be found here.
[5]. For example, an Airtel Whatsapp pack is less than half the price of a one month 2G connection
[6]. Zero for Conduct by Susan Crawford for Backchannel
The Buzz Around TV White Space
The article published in the Business Standard on November 4, 2015 was mirrored in Organizing India Blogspot on November 5, 2015.
One such category is unused/underused TV spectrum or "TV White Space" (TVWS). Despite growing demand, operators face bleak prospects as they struggle to deliver, starved of spectrum and infrastructure. Their dilemma is how to extend delivery capability without choking on buying spectrum so precious it's like an albatross around their necks, leaving little capital for densifying and extending their networks.
There's a war brewing around wireless broadband trials using TVWS in India, years after completion in other countries. These frequencies are most effective for long-range broadband. Mobile operators are watchful of developments such as Microsoft getting preferential access, triggered by announcements of its partnership with the Education and Research Network (ERNET) for countrywide rural broadband. Equipment suppliers also seem apprehensive of developments that could lead to swathes of spectrum being "unlicensed", reducing markets for their established products for licensed spectrum.
This article aims to clear some of the misinformation to facilitate policies for Digital India.
What is "TV White Space"?
There's confusion and disinformation about what TVWS is. Quite simply, TVWS is unused TV spectrum, or TV bands devoid of TV signals. The meaning derives from the areas on a page without print or pictures. Microsoft calls [the technology developed for] it "White-Fi", while some call [the technology developed for] it "super Wi-Fi".
Even bands broadcasting TV programs can have underutilised sections that can carry broadband, as pioneered by researchers at Rice University in Houston, Texas. Rice has a system that uses TV bands for both broadcasting as well as broadband.1 According to researchers, although the 400 to 700MHz band is used for broadcasting TV in many US cities, its capacity is largely underutilised because of alternative ways of accessing TV signals, such as through cable, satellite, or Internet TV. Therefore, incorporating Rice's technology in TV sets or remote equipment could significantly expand the urban reach of "super Wi-Fi", and not restrict it to rural areas.
Is there any TVWS in India? Some say there isn't!
Studies across the country show that over most of it, unused TV spectrum (white space) amounts to 85 to 95 per cent of TV spectrum.2,3,4 Studies excluding northern India show that in over a third of the area, a large band -- 470 to 585 MHz -- is available for alternate use.2,4
An odd controversy has been created about whether this is "white space" or not, precisely because the spectrum is largely unused.5 The convoluted semantics are mystifying, because white space is by definition unused broadcast spectrum. The National Frequency Allocation Plan already designates this band for fixed or mobile wireless, in addition to TV. In other words, without changes in allocation, operators can share TV spectrum on a secondary basis, as in the USA, the UK, and Singapore.
Regarding spectrum usage charges, as with any infrastructure, it is much more beneficial in the public interest to provide affordable services first and to collect government fees and taxes later, than to front-load auction fees and have no services at all (imagine road systems if up-front charges had to be paid for the right to build them). Overall benefits from Digital India, which is impossible in the foreseeable future without low-cost wireless broadband connections to the NOFN and other backbone networks like ERNET, will far exceed cash collections from auctions.
Proponents of auctions suggest that TVWS be reallocated as cellular spectrum and auctioned. Their reasons: (a) The transfer of public property to private operators; (b) Transparency and fairness; and (c) Government collections. This reasoning is false and misleading, because: (a) No transfer is required, as all operators can get secondary access equitably through a consortium approach; (b) This ensures transparency and fairness; and (c) Government collections from productive use will far exceed any auction collections, as evidenced by licence fees: in 2005, estimated auction fees lost until March 2007 were Rs 20,000 crore, whereas actual collections were double, at Rs 40,000 crore; collections by March 2010 were Rs 80,000 crore, in addition to the public benefits of better services.
Should TVWS be used only for 3G & 4G?
Another negative argument is the insistence that TVWS should be auctioned for 3G and 4G. Whereas Digital India needs low-cost wireless broadband, especially for long-distance links in rural India, because of the high cost and difficulty of building and maintaining fibre or wired networks in difficult terrain, and/or in sparsely populated areas. Therefore, access to TVWS needs to be bundled with the National Optic Fibre Network/BharatNet, and other shared backbone networks like ERNET. Policies should permit different network design scenarios including transmission power and purpose. Point-to-point links are needed over long distances in place of fibre or microwave, and broad coverage is needed for contiguous areas like industrial developments, campuses, commercial complexes, or rural communities. At the user end, TVWS could interface through cellular (3G or 4G) or Wi-Fi transceivers.
TVWS does need tight radio filters (unlike Wi-Fi) to minimise interference, the underlying consideration that drives spectrum management. There's also need for varying power specifications depending on the network design and purpose as described above, and policies for unlicensed sharing using geolocation databases, as defined by the US FCC (Federal Communications Commission).
To be most beneficial, it is not important to extract the maximum carrying capacity from TVWS in every location, as in the misplaced number-of-subscribers-linked spectrum policy some years ago. Rather, the objective for Digital India is to use this technology in combination with others for the purposes people need, namely, for affordable broadband wherever they are, while mitigating radiation hazards. This is essential for India to get its basic communications infrastructure.
Shyam (no space) Ponappa at gmail dot com
1. http://news.rice.edu/2015/07/13/rice-tests-wireless-data-delivery-over-active-tv-channels-2/, Jade Boyd, September 5, 2014.
2. IIT-Hyderabad studied TVWS in southern India from 2009, shared findings with the government/other IITs from 2011, and published in 2014:http://link.springer.com/chapter/10.1007/978-3-319-08747-4_3#, Kalpana Naidu et al.
3. http://www.cse.iitd.ernet.in/~vinay/papers/coral13.pdf, Pradeep Kumar et al, June 2013, IIT-Delhi.
4. arXiv:1310.8540v1 [cs.IT], Gaurang Naik et al, 31 October 2013, IIT-Bombay.
5. https://www.linkedin.com/pulse/tv-whitespaces-how-white-spaces-parag-kar;http://www.financialexpress.com/article/fe-columnist/editorial-beware-the-white-spaces/146355/
Digital India - Now to Work
The article was published in the Business Standard on October 1, 2015 and mirrored in Organizing India Blogspot on October 2, 2015.
The announcements are certainly promising. For instance, that Indian Railways will provide Wi-Fi services at 500 railway stations over the next few years. Google's support tendered by CEO Sundar Pichai offers new hope that this will happen. Other promising announcements include Microsoft CEO Satya Nadella's announcement of cloud-based services from India, and connectivity at the village level through TV White Space (unused broadcast spectrum), and Qualcomm CEO Paul Jacob's $150-million fund for start-ups in India.
There have been announcements like these before. For instance, the Railways announced Wi-Fi projects for years, with modest achievements. For details, see "A history of Wi-Fi and Indian Railways from 2006 to Infinity (maybe)". [See http://www.medianama.com/2015/02/223-a-history-of-wi-fi-and-indian-railways-from-2006-to-infinity-maybe/, Riddhi Mukherjee, February 27, 2015].
What's troubling is that in terms of ground realities, except for TV White Space for broadband, there's little evidence of a systematic approach to problems besetting communications, and changes in policies to solve them. Everyone seems carried away, and this is as true of most of the media and the commentariat as it is of the politicians. But informed, systematic efforts at solutions are absolutely essential to achieve these aspirations.
Take the ingenuous comparisons of Silicon Valley with Bengaluru, with the latter being described as "nearly there". Such election rhetoric from former US Senator and Secretary of State John Kerry is one thing, but our savvy media folk should know better. People who visit Silicon Valley from India, or those who are based there and occasionally visit India, can't be blind to the stark differences. One is a place where the basics related to living and functioning effectively actually work well; the other isn't. One has potholed streets with garbage, decrepit or nonexistent sanitation, and chronic power cuts; the other doesn't. It's as simple as that.
This leads to another observation that's tossed off too easily, about less need for government. Blithe statements that government needs to be reduced, or to get out of the way and let the private sector function, are often made with apparently little understanding of what governments do before getting out of the way. Those essential services in Silicon Valley and elsewhere that function seamlessly and are taken for granted? That's what governments can do. In other words, that is government's responsibility: to provide, apart from security and law and order, the infrastructure services and organisation of communities, markets and financial systems that enable citizens to function effectively and live well. Yes, markets are indeed planned and structured in order to function well.
The data on broadband at the end of 2014 in the Broadband Report 2015 by the ITU and Unesco suggest that India is not doing too well compared with its developing neighbours in Asia (see chart at http://www.broadbandcommission.org/ documents/reports/bb-annualreport2015.pdf). Our leadership and government need to confront this reality, and apply themselves to reforms to improve conditions. Broadband subscriptions as a percentage of our population trail most countries, and the percentage of individuals using the Internet is at the bottom of the pack, with Myanmar, Bangladesh, Pakistan and Nepal.
To make Digital India a reality, here's what the government needs to do:
- Trials using TV White Space (TVWS, or unused broadcast spectrum) for broadband are finally under way, after years of struggle to get them going. If they work out, policies must be framed quickly for this spectrum to be bundled with fibre backbones such as BharatNet (the erstwhile National Optic Fibre network), and licensed service providers given access at reasonable cost.
- Policies need to be formulated with government and operators working together, instead of as adversaries. This will increase the probability of success, as the private sector can be convinced of and contribute to practicable methods that they accept.
- Policies for sharing spectrum can be extended to other under-used spectrum held by the government and Defence (secondary sharing, as in the USA), and to networks as well. This will facilitate broad, contiguous spectrum bands that are essential to support rising data usage that is affordable. Policies must also enable authorised operators to access all networks, fostering competition while increasing revenue potential and reducing costs. The data on broadband at the end of 2014 in the Broadband Report 2015 by the ITU and Unesco suggest that India is not doing too well compared with its developing neighbours in Asia. Our leadership and government need to confront this reality, and apply themselves to reforms to improve conditions.
- The TVWS devices are manufactured by relatively small companies abroad with the exception of Huawei, which acquired Neul, one of the pioneers in the UK. Indian innovators can produce such devices locally, but only if they have a supportive ecosystem. That means sufficient continuing orders to create revenues for sustainable profits and cash flows. In a market like India, such orders need government support until new policies are in place and the demand is established. Once that happens, private enterprises can compete.
For instance, a chip designer start-up in Bangalore with designs for TV and broadband cards using TV White Space has had to scramble to manufacture complete products to bring their prototypes to market. Without sustained buying, they'll languish like other device manufacturers overseas, with episodic sales to narrow markets. That's because developing economies are likely to be bigger markets for these devices than developed economies, but only after policies allow deployment; secondly, there's insufficient support in developed markets. The irony will be if Indian innovators can get only offshore prospects like Huawei as partners or investors. - Unremitting government effort in the systematic development of basic infrastructure services (at the primary level, besides communications, there's power, transportation, water and sanitation, basic health and education; at the secondary level: communities, markets and financial systems) will round out the potential for India as a producer economy as well as a large and growing market.
This is the work that now needs to get done: accept the reality of our infrastructure deficiencies, change our spectrum and network sharing policies, plan step-by-step, and execute for results.
Comments on the DoT Panel Report via MyGov
It is praiseworthy that the panel emphasizes the separation in regulatory terms between the network layer and the service layer. This also means that telecom carriers should be regulated differently from OTT services.
Licensing of Communication OTT Services
The proposal by the DoT panel of a licensing regime for communication OTT services is a terrible idea. It would presumptively hold all licence non-holders to be unlawful, and that should not be the case; as the panel itself notes, apps that lower the cost of communication are a welcome development and should be encouraged by the government and not made presumptively unlawful.
While it is in India's national interest to want to hold VoIP services to account if they do not follow legitimate regulations, it is far better to do this through ex-post regulations rather than an ex-ante licensing scheme.
A licensing scheme would benefit Indian VoIP companies (including services like Hike, which Airtel has invested in) over foreign companies like Viber, or free/open source technologies like WebRTC. The Universal Licence is designed for a world where all the licencees have an operational presence in India. This is not true of communications OTT services. Therefore a licensing regime would unjustly favour some services over others.
Further, VoIP services need not be provided by a company: a person can choose to run XMPP, SIP, or Mumble — all of which are protocol that support VoIP — on their own computers. Will a licensing regime force such individuals' many of whom may not be Indian nationals — to become licence-holders if they facilitate domestic communications within India? The DoT panel report doesn't say. This would also result in a licensing regime unjustly favouring some services over others.
The report also doesn't say how one would distinguish between OTT communication services and OTT application services, when many apps such as personal assistance apps like HelpChat, are centred around communications. It also does not mention what regulatory distinction exists between text communication services and video/voice communication services, or between purely domestic and international video/voice communications. Stating that certain telecom companies are currently earning most of their revenue from domestic voice traffic will not suffice as a regulatory, just as it did not suffice to say that VSNL's international telephony monopoly earned it a lot of money. Regulatory fairness is the important issue and not protecting specific business models. Thus, there is no rational distinction to be drawn. Even if the panel has some regulatory distinction that it has not stated, this is an impossibility to enforce. Much domestic IP traffic is 'round-tripped', with traffic leaving India and coming back in. How would the regulator propose to regulate that?
Will there be a revenue-sharing mechanism, as is currently the case under the Unified Licence? If so, how will it be calculated in case of services like WhatsApp? These questions too find no answer in the report.
Given these numerous objections and unanswered questions, the government would be well-advised not seek to license OTT communications services. Instead, it would be useful for the government to hold public consultations about:
1. What Universal Licence conditions makes sense in the world of IP-based services, and international services?
2. How can we frame ex-post regulations that address legitimate concerns? Is there overlap with provisions of the IT Act such as s.69, s.69B, s.79, and others?
3. How can we ensure that the regulatory burden for telecom players with respect to their being able to provide IP-based services that are equivalent to OTT communication services?
Net neutrality
While the DoT panel reiterates a number of times that the core principles of Net neutrality should be adhered to, it nowhere defines what these core tenets are. We suggest the following definition:
- net neutrality is the principle that we should regulate gatekeepers to ensure they do not use their power to unjustly discriminate between similarly situated persons, content or traffic.
The above definition applies to the way the ISPs treat consumers, treat interconnecting networks, as well as the way they treat traffic internally.
We agree with the panel that in that while Net neutrality should find place in a new law, for the time being Net neutrality principles can be enforced through the licence agreement between the DoT and telecom providers.
Traffic Management
It is unclear what precisely the DoT panel means by "application-agnostic" and "application-specific" network management. Different scholars on this issue — such as Barbara van Schewick and Christopher Yoo — mean different things when they use the word "application". Without a definition, it is difficult to say whether the panel's recommendation on that front are sound.
Instead, we suggest the following tests:
Discrimination between classes of traffic for the sake of network management should only be permissible if:
- there is an intelligible differentia between the classes which are to be treated differently, and
- there is a rational nexus between the differential treatment and the aim of such differentiation, and
- the aim sought to be furthered is legitimate, and is related to the security, stability, or efficient functioning of the network, or is a technical limitation outside the control of the ISP, and
- the network management practice is the least harmful manner in which to achieve the aim.
As for the provision of enterprise and managed services, which we more broadly term "specialized services", we would recommend:
- Provision of specialized services is permitted if and only if it is shown that
- The service is available to the user only upon request, and not without their active choice, and
- The service cannot be reasonably provided with "best efforts" delivery guarantee that is available over the Internet, and hence requires discriminatory treatment, or
- The discriminatory treatment does not unduly harm the provision of the rest of the Internet to other customers.
Lastly, we would recommend that the above regulatory guidlines only be applied against ISPs, and not against public providers of Internet connectivity, such as a library, a school, an airport, a hotel, etc.
Zero-rating
On the contentious issue of zero-rating, a process that involves both ex-ante and ex-post regulation is envisaged to prevent harmful zero-rating, while allowing beneficial zero-rating. Further, the report notes that the supposed altruistic or "public interest" motives of the zero-rating scheme do not matter if they result in harm to competition, distort consumer markets, violate the core tenets of Net neutrality, or unduly benefit an Internet "gatekeeper".
Much of the discussion around zero-rating has been happening around an assumption of common understanding of the phrase. Unfortunately, that is not true. There is no consensus as to whether a "special Facebok pack of 200MB for Rs.20" offered by a telecom company constitutes zero-rating or not. Without a working definition of zero-rating, not much progress can be made.
We propose the following as a definition:
- Zero-rating is the practice of not counting (aka "zero-rating") certain traffic towards a subscriber's regular Internet usage.
The zero-rated traffic could be zero-priced or fixed-price; capped or uncapped; subscriber-paid, Internet service-paid, paid for by both, or unpaid; content- or source/destination-based, or agnostic to content or source/destination; automatically provided by the ISP or chosen by the customer.
We believe that zero-rating can be non-discriminatory in nature, and such zero-rating should not be prohibited. Having a system with both ex-ante and ex-post checks is rather heavy-handed regulation, but since the issue is very contentious in India, we believe it might be merited.
We thank you for giving us this opportunity to comment.
Pranesh Prakash, Policy Director at the Centre for Internet and Society
More On Those Dropped Calls
The article originally published in the Business Standard on September 2 was mirrored in Organizing India Blogspot on September 3, 2015.
Will the government's variant of "speak softly and carry a big stick" deliver Digital India in a hurry? Unlikely, because the problem is an overloaded system with a too-spare design, and insufficient cash flows. Increasing call drops are a symptom of inadequate carrying capacity for the demands of traffic, from voice to data in 3G and 4G. These are structural problems, because the system doesn't generate sufficient investible funds; nor are conditions right to develop such investment capacity; nor are the prospects demonstrably healthy. The situation requires the policy changes outlined below, which only the government can bring about, as it has in the past.
A fundamental aspect of the problem is low spectrum availability. India's operators have 12-15 MHz, compared with a global average of 45-50 MHz. Leading countries have even more; for instance, operators in Seoul reportedly have 10 times more spectrum than operators in India. Limiting the spectrum available to operators compels them to invest more to deliver a given level of traffic and quality than if more spectrum were available.
There are other aspects as well:
- high charges for licences and for spectrum, 8+4 per cent of (adjusted) revenues in addition to auction payments,
- imported equipment paid for with a weak stream of local-currency revenues,
- changes in spectrum holdings that require adjustment in equipment after older spectrum assignments lapse and new spectrum has been acquired, and
- the burgeoning need for new investments for 3G and 4G services. Embedded in the latter is the additional overload caused by tower shut-downs and the difficulties in getting additional sites, apart from the need for more capital.
Add regulations that hinder spectrum trading and sharing, and we have a sector that is structurally weak and restricted in scope.
As for call drops, operators in developed markets experienced similar capacity pressures when there was very rapid growth in data usage, for instance AT&T in the US and O2 in the UK some years ago. The difference is that they were able to invest rapidly to shore up their networks. By contrast, Indian operators had to invest disproportionately in acquiring spectrum, leaving less capacity for investment in networks. For example, in 2014 operators in China reportedly invested $35 billion in 4G equipment, whereas in India, only $3 billion went into equipment. Most of its $32-billion investment - $29 billion, over 90 per cent - was for spectrum. There has also been the diversionary effect because difficult business conditions in the sector led to profits being invested elsewhere, instead of back into communications infrastructure. The difference in approach and functional capacity is stark: China is moving ahead with building high-speed data capability, while the struggle in India is with dropped calls and simply keeping users connected. The government, therefore, needs to facilitate conditions whereby operators invest substantial amounts every year.
For this to happen, the structure of high charges for spectrum and licences relative to earnings has to change, as do restrictive regulations. The monthly average revenue per user in India at the end of 2014 was of the order of Rs 110-120. Capital expenditure ranged from 13 to 15 per cent of revenues in 2014, rising to 20 per cent in 2015. The latter exceeds the percentage invested in the US - but the revenue in India is about 25 times less than the $50 revenue in America, and the US has had well-developed networks for decades. Meanwhile, the recent spectrum-sharing guidelines that restrict more than enable effective sharing epitomise our dysfunctional regulations.1 It is baffling why the government would issue such retrograde regulation if the goal is digital development, because these guidelines do exactly the opposite of what is needed.
Government versus Private Sector
Meanwhile, there has been an escalating war of words between the government and service providers. The latter are trapped in a vicious circle of heavy investment requirement with low revenue-generation capacity, as explained above. Breaking out of this trap is possible only if the government develops conducive policies, as it did with the path-breaking changes associated with the 1999 New Telecom Policy (NTP-99). The change at that time was from up-front licence fees to revenue-sharing. It fell short because the government's share was too high, and began to work only after 2003, when government charges were reduced. In like manner, the government needs to frame policies applying similar principles to spectrum, and ultimately to network infrastructure, so spectrum and networks become more productive.
Our problems arise from three sources: regulations and government charges, operator behaviour and responses, and public opinion and the perceptions and actions of the judiciary. The government can take the initiative through creating policies that facilitate investment and service delivery. Many changes are purely administrative, such as permitting unrestricted spectrum sharing without additional "conversion" charges, or reducing licence and spectrum charges. Surely the department of telecommunications, the finance ministry, and the prime minister's office understand the logic of higher net present values that accrue from incremental revenues to operators. Conversely, any restriction of revenues or opportunity loss reduces the government's share, resulting in lower net present values. For example, restricting 3G roaming or insisting on payments to convert administered spectrum before it can be shared limit revenues, resulting in opportunity losses.
The government needs to be persuasive while acting decisively, to influence operators and public opinion through well-formulated systematic initiatives. Tighter monitoring of quality, including dropped calls, and related penalties are needed - but balanced with constructive policies. These could cover enabling regulations such as for roaming and secondary spectrum sharing with the government, and in developing a consortium approach for active network sharing initiated by the government with broad private participation, led by a private-sector partner. Other potential areas include enabling, organising, and facilitating broadband through cable networks, and inducting technologies such as TV White Space and satellites.
This is where the rhetoric of leading Team India has to be walked and not just talked, to persuade and lead the sector to collaborate and not undercut institutional development.
Those Dropped Calls
The Op-ed was first published in the Business Standard on August 5 and mirrored in Organizing India Blogspot on August 6, 2015.
Public opinion is conflicted, wanting better services at low prices, fearful of the hazard of more towers, while also wanting operators to pay dearly for spectrum through auctions. The government asserts there's enough spectrum and operators need only to invest and deliver. Can these be resolved to get better services?
There are several elements in this situation relating to technology, to the regulatory aspects of administration (policies and regulations), or to management aspects (structure, organisation and processes). Understanding these and managing them will be crucial in devising solutions.
First, an overview from a lay perspective. An operator runs a number of "cell towers" connected together, as well as to other operators' towers (mobile networks) and fixed networks. A cell tower in its simple form - for one operator, covering one cell/area - comprises a base transceiver station (radio), antenna (mast), and other equipment. Radios need spectrum for wireless communication between towers, and subscribers linked to towers.
Apart from spectrum and licensing costs, the number of towers in an area drives the capital and operating costs, materials and energy used, and the environmental impact. As each tower covers a number of subscribers and spectrum is used for wireless connections, more subscribers need more spectrum. So, a given set of towers provides greater traffic-carrying capacity if there is more spectrum. Conversely, less spectrum requires more towers and equipment, which means higher costs and environmental impact. In other words, for a given frequency range (spectrum band) and set of towers and subscribers, a small set of broader bands can carry more traffic than can a large set of narrower bands.[1]
Calls get dropped or blocked if there is too little spectrum for the number of subscribers, because the calls exceed the spectrum's carrying capacity. Users get good reception if they are near towers, but if other towers are too close, interference from signals from those towers can reduce the capacity of available spectrum, and reception may also be noisy. A weak connection with a distant tower results in poor reception. Distance cuts both ways: a short distance from tower-to-user yields a good connection (strong signal), but other towers must be far enough to avoid interference (i.e., have weak signals for the user). For 900 MHz with a mast height of 10 metres, this tradeoff results in distances between towers of under 100 metres in Delhi because of the scarcity of spectrum, compared with 200 metres in Istanbul, 300 metres in Munich, or 350 metres in Berlin.[2]
An additional benefit of more spectrum is that peak-hour capacity increases, so that more traffic can be carried without calls being dropped or blocked over the same network configuration. Our problem is that we have many operators with narrow, non-contiguous slivers of spectrum. This further reduces the efficiency of the available spectrum.
A reduction of towers because of closure on account of public pressure or for environmental reasons creates genuine problems, but simply adding towers is only a partial solution, as it doesn't remedy the shortage of spectrum. One reason is interference resulting in the reduced capacity of available spectrum - because cells in our urban centres are less than 100 metres apart, much less than in other countries, because sufficient commercial spectrum hasn't been made available. Therefore, more towers alone will cause spectrum to be used less efficiently, but won't reduce dropped calls arising from insufficient, fragmented spectrum. Also, adding towers is expensive, and is detrimental to the environment.
Operators deal with scarce spectrum by deploying more base stations per unit area, and also by using advanced technologies such as adaptive multi-rate codecs and synthesised frequency-hopping. In 2008, Indian operators were among the few worldwide to adopt such techniques, while having the smallest outdoor sites and heaviest traffic densities per MHz.[3] This results in higher costs relative to revenues.
Contrast with China
Comparing the approaches taken by China and India, there's little doubt of the need for a change in our approach. China provided operators with low-priced spectrum to scale up and drive economic growth, among other forms of support. Despite foreign holdings, it hasn't imposed substantial fees. India brought in more operators than other markets, didn't provide as much commercial spectrum, fragmented what it had, and priced it out of sight. Consequently, substantial spectrum is idle with the government, while large operators with very little spectrum and the legacy of underdeveloped fixed networks have over 100 million customers each, with high voice and growing data usage. This situation is likely to worsen as more spectrum holdings come up for renewal.
Efficient data transmission requires even broader bands. The charts below show how capacity increases per MHz with broader bands, and the bandwidth in terms of megabits per second (Mbps) needed for services.
Capacity Increases with Broader Bands
Possible solutions
One possibility is to adopt policies and regulations that facilitate spectral efficiency, e.g., allowing roaming and spectrum trading. This wouldn't mitigate the problem of excessive capital expenditure on spectrum auctions that exceeds investment in networks (according to an industry estimate), but would probably improve spectrum utilisation.
Another is to share all spectrum through pooling, allowing common-carrier access on payment to Radio Access Networks including spectrum. If charged only a reasonable revenue share with incentives such as reductions for rural services, there is likely to be explosive growth in broadband delivery with an increase in government revenue, if the organisation and coordination is done right. The government needs to bring together operators and other stakeholders, including the Ministries of Communications & Information Technology and of Information & Broadcasting, and with expert help, work out how to organise and deliver the promise of Digital India.
[1]. An assessment of spectrum management policy in India, 2008; p 10: http://www.aegis-systems.co.uk
[2]. For GSM, there is a 50 per cent increase in the capacity per MHz using two channels of 12 MHz each instead of two channels of 6 MHz each. Ibid., 15.
[3]. Ibid.,28.
Funding of National Optic Fibre Network (NOFN) - Who's Accountable?
The National Optic Fibre Network (NOFN) is a project launched by the Government under their 'Digital India' initiative. Implementation of the project is being undertaken by Bharat Broadband Nigam Limited (BBNL), a Special Purpose Vehicle (SPV) created for the project. [1] The project, launched in 2011, has seen multiple delays. The recent Expert Committee report on the project has now set an end-date for December 2016. It has also proposed an increase in the funding from 20,000 crore to 72,000 crore approximately. This is greater than a threefold increase.[2] The Universal Service Obligation Fund (USOF) provides all the funding for the implementation of the project under an agreement between them and BBNL. [3] The close relationship between the two entities through their parent entity, however, can lead to a lax oversight of the entire process.
Universal Service Obligation Fund
USOF, established in 2002, provides effective subsidies to ensure telegraph services are provided to everyone across India, especially in the rural and remote areas. It is headed by the USOF Administrator who reports to the Secretary, Department of Telecommunications (DoT). [4] Funds come from the Universal Service Levy (USL) of 5% charged from all the telecom operators on their Adjusted Gross Revenue (AGR) which are then deposited into the Consolidated Fund of India, and require prior parliamentary approval to be dispatched.[5] The USOF works through a bidding process, where funds are given to the enterprise quoting the lowest bid. However, the funds for NOFN were made an exception to this process since BBNL was the sole party involved in the implementation having being specifically created for it.[6]
Agreement to Transfer Funds between USOF and BBNL
The agreement[7] between USOF and BBNL provided for USOF to cover all the expenses of BBNL undertaken while working on NOFN project. It empowered USOF, amongst other things, to:
- Revoke the Agreement in Public Interest within 5 years from signing; and to re-new the agreement or not to re-new it
- Enforce Operating and Technical Condition upon BBNL while implementing the NOFN project
- Have the Right to Inspect, Test and Monitor the enforcement of such Conditions so imposed
Conflict of Interest between both parties
The Administrator of USOF functions as an attached office to the Ministry of Dot, and is required to report to them,[8] while BBNL is an SPV established under the DoT[9] and has an Memorandum of Understanding [10] with them. Since the parent entity of both the parties is the same, there is a definite conflict of interest. An analysis of USOF's largest and most ambitious program for mobile provisioning in rural areas showed slow progress due to[11]:
- Lack of Accountability arising from the relationship between the Government owned incumbent and the USOF Administrator
- No proper evaluation of USOF
- Non-ring fencing of the fund
- Poor quality project management
Lack of Review Mechanism with effective power
Similarly in NOFN, if no effective review mechanism is evolved to check the progress of the timeline and implementation of the projects, it may prove ineffective.[12] 3rd party review mechanisms have been suggested as an alternative to USOF mechanisms to ensure neutrality and efficiency[13] since the the agreement gives USOF the Right to 'Inspect, Test and Monitor', but there is no effective Review Mechanism available with the USOF to actually undertake the task. The ones available would also be working under the DoT and hence operate under a conflict of interest which may be misused to disburse funds even though they are not being used efficiently or in a timely fashion.
Other Funding Options - Private Actors and State Govts.
The Expert Committee also looked into two other funding options. Bringing Private Actors on Board in implementation of Phase II of the Project was the first.[14] This has been criticized as being unfair to Public Enterprises since they have been allotted the 'hard' areas while the Private Actors will get the 'soft' ones. [15] The abysmal record of Private Actors in Rural Areas has also been mentioned as a factor against them.[16]
The second suggestion is to bring in State Governments. Andhra Pradesh has already decided to opt for its own SPV to implement NOFN while Kerala and Tamil Nadu are considering it.[17] The problems with having multiple implementing bodies are:
- Transferring Funds to multiple bodies
- Having to track their work separately
- Lack of accountability for work done by them individually
Since a criticism of the current implementation mechanism has been based on the fact that 3 PSUs (BSNL, RailTel and PowerGrid) have been involved, having multiple SPVs would only add to the woes.[18]
The project, having been delayed multiple times, is now set for a December-2017 end. The funding for it has also been tripled. Hence, when we see that the funds are being given away so easily to BBNL and without any effective procedure to maintain the efficacy of the work done, it raises questions on the accountability of the Government regarding the fund which has been collected through revenue from all telecom operators (via USL). Therefore, a more open mechanism has to be ensured to reduce chances of bias towards BBNL by USOF, both having the same parent entity leading to conflict of interest between the two. This should be the focus right now, rather than introducing new funding options.
[1] 'Objectives, About BBNL' http://www.bbnl.nic.in/content/page/objectives.php accessed 2 July 2015.
[2] Yuthika Bhargava, 'National Opic Fibre Network - Revamp on Cards' (The Hindu, 30 May 2015) http://www.thehindu.com/business/Industry/national-optical-fibre-network-revamp-on-cards/article7261346.ece accessed 2 July 2015.
[3] 'Agreement For Support from USO Fund For Creation, Operation and Maintenance of the National Optical Fibre Network (NOFN) for Provision of Broadband Connectivity to the Panchayats to be executed by Bharat Broadband Network Limited (BBNL) Under Universal Services Obligation Fund, The Indian Telegraph (Amendment) Rules, 2012' http://www.usof.gov.in/usof-cms/GagendaPdf/NOFN_Agreement.pdf accessed 2 July 2015.
[4] 'About USOF' http://www.usof.gov.in/usof-cms/usof_home_contd.htm accessed 2 July 2015.
[5] 'USOF Brochure' http://www.usof.gov.in/usof-cms/USOF-Brochure.pdf accessed 2 July 2015.
[6] 'Indian Telegraph (Amendment of 2012) Rules, 1951' http://usof.gov.in/usof-cms/ActsRules/Indian%20Telegraph%20Rules%202012.PDF accessed 3 July 2015.
[7] 'Agreement For Support from USO Fund For Creation, Operation and Maintenance of the National Optical Fibre Network (NOFN) for Provision of Broadband Connectivity to the Panchayats to be executed by Bharat Broadband Network Limited (BBNL) Under Universal Services Obligation Fund, The Indian Telegraph (Amendment) Rules, 2012' http://www.usof.gov.in/usof-cms/GagendaPdf/NOFN_Agreement.pdf accessed 5 July 2015.
[8] 'Constitution, Powers and Functions of the Office of Universal Service Fund Administrator' http://www.usof.gov.in/usof-cms/usofsub/Constitution,%20Powers%20and%20Functions%20of%20the%20Office%20of%20Universal%20Service%20Fund%20Administrator.pdf accessed 6 July 2015.
[9] 'Company Profile' http://www.bbnl.nic.in/content/page/company-profile.php accessed 5 July 2015.
[10] 'Memorandum of Understanding 2015-16 with Department of Telecommunication' http://www.bbnl.nic.in/upload/uploadfiles/files/BBNL_Signed_Copy%20of%20MoU%202015-16.pdf accessed 6 July 2015.
[11] Rekha Jain & G. Raghuram, 'Role of Universal Service Obligation Fund in Rural Telecom Services: Lessons from the Indian Experience' http://www.iimahd.ernet.in/assets/snippets/workingpaperpdf/2009-06-03Jain.pdf accessed 2 July 2015.
[12] Ibid
[13] Ibid
[14] Mansi Taneja, 'Govt decides to rope in private players for NOFN project' (Business Standard, 15 January 2015) http://www.business-standard.com/article/economy-policy/govt-decides-to-rope-in-private-players-for-nofn-project-115011401190_1.html accessed 1 July 2015.
[15] Prabir Purkayastha, 'National Optical Fibre Network Project And the Expert Committee Report' (Peoples Democracy, No. 25, Vol. XXXIX, 28 June 2015).
[16] Ibid
[17] Mansi Taneja, 'National Optic fibre network: Govt to rope in state govts' (Business Standard, 29 May 2015) http://www.business-standard.com/article/economy-policy/national-optic-fibre-network-govt-to-rope-in-state-govts-115052900050_1.html accessed 4 July 2015.
[18] 'Trai: Optical fibre network project caught in red tape' (The Financial Express, 18 April 2015) http://www.financialexpress.com/article/economy/trai-optical-fibre-network-project-caught-in-red-tape/64699/ accessed 2 July 2015.
The Centrality of Cash Flows
The article was originally published by Business Standard on July 1 and also mirrored in Organizing India Blogspot on July 2.
Many of our politicians and bureaucrats and a large proportion of the public seem oblivious to how cash flows affect our political economy. This apparent absence of understanding (or flouting of fundamentals by opportunists who understand them but act in their own interests) shows up in many ways among all political parties in their approach to the basics: the provision and pricing of essential services such as security and law-and-order, electricity, broadband communications, transport, water, sanitation, and waste disposal. Without an understanding and acceptance of how essential cash flows are for providing these services, we can't realistically aspire to better living conditions. No matter how well or wealthy you may be, you still have to pick your way gingerly through the mess and the stench of your environs when you step out.
Cash flows are at the crux of the problems our governments face at the Centre and states, and that society is up against. They include all the legacy issues mentioned above of the inadequate infrastructure services that we endure, and extend even to problems such as the defence services pensions. While the National Democratic Alliance is not blameless, there are egregious instances among other political parties, such as the Aam Aadmi Party's (AAP's) actions on waste management and electricity supply in Delhi. The essential sticking points have been delayed (obstructed) cash flows, whether in paying sanitation workers or electricity distributors. These instances are mentioned only as indicative examples, as their processes hark back to the habitual practice of governments at the Centre and the states of delaying payments, whether it is fertiliser subsidies to manufacturers (a central government "habit" for decades), or setting realistic tariffs and making prompt payments to electricity distribution companies, as in the case of state governments running Delhi. Various parties - the Congress until 2014 and the AAP thereafter - have themselves been victims of the structural constraints of electricity generation plants with antiquated, inefficient equipment, as in the old coal-based plant at Badarpur, or efficient, modern plants using gas caught in an upward price spiral with domestic gas not being available, such as at Bawana.
In the communications sector,constrained cash flows limit services. One rough estimate is that cumulative charges for spectrum amount to about Rs 1.8 lakh-crore ($30 billion), roughly equal to the total amount invested in networks and equipment. In other words, operators could have invested double the amount in networks and equipment if it had not been paid in government charges. Operators had to take on significant debt for prior payments, thereby hampering their ability to invest in extending and upgrading their networks.The operators' financial constraints constitute one major reason that a market hungry for data services is starved. (Another major reason is the technology constraint of narrow, noncontiguous bands of spectrum, but that is another tale).
The situation in electricity supply is much worse, because of the high and still growing level of stressed assets of the state electricity boards. Press reports estimate that as much as Rs 53,000 crore may possibly become non-performing assets (NPAs) by the end of September.
There is a view that stressed assets and NPAs need not be a problem, because they can be readily sold to new owners who could reorganise the undertakings, which could succeed or go out of business if they fail. While this is theoretically possible, in practice, this is quite difficult and impractical to carry out, especially in hard times. Banks typically are not equipped to take over a number of non-performing businesses and run them until they can dispose of them. Secondly, considering the problems of being profitable in bad times combined with generating cash for operations in downbeat markets, it is unlikely that there will be acceptable buyers willing to pay reasonable prices for loss-making assets.
One difficulty in addressing such issues is that the basic concepts - of cash flows, of numbers from operations in the profit-and-loss statement in tightly coupled lockstep with the balance sheet, which leads to the cash flow statement, require a level of effort to understand that many are unwilling to put in. Cash flows are measurements of flow, whereas profit-and-loss and balance-sheet items are accumulated over specified periods such as a month or quarter, i.e., statements of stock,with no easily discernable relationship to actual cash movements in those periods. There are additional complexities in delving deeper, e.g., in considering the similarities with the flow of liquids. As cash flows are in some ways comparable to liquid flows, there is research from the perspectives of fluid dynamics that requires an understanding of more complex mathematics, physics, or engineering. For those interested in exploring these aspects, further readings are suggested here.
Put intuitively, the key is in setting up and/or taking corrective action to facilitate smooth flows, with the recognition that disruptions create turbulence. Smooth flows are laminar, as the layers or lamina of fluid move easily without mixing (see diagram). Once turbulence sets in, it takes time and often additional effort (resources) to revert to smooth flows, because the obstacles have to be removed or worked around, and the vortices and eddies created by disruptions have to be stabilised and smoothed out.
Unfettering Stranded Capacity
The article was published in the Business Standard on June 3, 2015 mirrored in Organizing India Blogspot on June 4, 2015.
We want reforms, but don't want to pay for them. For instance, coal-based power needs additional investment to lower emissions. While beneficial, it will not be popular. Worse, sometimes even the path to resolution may not be clear, yet new ways have to be found, because business-as-usual along the paths taken is unsustainable going forward. This becomes evident in considering issues such as electricity distribution, where states have key responsibility and authority for some of what needs to be done. Concerning spectrum and coal allocation, there's widespread mistrust about operators getting something for nothing, sort of an East-India-Company syndrome, despite user benefits from lower rates and better services if there is appropriate regulation. We'll have to get over this mindset to stop doing ourselves in. This holds regardless of which party rules and at what level - the Centre, state or local government - or what their philosophy might be: rightist, leftist, something in between, or simply pragmatist.
The most prominent category of stranded capacity is where capital has been invested, but the capacity is unusable for some reason. Examples abound in infrastructure, in manufacturing, and in residential and commercial development, as detailed in the Economic Survey. But there are other categories of stranded capacity which are more difficult to address, because they are in the nature of opportunity costs rather than invested capital. They deserve equal attention because an opportunity loss, or benefit foregone from paths not taken, can result in as much detriment as from a stalled investment. But before we get into examples of opportunity costs, consider the more straightforward case of investments in power generation that are infructuous.
Stranded Power Generation
An estimated Rs 60,000 crore is unproductive in stranded power generation projects which stopped operating because fuel was unavailable. About a quarter of this relates to 31 gas-based plants of over 14,300 MW, nearly 60 per cent of the total gas-based capacity of 24,150 MW. Another 23 per cent or 5,500 MW is operating at below the 30 per cent plant load factor required to just cover costs. The government has devised a scheme using the Power System Development Fund to import liquefied natural gas to run some of these projects at 30 per cent capacity. Operators must compete through reverse-bids with a fixed tariff of Rs 5.50 per unit. The lowest bidders win PSDF support, which will be paid to distributors. There is a ceiling of Rs 3,500 crore to gas-based projects, and plants aggregating 8,000 MW had submitted bids by early May.[1]
Regarding electricity distribution, press reports suggest that states buy only 20-30 per cent of their requirement at the prevailing low spot rates in the last three months,ranging from Rs 2.56 to Rs 2.82 per unit. This is because of the distributors' committed power purchase agreements as well as their weaker finances. In some cases as in Delhi, some old plants incur highoperating costs, and power from clean, gas-based plants costs more.[2]
Another serious problem is that of "regulatory assets" in Delhi. This euphemism covers under-recoveries because tariffs were set too low for years in response to popular demand. There was a crisis last year when NTPC refused to supply power until the distributors paid their dues, while the state owed the distributors Rs 20,000 crore. The problem is ongoing; meanwhile, the regulator has increased tariffs, but not enough to recover past losses. While a number of states have begun transmission and distribution reforms,[3] it's already evident with rising generation that unless financial and distribution capacity are built on sound principles, electricity supply cannot stabilise for users. We must grasp the nettle of a disciplined, responsible approach.
On a broader front, the government has been coordinating meetings between government officials, banks, and the RBI, seeking to resolve problems affecting some Rs 3.51-lakh crore in stressed projects in steel, cement, power and transport.
Opportunity Losses (or The Road Not Taken)
The regulations on radio frequency spectrum show how administrative rules can deprive us of readily available benefits. The most glaring example is the prevention of roaming using 3G spectrum. The resource was available, and was allocated to operators for various locations, but their roaming agreements were disallowed. This doesn't help us, whether from the perspective of government's increased share of revenues from greater usage, or the denial of user benefits from a better service offering. Instead, this approach constrains capacity by an arbitrary rule. Such issues need to be reviewed and rationalised to unfetter latent capacity towards attaining Digital India.
Another instance is that of limitations imposed on spectrum sharing which have nothing to do with technology. The reason exclusive spectrum allocations were introduced years ago was to prevent radio frequency interference. Now, imposing arbitrary limitations on spectrum usage results in denying ourselves available capacity. More radical and complex alternatives like pooling spectrum and facilities, and common carrier access for certain services, deserve consideration for exactly the same reasons: increased productivity and benefits from investments already made. Otherwise, it is like stranded capacity in stalled projects.
The same issues apply to the auction of mineral rights for core industries in domestic manufacturing. Any ingenuous fascination with free-market principles in allocating resources that overlook the fundamental requirements of a strong manufacturing base in a large country, or that don't comprehend the realpolitik of how free-market dogma is selectively argued, will leave us farther behind on the road to prosperity.
TRAI and the Disclosure of Personal Information
This note sets out the law in relation to the unauthorized disclosure of personal information. Many thanks to Bhairav Acharya for his inputs on this.
Subsequently, on April 27, 2015, TRAI made all responses received by it public, including personal information like email addresses along with any information contained in email signatures, which invariably include a phone number or address. While disclosure of names was needed to ensure transparency in the consultation process, disclosure of personal information gave rise to criticism and questions around the legality of such disclosure.
This note sets out the law in relation to the unauthorized disclosure of personal information:
Section 43A of the IT Act provides for subordinate legislation to govern the manner in which sensitive personal data is collected and processed. The governance of personal information is dealt with under the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 (“2011 Rules”). The 2011 Rules are made to give effect to Section 43A of the IT Act.
TRAI is a body corporate as per Section 3(2) of the TRAI Act. Hence, TRAI’s collection, storage, and disclosure of personal information is governed by the 2011 Rules. Rule 5(8) requires personal information collected to be held securely. TRAIs publishing of email addresses is a violation of Rule 5(8).
Rule 4 of the 2011 rules requires a body corporate to have a privacy policy. On its website, TRAI publishes a Privacy Policy. However, the Policy speaks of information gathered from the TRAI- Website. Even the wording on the Home Page of the TRAI website (that links to these policies) says “Website Policies”. It is unclear therefore, whether the Privacy Policy applies ONLY to the collection of information over the TRAI- Website or whether the Privacy Policy applies to TRAI overall.
Either way there is an argument to be made. TRAI has failed to draft and publicize a privacy policy for the personal information it collects directly. Without prejudice to the above, if the privacy policy on the TRAI website governs this collection of email addresses, then its unauthorized disclosure is a contravention of its own Privacy Policy, specifically paragraph 2.
Since the IT Act does not enact a specific penalty for contravention of section 43A in respect of personal information, TRAI’s unauthorized disclosure will be penalized through the residuary penalty contained in section 45 of the IT Act.
Hence TRAI is liable under Section 45 of the IT Act read with Rules 4 and 5(8) of the 2011 Rules. Section 45 provides a “residuary penalty”; for those provisions under the IT Act or Rules for whose contravention no other penalty has been prescribed. For this contravention, TRAI would have to pay a compensation of 25,000/- to the affected persons or a penalty of 25,000/- rupees.
TRAI may argue that it disclosed that personal information would be disclosed/published. However, the Call for Comments Press Release says that Comments will be published. Email addresses are not comments, and therefore TRAI did not issue a prior disclaimer for the publication of this personal information – hence the disclosure of e-mail addresses is still a violation.
The remedy for violation of Section 43A of the IT Act is the Adjudicating Authority appointed under Section 46(1), which requires a person not below the rank of Director in the appropriate government to receive complaints. Since TRAI is a body corporate as per the Act, it is unclear as to who the adjudicating officer in the present case should be; and is the matter of a separate research question.
The Appellate authority is the Cyber Appellate Tribunal constituted under Section 48 of the IT Act . It is not known if the tribunal has been constituted, and if it has; it is unknown whether it is staffed.
In the absence of clarity with regard to statutory authorities, a citizen whose personal information has been disclosed by TRAI without authorization may file a writ petition in the Delhi High Court under Article 226, or in the Supreme Court under Article 32 for issue of a writ of mandamus or prohibition, for appointment of the first adjudicating officer and also for issuance of directions in lieu of such an officer.
Stranded Capacities & Greater Expectations
The post was published in Organizing India Blogspot on May 8, 2015. It was earlier published on May 6 in the Business Standard.
The remarkable change in expectations from last May that the National Democratic Alliance (NDA) government achieved appears to be giving way to closer scrutiny based on actual performance. Meanwhile, the wait for significant economic reforms is excruciating.
A couple of indicators of uneasiness: foreign institutional investors (FIIs) have turned watchful, with investments in equity and debt slowing after sustained inflows. (See Chart 1).
Also, while some leading businessmen have been saying everything is on track, industry credit growth is slowing relentlessly, as is to be expected when demand is muted, infrastructure is dysfunctional and credit is expensive. (See Chart 2).
The flurry of claims, accusations, rebuttals and counter-claims about earlier growth rates dwell on reclaiming the past, with little evidence of seeking clues to generate momentum and confidence. This may be attributable partly to the curse of our times: a penchant for headline-grabbing or headline-making. There is scarce interest in less flamboyant, fact-based presentation - whether it is politicians, TV and print media, or the audience, the general public. This may also be partly attributable to inept communication, a malady that seems to plague this regime despite its vaunted communication skills as much as it did the United Progressive Alliance (UPA) before it. Perhaps the Web can be better used to not only organise and coordinate within and across ministries, but also to disclose information while building convergence and confidence.
Consider some points that stand out from the clamour. One is that insufficient attention is directed towards cohesive policies, processes and institutions. On the face of it, there do appear to be several efforts at policy reform, for instance, in land and labour legislation, as well as in judicial reforms. There are critiques, however, suggesting that these stand-alone efforts suffer from insufficient resource allocation and ineffective implementation. The implication is that there is an absence of overarching vision and flowing from that, a lack of direction and integration.
Are constructive alternatives possible?
Last week's observations by former NDA minister Arun Shourie highlighted this apparent lack of vision, and how the government seemed to be dealing with the many problems like pieces of a jigsaw puzzle without an appreciation of the big picture. For example, the government's actions relating to coal and spectrum auctions are merely in line with court orders. There is no apparent effort to develop constructive alternatives in the public interest.
From a societal perspective, surely the government, the courts and the public need to ask: for whose benefit and at what cost? For instance, how are upfront government revenues from auctions beneficial to the public if they result in non-delivery or a slowdown of requisite services, compared with much larger collections over time from enterprises that deliver services after criteria-based allocations?
Note: revenue sharing can also be transparent. For transparent allocations, one alternative is to draw up technical and financial shortlists with integrity, followed by a lottery (with equal integrity). Another possibility is merit-based, open criteria judged by individuals with understanding and integrity - as was done to affect a breakthrough for land acquisition for the Calcutta Metro in 1982 and for part of the Bengaluru Metro in 2006. Both were achieved effectively without controversy by officials (or, to use the customary pejorative, "bureaucrats") entrusted with the responsibility. These individuals could be consulted.
Cohesive Leadership
An elephant in the room is the NDA's socially divisive stance. If the goal is high achievement, the need for convergent effort from our diverse, vast population is a no-brainer. Strong leadership resulting in cohesive effort is essential. The misgivings created so far must be addressed and reversed. If not attempted now, it will be a tremendous opportunity squandered.
There will be, of course, many impediments to achieving convergent efforts. And the dissonant legacy structures - such as realigning the judiciary and executive to constructive engagement, a constructive welfare net in place of Mahatma Gandhi National Rural Employment Guarantee Act, formulating truly beneficial policies for our needs instead of aping detrimental auction models - will be difficult to replace.
It is likely that we will continue in our shambolic ways, depriving ourselves of the gains of organisation and productivity. Yet there is the tantalising possibility of great gains if we were to have the right leadership, and if we could ourselves rise to the occasion.
Infrastructure
Another elephant in the room is our atrocious infrastructure. Successive governments and all parties have foundered on this. Empty talk of "second-round" reforms and so on betray a complete lack of understanding of the elements of essential, enabling infrastructure. At the most basic level, electricity, communications, transport and logistics, water and sewerage/waste disposal are fundamental requirements for productive living. These must be the relentless focus of end-to-end delivery systems.
The reforms in power and communications since 1991 were encapsulated sub-processes, as in Chart 3. Each of the boxes is a complex process in itself, and each has its position in the process flow as shown. Electricity reforms relate to fuel, generation, transmission, distribution and cash collection. Unless all steps in the chain are completed, we will be left with stranded capacities in one or more of these "boxes", like stranded generation plants, as we have been so far.
For broadband communications, the areas are the access, aggregation and the core or backbone networks. The most difficult are the last-mile links in access networks. Elements like the National Optical Fibre Network (NOFN) backbone are stranded unless they are connected with aggregation networks that lead to last-mile access, which could be a wireless, cable, telephone wire, or an electricity link. The system must be designed in its entirety to deliver.
What began the information technology services revolution was facilitating every link in the chain from one end to the other, with permissions, incentives and tax cuts, even if it was only a "thin pipe", 64 kbps link that bypassed initial hurdles for a start. The government could consider variants that could work for each infrastructure sector.
Response to TRAI Consultation Paper on Regulatory Framework for Over-the-Top (OTT) Services
Executive Summary
The principle objective of net neutrality is that “all the Internet traffic has to be treated equally without any discrimination”; but this has had different interpretations over varied contexts. While the discourse in India has often treated net neutrality as a singular policy construct, we break down net neutrality to its various components. We then individually contextualise each component to the unique characteristics of the Indian telecommunications industry such as dependence on wireless internet access, the fragmented and non-contiguous distribution of spectrum, high competition between TEL-SPs and low digital literacy. The evolving nature of markets and networks are also considered while taking into account various public policy perspectives.
In this submission, we also argue for the need to introduce reasonable regulatory parity between functionally equivalent communications services provided by OTT-SPs and TEL-SPs. We compare the regulations for OTT-SPs under the Information Technology Act 2000 (as amended) with the regulations for TEL-SPs under the Telegraph Act 1885 (as amended), the license agreements (UL, UASL, ISP-L) and TRAI Regulations. Based on an analysis of the current laws and regulations, we suggest how TRAI needs to intervene to create this regulatory parity (for example in areas such as privacy, spam/UCC, interception etc.).
Through the above analysis, we recommend an overall regulatory framework that should be adopted by the Government. The framework takes a nuanced approach to various components of net neutrality, contextualised to India, and also attempts to bring reasonable regulatory parity. Instead of compartmentalising TEL-SPs and OTT-SPs as two distinct actors, the recommended framework considers a two-layered approach which recognises that there is an overlap between TEL-SPs and OTT-SPs. The first layer comprises of network and infrastructure (collectively called the network layer) and the second layer comprises of services and applications (collectively called the service layer).
The framework further divides the service layer into “Non-IP Services”, “Specialised Services” and “Internet Based Services”. The concept of “Specialised Services”, which is borrowed from the European Union, refers to traditional services that have migrated to an IP architecture such as facilities-based VoIP calls to PSTN and IPTV, and are either logically distinct from the Internet or have special needs which the “best efforts” delivery of the general Internet cannot satisfy. This concept helps in applying different evaluation criteria to functionally equivalent “Non-IP Services”, “Specialised Services” and “Internet Based Services”. In the framework, “Specialised Services” are also recognised as an exception to net neutrality. The concept of “Specialised Services” also helps to create an incentive for continued investment in underlying infrastructure by TEL-SPs.
This framework has helped us to bring a more balanced approach from the perspective of both TEL-SPs and OTT-SPs, while also taking into account technological convergence. It has also helped us to bring a more nuanced approach to various issues comprising net neutrality such as zero rating, paid prioritisation etc. We have considered best practices from different international regimes and the pros and cons during implementation in order to determine the exceptions and boundaries of net neutrality that should be adopted in India.
Railway Takeaways for Digital India
The Op-ed was published in the Business Standard on March 4, 2015 and mirrored on Organizing India Blogspot on March 5, 2015.
Last week's Railway Budget is the first indicator of possibly better days, after all the rhetoric. Perhaps the reservations of some former railway ministers and excoriating comments such as "dreams without substance" have a basis. But in my reckoning, there's a sense of coming to grips with reality based on a rational evaluation, and a systematic approach through problem solving. This was backstopped by a finely balanced Union Budget that supports infrastructure and growth.
Going forward, we need more explicit articulation of detailed steps for execution and inter-sectoral linkages, which would be highly beneficial for the overall economy as well as for the Railways. For example, on how aspects of the Budget relate to stalled and stranded power generation, how these relate to electricity transmission and distribution, and the resolution of non-performing assets (NPAs) of banks. Additionally, the financial discipline of cash flows could be extended to substantially benefit other sectors. As for the financing relating to the Railways, the expectation that the details will be worked out needs to be met soon to establish credibility.
Setting aside all normative criticism, however, what's most important now is that the Railways delivers on this Budget. This will require more resolute coordination and emphasis on implementation than in the past, for example, in contrast to the poor implementation of the Electricity Act of 2003, a good piece of legislation that's unfulfilled.
Extending the approach of realistic goals with explicit action plans and execution could benefit other areas of the economy and infrastructure. The elements include:
- Toning down the rhetoric, avoiding grandiose statements and instead, defining realistic objectives. It may be argued that realism and understatement are difficult, even counterproductive, when political rivals indulge in a race to the bottom in terms of giveaways. This is true of state elections, as in Delhi, and at the national level, in the confusing if not irresponsible allocation of substantial funds to the debatable benefits of the Mahatma Gandhi National Rural Employment Guarantee Act. The difficulty is that it needs responsible voters to act against opportunistic populism to discourage such gaming strategies in favour of better governance, but it will also need credible candidates with sound party positions and sustainable policies.
- A willingness to depart radically from past practices for better results. For instance, no new trains were announced in this year's Railway Budget, a major, responsible departure from an otherwise pernicious customary indulgence.
- An effort to develop a user-centric, outward-oriented strategy for improving services. This is the opposite of a department- or ministry-centric approach, emphasising the "scheme"-driven perspective of the department/agency for limited, piece-meal targets, as against an overall system in the interests of users.
Extending these principles to Digital India
Consider how these might apply to another flagship concept - Digital India - in telecommunications and broadband. Networks and their elements, including projects like the National Optic Fibre Network, would be treated as integral components - stepping stones or links in a chain, and not the ends in themselves - of a systemic delivery process for what users need: a broadband connection to the internet, which becomes the goal. In addition to the access to general information, telecommuting, entertainment and e-commerce through the internet, additional content relating to government, educational and health services would also need to be made available over time. Viewed from this perspective, the requirement changes from achieving targets for the installation of "x" km of fibre or "y" pieces of customer equipment, or the auction of "z" megahertz of spectrum, some of which may be stranded or not working, to achieving targets for end-to-end connectivity with high-speed access to the internet at reasonable prices for the population of users. A classic example of dysfunctional targets was the subscriber-based spectrum allocation rule, which sought to cram the most users on the least spectrum - akin to stuffing a highway with vehicles, instead of getting them to their destination.
From this vantage, it becomes clear that policies should facilitate users' access and connectivity to the internet. Therefore, systems and methods for access through elements that provide connectivity - spectrum, fibre-optic cable, coaxial cable, or "twisted-pairs" for ADSL - must be devised in an integrated manner and made available at low cost.
Networks are useful only if they are accessible to end-users. Here's where the analogy of no new trains applies: for broadband, it could mean giving up spectrum auctions that fragment delivery capacity while draining away potential capital that could be invested instead in networks. Bundling spectrum and other last-mile access technologies with stranded backbone networks seems the obvious way to reach end-users. Where fibre can't be laid and maintained economically, the intermediate linkage over several kilometres could be through reasonably priced wireless, with technologies such as microwave links in the six-gigahertz, 11-GHz, 18-GHz bands and so on, local multipoint distribution systems in the 28-32-GHz bands, TV white space (unused broadcast spectrum, for example, in the 600-MHz band), satellites, or 4G (LTE). For India with its present state of infrastructure, governments must choose to favour delivery to end-users, collecting tolls and taxes at the back end, after the revenues and profits are made. This is how mobile telephony succeeded in India. Broadband can succeed in the same way.
Another concept applicable from the Railways (and roads) is common-carrier access: all trains have access to common rail networks, just as all licensed vehicles have access to road networks, with additional tariffs for high-speed links like expressways or for captive rail. This is the way to achieve Digital India quickly, by adopting common-carrier principles on payment, whereby people in cities as well as the countryside can study, telecommute and conference for work anywhere, get health care, information and entertainment, sell their produce and artefacts, vote, and access government services.
The wisdom of the Railway Budget approach needs to extend to Digital India.
TRAI-ing Times: The Story So Far
Under this policy, usage of VoIP services would henceforth be excluded from standard data usage packs and would instead be charged at standard data rates (of 4p / 10KB on 3G and 10p / 10KB on 2G).[1] Alongside this modification to 2G and 3G packs, a separate data pack exclusively for VoIP services was to be introduced. [2]
The flurry of activity the announcement precipitated included widespread consumer and civil society outrage[3], a statement by the Union Minister for Telecom[4], a justificatory counter-statement by Airtel itself[5] and ultimately, a statement by TRAI. [6] While it remains to be seen whether this was a calculated move by Airtel to kick-start the neutrality discussion in India (as some suspect[7]), the implementation of the new policy/pack was deferred pending TRAI's proposed consultation paper on OTT services. [8]
In the context of the impending (though seemingly delayed[9]) release this paper, we take this opportunity to study TRAI-linked output on network neutrality in the past. This study was carried out using RTI requests [Part I] and targeted keyword searches of the TRAI website [Part II].
Information received through RTI requests
We had filed the following request under the Right to Information Act, 2005 on the subject and net neutrality and any material available with them generated in the course of internal or other discussions:
Request for Information under the Right to Information Act, 2005 To Shri V.K.Saxena Dy. Advisor (GA.) & Central Public Information Officer-LO Telecom Regulatory Authority of India Mahanagar Doorsanchar Bhawan, Jawaharlal Nehru Marg, Old Minto Road, New Delhi-110 002 Date of application : 08-10-2014 Subject: Documents relating to Network Neutrality 1. Please provide a list of all the consultations/discussions/meetings that have taken place with respect to network neutrality by TRAI. 2. Please provide a list of all responses received by TRAI which concern network neutrality. 3. Please provide a list of other documents/memos/minutes regarding network neutrality available with TRAI. 4. Does TRAI possess power to punish ISPs for violating principles of network neutrality? If so, please mention the provision of law which permits this. 5. What measures are taken by TRAI to monitor network neutrality violations by ISPs? For example, throttling of internet content/protocols. 6. What is the procedure for a consumer to file a complaint with TRAI regarding network neutrality violations? 7. Please provide copies of any documents regarding complaints received / action taken with respect to network neutrality violations in the past three years. It is certified that I am a citizen of India and that I do not fall within the BPL category. I am enclosing Rupees thirty (Rs. 10) towards the application fee and photocopying costs under the RTI Act for the information and documents requested. Kindly inform me at the address stated below if any further fees are required to be paid.
Applicant : Signature of the Applicant Tarun Krishnakumar Centre for Internet and Society 194, 2nd C Cross Road, Domlur II Stage, Bangalore - 560071 |
____________________________________________________________________________________________________________________________________________________________________________________
In response to the same, we received the following reply which smacked of non-application of mind by the concerned officer to the request:
To, Shri Tarun Krishnakumar Centre for Internet and Society 194, 2nd C Cross Road, Domlur II Stage Bangalore (Karnataka) - 560071. SUBJECT: REQUEST FOR SUPPLY OF INFORMATION UNDER THE PROVISIONS OF THE RIGHT TO INFORMATION ACT, 2005. Sir,
Yours faithfully, (V.K. Saxena) Central Public Information Officer (LO) Tele: 011-23211622 |
____________________________________________________________________________________________________________________________________________________________________________________
In reply, we filed the following appeal with the designated Appellate Authority:
Appeal under the Right to Information Act, 2005
To : Appellate Authority Shri. Suresh Kumar Gupta, Pr. Advisor (CA and QoS), Telecom Regulatory Authority of India, Mahanagar Doorsanchar Bhawan, Jawaharlal Nehru Marg, Old Minto Road, New Delhi - 110002 Date: 23.11.2014 Subject: Appeal under Section 19(1) of the Right to Information Act, 2005 with reference to your reply No. 1(658)/2014-RTI dated 10.11.2014 Dear Sir, I write to you with reference to my RTI Application dated 08.10.2014 for information relating to 'network neutrality' held by TRAI. The CPIO, Shri. V.K. Saxena, rejected my request vide letter no. 1(658)/2014-RTI dated 10.11.2014 stating that " the information sought by you vide the above referred application is not available in TRAI." (enclosed herewith). As the applicant, I am unsatisfied and aggrieved by the above decision and hereby appeal against the same. Circumstances and Grounds of Appeal : By way of my application (enclosed herewith), I sought any and all information held by TRAI in relation to 'network neutrality'. For example, questions 1 - 3 queried the list of consultations etc. that have taken place involving network neutrality and sought copies of all documentation pertaining to the same. The other questions sought information pertaining to the powers of TRAI in relation to internet service providers and complaints received by it in relation to network neutrality. I submit that the failure of the CPIO to provide any answer to my queries is erroneous and therefore liable to be set aside on appeal to you. It is well-documented that there is at least one consultation connected with the subject-matter of my application i.e. 'network neutrality' released by TRAI in December 2006 (Paper No. 19/2006). In fact, the paper is currently available on the TRAI website at the following URL: http://www.trai.gov.in/WriteReaddata/ConsultationPaper/Document/consultation27dec06.pdf (Please see heading 3.6 and 3.7). Therefore, if nothing else at least all information pertaining to this paper including the responses received to the question under Heading 3.7 must be supplied to me. You may also take note of TRAI's "Recommendations on Application Services" (available at URL: http://www.trai.gov.in/writereaddata/recommendation/documents/as140512.pdf ) dated 14.05.2014 where paras 1.29 - 1.31 pertain to net neutrality. This is another document that the CPIO failed to take notice of. The failure of the CPIO to even acknowledge the existence of TRAI's own papers as cited above shows that there has been no application of mind to my application and a mechanical denial has been issued. Prayer : In light of the grounds advanced above, I request that: i. My application for all information pertaining to 'network neutrality' be allowed and the relevant documents be released to me. ii. I receive a question-by-question response to each of my queries. List of Enclosures: 1. Original Application dated 08.10.2014 2. Reply of CPIO No. 1(658)/2014-RTI dated 10-11-2014
Name of Appellant/Applicant and Address : Tarun Krishnakumar Centre for Internet and Society 194, 2nd C Cross Road, Domlur II Stage, Bangalore - 560071 |
____________________________________________________________________________________________________________________________________________________________________________________
The appellate authority vide dated decision 12-01-2015 replied as follows:
BEFORE THE APPELLATE AUTHORITY UNDER THE RTI ACT, 2005
F. No. 1(658)/2014-RTI
Telecom Regulatory Authority of India Mahanagar Door Sanchar Bhawan, Jawaharlal Nehru Marg (Old Minto Road), New Delhi-110002.
APPEAL in terms of Section 19(1) of RTI Act, 2005
Date of Decision: 12th January, 2015
In the Matter of: SHRI TARUN KRISHNAKUMAR, CENTRE FOR INTERNET AND SOCIETY, 194, 2nd C CROSS ROAD, DOMLUR ll STAGE, BANGALORE (KARNATAKA)-560071
vs
CPIO, TRAI.
Sd/- (Suresh Kumar Gupta) Appellate Authority, TRAI Under RTI Act, 2005 |
This reveals the extent of TRAI-produced output on the issue of 'net neutrality'. Besides a reference to Neutrality in 2006 paper TRAI did not disclose any other instance where it had discussed the issue.
_________________________________________________________________________________________________________________________________________________________________________________________
Targeted Keyword Searches of the trai.gov.in website
This leg of the survey consisted of conducting targeted keyword searches of the trai.gov.in website to gauge the engagement with the subject of Network Neutrality either in the form of TRAI Output, Submissions to TRAI or other outputs (from seminar, conferences etc.). The results - aggregated using Google and Bing - have been tabulated.
Note: The results do not include the OTT Consultation Paper of 27-03-2015.
Methodology : Keyword searches of specific website using the advanced search / site-search search operator ("KEYWORD + site:<URL>"); Repeated Hits were not tabulated.
i. Keyword: "Net Neutrality"
Total No. of search results returned = 10 (Google), 6 (Bing)
Relevant Hits: 8
|
Hit URL |
Name of Document |
Date |
Relevant Page |
Remarks |
|||
1. |
http://www.trai.gov.in/WriteReaddata/ConsultationPaper/Document/consultation27dec06.pdf |
Consultation Paper on "Review of Internet Services" (No. 19/2006) |
26-12-2006 |
References at Pg. 27-28. |
Views were sought in relation to emerging trends one of which outlined was 'Net Neutrality.' Selected Extracts: " 3.6.2 The situation may also rise in India as Internet access providers may use their market power to discriminate against competing applications and/or contents. " " 3.6.3 The issue of net neutrality in the long term can threaten popularity of Public Internet based Internet telephony and similar 28 other applications as all the intermediate Internet providers may start asking commercial agreements in absence of which they may refuse to carry the content and provide desired quality of service. The future developments are likely to have new applications and contents. The business models of ISPs are concentrated around useful application. In this background views of stake holders are required whether regulatory intervention is needed to ensure net neutrality in India in times to come or it may be left to market forces. " |
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2. |
http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/201410221229242471860Vodafone_Delivering%20Broadband%20quickly_Counter_21Oct2014.pdf |
Vodafone's counter-response to TRAI's Consultation paper on 'Delivering Broadband Quickly' |
22-10-2014 |
References at Pg. 3-4. |
Here, Vodafone pledges support for an 'open internet' for all however comments " net neutrality has long been a solution in search of a problem" and criticises EU framework. |
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3. |
http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/20120730022807389860713.Etisalat[1].pdf |
Response of Etisalat DB to Pre-consultation paper on "IMT-Advanced (4G) Mobile wireless broadband services" |
15-04-2010 |
References at Pg. 2 (Paragraph 12). |
Etisalat notes that net neutrality is a topic that requires deliberation in reference to the proposed consultation paper on 4G. It defines neutrality as "Avoiding blockage of any specific web site on a particular network". |
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4. |
http://www.trai.gov.in/WriteReadData/Recommendation/Documents/recom18aug08.pdf |
TRAI Recommendations on "Issues relating to Internet Telephony" |
18-08-2008 |
References at Pg. 46 and 78 |
At Pg. 46: " The very popularity and success of the Internet is due to Net neutrality, i.e packets of all services and applications shall be processed and delivered without any discrimination by the intermediate service providers." At Pg. 78: " Regulation in Argentina considers IP as a mere way to offer telecommunication services, such as telephony in the form of VoIP, thus there are no legal barriers that impede market access or any plans to regulate different types of the service. Any provider is free to offer telecommunication services with different technologies and network architectures, based on the network neutrality principle…"…" The foreign investment policy is liberal and there are no distinctions between local and foreign companies. According to the network neutrality principle, there are no regulated technological standards or protocols for VoIP " |
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5. |
http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/201412300449107784040Dr%20Rohit%20Prasad.pdf |
Response to the Consultation Paper (No: 13/2014) on "Interconnect Usage Charges" filed by (i) Dr. Rohit Prasad, Professor, Management Development Institute, Gurgaon (ii) Mansi Kedia, Researcher, Indian Council for Research on International Economic Relations (ICRIER) (iii) Dr. V. Sridhar, Professor, International Institute of Information Technology Bangalore |
Reference at Pg.7 |
Raises the question of Net Neutrality with reference to OTT services. At Pg. 7: "… Since an Internet Telephony call is a partial OTT service (i.e. from the origin until it hits the IP-Telco gateway), should Net Neutrality principles (as and when drafted) should be applicable for this as well. The above question, can be taken up when the Net Neutrality rules or OTT regulation rules are framed by the regulator. " |
||||
6. |
http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/2.Infotel_Broadband..pdf |
Response of Infotel Broadband Services Ltd to Consultation Paper on "Mobile Value Added Services" (CP 05/ 2011) |
11-08-2011 |
Reference at Pg. 3 |
Opposition to Licensing regime for Internet Content and Application Providers: At Pg. 3: " 3. Internet/ Data Applications do not depend on Telecom Operator, and are not licenced in open mature countries The need to exercise restraint on regulation is stronger in the case of data/ internet services. In the case of VAS on data/ internet services, VASPs have no technical dependence on Telecom/ Internet Service Provider for providing the service, as the data connection is generally a dumb pipe. For some services, VASPs choose to partner Telecom Operators for billing convenience (as in the case with currently provided Games-on-Demand service and Anti-virus services over Broadband). Globally, Internet Application Companies and Regulators mostly operate on a net neutrality approach, wherein a broadband application is accessible across Telecom/ Internet Service Providers. Thus, especially in the case of data services, there is no case to govern a relationship/ arrangement that has no technical necessity. Licencing Regime for Internet Content and Application providers, like portals, e-commerce, etc is not in practice in any of the open countries and should not be introduced in India too." |
|||
7. |
http://trai.gov.in/WriteReadData/ConsultationPaper/Document/201308221249488827971vodafone-final3.pdf |
Response to Vodafone to Consultation Paper on "Valuation and Reserve Price of Spectrum" |
21-08-2013 |
Reference at Pg. 11 |
Reference irrelevant / not-substantive. |
|||
8. |
http://www.trai.gov.in/writereaddata/recommendation/documents/as140512.pdf |
TRAI Recommendations on "Application Services" |
14-05-2012 |
References at Pg.18 and 19. |
At Pg. 18: " 1.29 Net neutrality advocates no restrictions by Service Providers on content, sites, platforms, on the kinds of equipment that may be attached, and no restrictions on the modes of communication allowed. Issue of net neutrality started in early 2007 when it was revealed that Comcast, a provider of broadband Internet access over cable lines intentionally blocked the traffic of peer-to-peer (P2P) applications and gave other Internet traffic preferential treatment. " At Pg.19:" 1.31 The issue of net neutrality for ASPs providing services on OTT model will be dealt as and when required." |
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ii. Keyword: "Network Neutrality" Total No. of search results returned = 16 (Google), 8 (Bing) Relevant Hits: 11.
|
||||||||
S.No. |
Hit URL |
Name of Document |
Date |
Relevant Page |
Remarks |
|||
1. |
http://www.trai.gov.in/WriteReadData/Events/Presentation/PPT/201111291232282048929Matthias_Ehrler_Migration_NGN.pdf |
Presentation titled "Regulatory implications of migrating to NGN" made at the TRAI - Seminar on Next Generation Networks by Matthias Ehrler |
25-08-2011 |
Pgs. 6 and 15 |
Presentation by expert covers neutrality implications of migrating to next generation networks. |
|||
2. |
http://www.trai.gov.in/WriteReadData/Events/Presentation/PPT/201111291229152361429Scott_Marcus_QoS.pdf |
Presentation titled "Management of QoS" made at the TRAI- Seminar on Next Generation Networks by J. Scott Marcus of wik consult. |
25-08-2011 |
Pgs. 10, 11, 15 etc. |
Presentation by expert covers neutrality in the context of QoS. |
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3. |
http://www.trai.gov.in/writereaddata/consultationpaper/document/3agust.pdf |
Response of Microsoft to Consultation Paper on "National Broadband Plan" |
27-07-2010 |
Pgs. 1-2 |
Extract: " 2. Network Neutrality Openness has been the key to the ever-expanding nature of the Internet. We would urge that the Authority adopt a light-touch regulatory approach to network neutrality that appropriately balances the needs of consumers, network operators, and those of content/ application / service providers as well as those of device vendors. Some respondents have called out the Authority's attention towards this aspect and it is important for the Authority to chart a course that harmonizes the interdependent values of innovation and continued evolution of a robust network infrastructure while promoting consumer choice and freedom online. e suggest that the Authority undertake the following three steps in this regard: a. First, adopt the widely-accepted principles that consumers have the right to access and use the content, applications, services and devices of their choosing and to receive reasonable information about their Internet access provider's practices; b. Second, adopt a behavioral standard intended to prohibit Access Provider discrimination that is anticompetitive or harms consumers, and bar Access Provider conduct that violates the other core, open Internet principles, such as allowing access to lawful content, applications, and services of the user's choosing; and c. Third, implement an expert and efficient enforcement mechanism to identify and prohibit unlawful forms of discrimination. This framework would achieve a sensible balance by allowing Access Providers the flexibility to not only appropriately manage their networks by distinguishing, if necessary, among different types of traffic but also enter into business arrangements with content providers that are transparent and do not discriminate in a manner that is anticompetitive or harms consumers ." |
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4. |
http://www.trai.gov.in/WriteReadData/Events/Presentation/PPT/201301080620033272892NGN-Migration-Session6-Licensing-Issues-NGN_rev.pdf |
Presentation titled "Migration to Next Generation Networks" made at the Workshop on Migration to NGN by Martin Lundborg, Stephan Wirsing Martin Lundborg, Stephan Wirsing |
29-11-2012 |
Pgs. 30-36. |
Presentation by expert covers Network Neutrality in the context of content and licensing. |
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5. |
http://trai.gov.in/WriteReadData/Events/Presentation/PPT/201111291222335017679NGN_Dr.pdf |
Presentation titled "NGN: UK and European Frameworks" made at the TRAI Seminar on NGN by Rekha Jain. |
25-08-2011 |
Pg.18 |
Presentation by expert covers network neutrality as implemented by European authorities. |
|||
6. |
http://trai.gov.in/WriteReadData/Events/Presentation/PPT/201111291226086423929NGN_Interconnection.pdf |
Presentation titled "NGN Interconnection" made at the TRAI- Seminar on Next Generation Networks by J. Scott Marcus of wik consult. |
25-08-2011 |
Pg. 41, 43 and 46 |
Presentation by expert covers neutrality in the context of QoS. |
|||
7. |
http://www.trai.gov.in/WriteReadData/Events/Presentation/PPT/201301080612503134332NGN-Migration-Session1-Introduction-to-NGN_rev.pdf |
Presentation titled "Migration to Next Generation Networks" (Introduction to NGN) made at the Workshop on Migration to NGN by Martin Lundborg, Stephan Wirsing Martin Lundborg, Stephan Wirsing |
29-11-2012 |
Pg. 25 |
Cursory reference to important regulatory aspects of NGN Migration |
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8. |
http://www.trai.gov.in/WriteReadData/Events/Presentation/PPT/201111291221446111429NGN_Case_Studies%20-%20Scott%20marcus.pdf |
Presentation titled "Migration Studies Challenges and Migration Studies, Challenges, and Implementation Case Studies" made at the TRAI- Seminar on Next Generation Networks by J. Scott Marcus of wik consult. |
25-08-2011 |
Pg. 6. |
Cursory reference to public policy challenges in NGN Migration |
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9. |
http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/Auspi.pdf |
AUSPI's Response to the TRAI Consultation Paper No. 6/2011 on "IMT Advanced Mobile Wireless Broadband Services" |
Pg.10 |
At Pg.10: " In an effort to encourage network neutrality, Google asked that the spectrum be free to lease wholesale and the devices operating under the spectrum be open. Google's specific requests were the adoption of certain policies such as open applications, open devices, open services and open networks. Currently many providers such as Verizon and AT&T use technological measures to block external applications. In return, Google guaranteed a minimum bid of $4.6 billion. However, this model of broader eco-system players playing a part in spectrum auctions has not seen significant success, with Google in this instance not winning any licenses. Even if regulator wants to keep the market open for non-telecom players, broader eco-system players can participate through M&As which are likely to be permitted under the new telecom policy. " |
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10. |
http://www.trai.gov.in/writereaddata/consultationpaper/document/201304090446122006799casbaa.pdf |
Response of the Cable and Satellite Broadcasting Association of Asia to TRAI Consultation Paper on "Issues relating to Media Ownership" |
8-04-2013 |
Pg.30 |
At Pg.30: " Convergence: Despite convergence, there remains fragmentation in the approaches adopted by regulators towards intervention in telecoms and other sectors. However, issues of access, network neutrality, non-discrimination and protection of intellectual property rights ("IPR") are recurrent themes. These are issues that are familiar to competition authorities. Moreover, technological changes may break down these demarcations further. However the real challenge that convergence poses is increased uncertainty in respect of the speed of technical change and its effects in the short and longer runs. Regulators/competition authorities run the risk of 'getting it wrong' either by applying old style/stringent regulations and/or mistaking transitory profitability for abuse. A cautious and flexible approach is required. The application of old style regulations to such evolving markets is not recommended; it may stifle investment and innovation. Regulation should be flexible enough to take account of the evolving market dynamic and be informed by the best assessment of how markets are likely to evolve. TRAI's proposed intervention does not even come close to this dynamic approach since it is predicated on an assessment which is four years out of date. It does not take account of the increased diversity and competition currently prevailing and likely to develop in India over the next 3 to 5 years and beyond. " |
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11. |
http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/201306240358500637086RCOM_CC.pdf |
Counter Comments of Reliance Communications to TRAI Consultation Paper on "Interconnection Usage Charges" |
25-05-2011 |
Pgs. 230 (Internal Pg. 41 of appended document) |
Appended ERG DRAFT Common Position on Next Generation Networks Future Charging Mechanisms / Long Term Termination Issue document analyses questions in relation to QoS and Network Neutrality in the US and other jurisdictions. |
[1] See http://telecomtalk.info/airtel-starts-charging-for-voip-data-viber-skype-charges/128118/ (Last visited on 08-03-15).
[2] See http://telecomtalk.info/airtel-voip-rs75-75mb-with-a-validity-of-28-days/128216/ (Last visited on 08-03-15);
[3] See http://www.medianama.com/2014/12/223-net-neutrality-violation-airtel-introduces-differential-pricing-for-type-of-mobile-internet-usage (Last visited on 08-03-15); http://yourstory.com/2015/01/net-neutrality-startups-in-india-airtels-voip-charges/ (Last visited on 08-03-15)
[4] See http://articles.economictimes.indiatimes.com/2015-01-15/news/58109002_1_net-neutrality-internet-governance-model (Last visited on 08-03-15); http://gadgets.ndtv.com/telecom/news/government-to-look-into-airtels-plan-to-charge-for-internet-calls-ravi-shankar-prasad-639713 (Last visited on 08-03-15)
[5] See http://www.medianama.com/2014/12/223-a-response-to-airtels-statement-justifying-net-neutrality-violation/
[6] See http://indianexpress.com/article/business/companies/airtel-move-to-charge-voip-calls-not-illegal-khullar/ (Last visited on 09-03-15); For a video of the interview, see http://youtu.be/d6QyapRBPXA (Last visited on 09-03-15).
[7] See http://www.medianama.com/2014/12/223-airtel-withdraws-voip-charges-for-now-after-forcing-trais-hand-on-net-neutrality-consultation/ (Last visited on 08-03-15).
[8] See http://www.financialexpress.com/article/industry/companies/airtel-to-roll-back-higher-voip-charges/24057/ (Last visited on 08-03-15)
[9] See NDTV report dated 16-02-15 at http://gadgets.ndtv.com/telecom/news/trais-paper-on-ott-players-to-also-cover-voip-calls-net-neutrality-in-india-661111 (Last visited on 09-03-15).
A Road Map for Digital India
The article by Shyam Ponappa was initially published in the Business Standard on December 3, 2014 and mirrored in Organizing India Blogspot on December 4, 2014.
Comprehensive, Integrated Strategy & Execution
India has been coasting along on a post-feudal-colonial mélange of currents and tides, with the brigandage of opportunistic politics fed by our (the voters’) greed for short-term benefits. The result is grotesque populism and corruption in lieu of the deferred gratification of pleasing cities and countryside with the appurtenances of proper governance: sidewalks and drains, toilets, transport, administration and order, hospitals and schools.
We have to organize and manage ourselves, “engineer” our way ahead, taking active steps to build and develop our solutions, building systems and processes, and not just wait for things to happen. We need a comprehensive and integrated, systemic, silo-busting, problem-solving approach.
This applies across the board in the broadest “spatial planning” sense that integrates housing and land use at all levels with commercial, industrial, cultural, scientific and educational activity, transportation, and all governance and infrastructure: water, sewerage, energy, communications, basic health and education. Infrastructure being the first level of enablement is the essential starting point.
The 2014 Election - National Democratic Alliance II (NDA II)
Until the sweeping change resulting from the general election in 2014. The Modi-led BJP-dominated NDA government swept away the previous Congress government decisively, and seems set on making development the centrepiece of this stint in governing India.
Previously, India’s leaders acknowledged repeatedly that infrastructure is India’s great need. Yet, they took no steps [Addendum: see below for the exception: NTP-2011 in October, 2011] to marshal forces to draw up a credible strategy and execution plan. This is what needed doing. Only good intentions and/or money won’t do, because delivery systems and processes have to be developed, i.e., planned, then built from scratch.
It looks like the NDA II will seriously address the development of enabling infrastructure. A beginning on a long way ahead.
Transformation, or Drift?
The article published in Organizing India Blogspot on August 7, 2014. It was earlier published in the Business Standard on August 6, 2014.
An uneasy sense of drift has set in after the anticipation that accompanied the swearing-in of the National Democratic Alliance government. Surely, the government understands that its real task is to build on hopes and expectations, to channel energies, to organise and coordinate for results, even perhaps try bipartisan teams? The opportunity is to overcome factionalism and harness people's energies, instead of floundering in disunity. We need transformative policies, programmes and incentiveswith purpose.
Resolute efforts in specific sectors can change this sense of the same old same-old. Two aspects of infrastructure that need early attention are: first, solar power, and second,digital infrastructure (see "A great start by Modi government", June 5, Business Standard).
Solar power, critically important in its own right, is essential for digital infrastructure because of the poor grid supply. Disappointingly, the steps taken are more of the same. For instance, the renewal of the national solar mission. for an increased 1,500 megawatts, is on the same lines as before - that is, a 30 per cent subsidy for solar farms, accelerated depreciation and renewable energy credits (RECs) that provide subsidies for a fixed period. While the target is higher, it is minuscule compared to the potential, and relative to other energy sources. For distributed user installations, interest-free loans seem ineffectual, because the high prices are unchanged, although payable in instalments - hardly ground-breaking.
Could the government try a more radical incentive of zero tax on equipment in addition to a 30 per cent subsidy, with immediate reimbursement and stiff penalties for misuse? Lower capital costs would probably induce much more extensive deployment, spurring manufacturing and innovation through sheer volume. This is likely for solar farms as well, and these incentives could be made available if such farms are really desirable. The government would lose upfront taxes on equipment, but avoid the cost and complexities of the RECs and accelerated depreciation, while gaining taxes downstream from increased productivity.
Similarly, in communications, we need countrywide access to broadband at reasonable prices. Users could benefit from applications such as education at all levels, from secondary school to college to continuing education for adults, healthcare; e-commerce; remote working/telecommuting; government services, information; and entertainment. Of course, once we have broadband, we'd need the range of useful, attractive content and services that result in improved user satisfaction, as well as productivity. These "supplementary effects" will undoubtedly take time to develop and play out, but the prerequisite is the access.
On this score, the much-awaited spectrum sharing recommendations are sorely disappointing. Their intent is puzzling because they are so restrictive, limiting sharing to two operators who have acquired frequencies in the same band in the same manner, with a cap of 50 per cent.
Build and Run Communications Networks Like Roads
Perhaps the telecom regulator's recommendations on spectrum sharing are an opening gambit to explore active network sharing. The logic for network and spectrum sharing is compelling. With India's self-created spectrum constraints and genuine deficiencies of capital and network coverage, the rational approach for our developing economy would be to optimise their use, as with roads. For this, active network sharing, including radio access networks and spectrum, is the most efficient solution, as is the case for roads.
Unfortunately, our policies are at the other extreme, of spectrum auctions and exclusive networks. This is least efficient for extending underdeveloped infrastructure services, as building and operating multiple exclusive networks requires the most resources, including capital. Auctions may be a reasonable alternative where there's existing infrastructure, and the issue is of allocating resources to whoever can make the best use of them. In our situation and given our needs, the way we build and operate roads may be a better alternative to achieve coverage.
To see why, compare the contrasting approaches of building communications networks with highways and roads. Road developers not only don't have to pay auction fees for the right to build roads, they are paid periodically for the construction of the assets. Ownership of the assets is then transferred to the state or other agency, and all road tax and toll payers may use the facilities. Similarly, all licensed operators could have access to communications networks on payment. While payback periods are often longer for roads, the nature of the financial flows are the same: capital must be invested in building the network before revenues are generated from users. People need to be informed and educated about this inescapable process.
Sparsely populated rural areas have lower revenue potential than urban areas. Hence, communications networks and services in rural areas lag because of commercial considerations. This deprivation is aggravated by front-loading auction fees for spectrum, which curtails investments in the networks and services in areas with lower potential. Also, unless operators pool resources, exclusive usage militates against full utilisation of the infrastructure. Our policies should reflect all this, instead of restricting spectrum access and sharing, including for 3G.
The real irony is that the pay-for-use principle is well accepted for roads; yet the opposite principle of auctions is used for communications networks. This is the unintended consequence of accepting auctions without thinking through what we need in our circumstances compared with advanced economies, and how to achieve those objectives.
Our spectrum policies have resulted in small bands of non-contiguous spectrum holdings that severely restrict capacity. Besides, operators have to invest heavily simply to protect the assets built. Yet countrywide broadband services need more spectrum to be used much more effectively to facilitate last-mile access. The kind of solution we need is for all remaining spectrum to be used for a common-access network, owned by a consortium of operators, including state-owned Bharat Sanchar Nigam and Mahanagar Telephone Nigam as "anchors". Once integrated with existing networks, operators can commercially deploy services with enhanced capacity, for which they pay as they use, and get paid. Broadband can be revolutionised by setting this up and converting spectrum fees to pure revenue sharing, as happened for mobile telephony with licence fees years ago. With the benefit of hindsight, the fees can be set low from the start, with regulatory oversight to avoid predatory pricing, and growth will most likely explode.
“OTTs Eating Into Our Revenue”: Telcos in India
On Tuesday, the Telecom Regulatory Authority of India (TRAI) held a seminar to initiate discussion on potential regulation of “over the top” services (OTTs) in India. TRAI organized the seminar to “understand perspectives of all stakeholders involved”, following grievances of telcos that OTTs are eating into their revenues and free-riding on their networks. In fact, a letter from the Cellular Operators Association of India (COAI) to TRAI outlines these concerns excellently. The letter, which I had the opportunity to see in print, objects that telcos take the trouble of laying and maintaining networks, while rapidly mushrooming OTTs eat into their revenue. Whatsapp, Skype and alternatives to paid text-and-call find particular mention in the COAI’s letter, and the COAI President Vikram Tiwathia was vociferous in his iteration of operators’ concerns. With VOIP and other OTTs replacing telco services, telcos are rapidly losing large parts of their revenue, he said.
I don’t mean to brush their concerns aside, of course. However, there is a need to consider in depth certain questions with statistical, regulatory and principled exploration. As Dr. Rajat Kathuria of ICRIER said at the Seminar’s first session, we need to evaluate whether there’s a need for regulation in the first place. This includes exploring whether the answer lies in deregulation, as Suhaan Mukerji of PLR Chambers and Subho Ray of IAMAI emphasized separately. Our solution, as Mr. Ray said, should not be to chain the free OTTs just because we are in chains ourselves. Unchaining telcos from their stringent licensing and other regulations may be more appropriate.
The Seminar was attended by telcos, OTTs, civil society and other stakeholders, and the frank exchange of views at the PHD Chamber of Commerce was heartening. While telcos in the room were broadly open to OTT innovation upon their networks (Mr. T.V. Ramachandran of Vodafone was particularly vocal on this), there exists a broadly reactionary loss-of-footing and apprehension over their current and projected revenue loss. Mr. C.S. Rao of Reliance was spot on when he said that telcos are afraid that what’s worked for them so far may not work in the future.
We’ve seen examples of such fear of incumbent operators before. In the early 1990s, the invention and spread of the Internet displaced appliancized, bundled models of telco services, and telcos were similarly unwelcoming. Indeed, AT&T went to court to fight the introduction of the Carterfone. In India, the falling demand for VAS today, and OTT-response to consumer demand, fosters such fear.
But accounting for OTTs’ lack of consumer servicing or responsibility for monetization models, what was of chief concern at the TRAI Seminar was the predominant focus on revenue. Telco profitability and their incentives for investment are important. Increasing supply side costs, with the government seeking to maximize revenue from spectrum allocation and demands of lower consumer prices, might be throttling current telco business models. We’d need to analyse data usage charges and projected mobile broadband penetration, in comparison with voice penetration, to be clear about the extent of such strangulation. But if the answer to failing telco business lies in further regulation and potential strangling of innovation, that’s a concern.
That’s in two ways. First, it isn’t merely the NetFlix or Google or Apple that populate the app economy. Raman Chima (ironically of Google) offered the example of Slideshare in Okhla, Delhi as one of the many successful Indian micro-multinationals. There are many others across India. Second, India’s current telecom regulatory model is unfit for a data/Internet content model. There’s a need, Suhaan Mukerji and Mahesh Uppal of ComFirst pointed out, to rethink our strict telecom licensing regime. We should begin to think, at least, of a vertically integrated layered model of telecom regulation that regulates on the basis of function.
These layers are integral to Internet architecture: network, transport, application. OTTs lie at the application layer, while telcos operate at the network and transport layers. It may be inefficient to utilize failures at one layer to regulate or share revenue of companies at other layers – that would stunt competition and innovation. A reconfigured licensing regime, permitting telcos to innovate more (someone at the Seminar said security clearances take years, while OTTs need no such clearance) might be more efficient and beneficial for all stakeholders involved – not least the disempowered individual consumers.
That’s my sense of the Seminar. Profitability and incentives are crucial. But they are crucial insofar as they benefit consumers – with access, choice, freedom of speech, security and privacy. Revenue sharing or partnership models, which were mentioned far too many times by multiple speakers without sufficient justification or elaboration, may not be ideal for any of us in the long term. But these are issues we – and TRAI – should consider while debating a regulatory framework.
Underlying infrastructure has an impact on our fundamental freedoms such as speech – the Supreme Court’s decisions in Sakal Papers and Express Newspapers makes that clear. Fast-paced innovation and the boundary-less benefits of a single, interoperable Internet have pushed us to favour security against freedoms. But every model we consider today – ad-based monetization, big data analytics – have implications that the NSA’s mass, cross-border surveillance has highlighted. Since TRAI is rethinking our regulatory framework for telecom and the Internet – and I envisage this going into a constructive consultation in the near future – these issues must inform its analysis and conclusions.
For more, read Nikhil Pahwa’s report over at MediaNama.
A Great Start (for the Modi government)
The article by Shyam Ponappa was published in the Business Standard on June 5, 2014 and mirrored in Organizing India Blogspot.
With such an unequivocal mandate, it would have helped to avoid jarring notes like the appointment of the principal secretary to the prime minister through an ordinance. Besides, the government has already shown wisdom in its actions in not rolling back the previous government's good schemes and in extending senior administrators' incumbencies.
If this wise approach continues to show in their thinking and action, greater support is likely from civil servants, citizens, and perhaps even opposition politicians, resulting in better outcomes. It's a question of pulling together towards common goals, or pulling in different directions. Think of the indecisive second term of the United Progressive Alliance (UPA), and recall that it was the Bharatiya Janata Party that stalled the functioning of Parliament on many occasions, including measures such as the induction of the Goods and Services Tax (GST). The general perception, however, was of a dithering UPA unable to coordinate and achieve results. In other words, impressions are more important than the reality of untidy facts.
This is why it's important that the PM and his team consciously create a good impression and carry people along. If they can do that, they are likely to achieve a great deal for us all. Instead, if they are perceived as heavy-handed, roughshod, and not going through due process, the salutary effects of exemplary leadership and governance are likely to be lost. The two-thirds who voted for others recently might well begin to converge, so that an opposition that is currently non-existent because it is dispersed, begins to coalesce. This could obstruct a high-handed government, or even try to pull it down. The result, as before, is likely to be irresponsible shouting matches and disruptive behaviour in Parliament that have stymied efforts to improve our lot.
The Tasks Ahead
- The need to build electricity generation from all sources;
- The supply of fuels, including the mining, transportation and pricing of coal, the development and pricing of hydrocarbons, hydroelectricity, nuclear fuel, and alternative energy sources;
- The requisite transmission and distribution systems, and their finances; and
- Issues related to retail pricing and collection in the context of our difficult legacy of unsustainable giveaways.
In addressing these, there are a couple of priorities suggested for the new government:
1. Infrastructure & Digital Access
The government seems serious about infrastructure. The PM's 10-point guidelines to his ministers begin with infrastructure reforms, mentioning health, water, education, roads, and energy as priority areas, with a separate mention of e-auctions for transparency.[1] Given this, one would expect that digital networks are an integral aspect of desirable infrastructure that provide people access to e-governance services. However, if digital networks are not mentioned specifically among the government’s priorities, their importance is likely to be lost in the ensuing activities. Meanwhile, the situation in the sector is complex and confusing, with conflicting demands from private sector contenders, state-owned operators MTNL and BSNL, I&B, and the Finance Ministry’s need for short-term revenues. This is why issues relating to communications infrastructure deserve to be addressed and resolved with high priority, and the government needs to explicitly recognise this.
2. Solar Power: Incentives & Promotion
A baffling aspect of our energy policies is why solar power has not become a centrepiece of our daily energy use. Much of the country gets so much solar radiation for most of the year that it should be an obvious focus for an energy-hungry developing economy. It should be possible, one would think (without knowing how simple or complex it would be to engineer the solutions), to use solar power when it is available, and grid power when it is not. The ministry of new and renewable energy had a scheme for partial capital reimbursement and soft loans for individuals and groups until the end of March 2014.[2] It doesn't appear to have been particularly successful.
Surely our priority should be to devise and implement schemes that actively encourage individuals and groups to invest in distributed solar generation for themselves? A long-term approach may require feed-in tariffs and grid modifications, as well as changes in administrative policies including taxes, to ensure (a) a significant increase in solar power (b) with more locally manufactured equipment. In the short term, an appreciable increase can result from enabling changes in rules and procedures, and the reimbursement of some capital costs combined with reduced excise and taxes.
The scope at the macro and micro levels is immense, encompassing multiple ministries that add up to a vast tangle, like an immense Gordian Knot. Add the other aspects of infrastructure, and the list seems endless: networks that are essential to enable e-governance and productivity through communications, transportation - e.g., rejuvenating the railways, disentangling the stalled process of building highways and roads, air and water transport, water supply and sewerage, and so on. All these have to be addressed within the constraints of the fiscal situation, inflation, restrained economic momentum, employment generation, budgetary limitations, and the reconfiguration of asset pricing to make financial returns attractive relative to property and gold without disrupting property values and the banking system. It will certainly help if our energies converge on the tasks focussed on realising the requisite goals, instead of being frittered away on disunity and fratricidal skirmishing.
Despite the daunting tasks ahead the prospects are solidly encouraging, because of a clearly mandated government. Another positive factor is the swing in votes favouring development over regressive caste and religious affiliations or hand-outs. This happened abruptly, without warning. If such tremendous change is possible so quickly, imagine what good leadership and honest governance could pull off with an inspired and supportive citizenry.
An Infrastructure Road Map
The article was first published in the Business Standard on April 30, 2014 and in Organizing India Blogspot on May 1.
Comprehensive, Integrated Strategy & Execution
Let's hope a newly elected government has the coherence and leadership to begin to deal right away with the mess in infrastructure, learning from what has gone wrong before. There are problems galore with our infrastructure, but a couple of examples stand out for what to look out for and avoid in future initiatives. There's little doubt that we must improve our approach to projects and undertakings in terms of functionality and efficiency, and that digital infrastructure is a key requirement.
While this article is on prioritising digital infrastructure, let us not underestimate the problems of deficient infrastructure. For sustained high growth, equally critical needs relating to power and logistics, with its interdependent linkages between transportation - by road, rail, air and water, and the associated holding/staging areas of terminals, airports and ports - need to be addressed with organisation and capital for capacity and de-bottlenecking.
One example is the multiplicity of schemes to register individuals, including the Unique Identification (UID) orAadhaar scheme, the National Population Register (NPR), the multipurpose national identity card, the voter identification card, and so on1. Another example is the National Optical Fibre Network (NOFN) by Bharat Broadband Network Limited (BBNL). Accepting for the moment that these projects are well intentioned, there seem to be flaws right from the design stage, and on through execution. While the fallout from past errors has to be dealt with, it's most important to avoid these mistakes in fresh initiatives.
The UID and NPR projects apparently began without sufficient care in defining their purposes; they did not mesh seamlessly with each other and with other objectives and processes. This disjunction has carried through in implementing their design and execution2.
The NOFN aims to extend a countrywide network on the foundation of the existing fibre networks of state-owned entities Bharat Sanchar Nigam Limited (BSNL), RailTel and PowerGrid. This was to link over 245,000 village panchayats by the end of 2013, but is still undergoing limited trials. Given its magnitude, this requires vast capital investment that is unrelated to likely revenue generation in the short run. This critical infrastructure project is apparently behind time and over budget despite its reduced scope3. That said, such monumental undertakings and changes can't be expected to go like clockwork, and the considerable efforts being made should eventually contribute to positive outcomes. For instance, a Confederation of Indian Industry report prepared with the help of KPMG in 2013 outlines possible business models and ecosystems in four areas, namely, education, health care, banking and agriculture4. It's just that a thorough, comprehensive approach from the outset would be most beneficial.
In hindsight, what's lacking in both instances is proper organisation and co-ordination, the discipline of sound project management; and this is a missing piece in most areas of deficiency in governance, including infrastructure development. While a great deal of opprobrium is directed at corruption, there's little focus on these disciplines related to competent design, execution and delivery. Both depend on digital infrastructure. This is where real efforts must be focused to fix things, quite apart from dealing with corruption.
The "plumbing" of hardware, software, communications lines, and systems that enables effective use of information and communications technology is a critical necessity for our economic growth and well-being. While a balanced availability of energy, transportation and water supply/sewerage is required, in the short run, it is ICT that is likely to yield the broadest overall benefits and economic returns through multiplier effects, provided the others come up to minimum requirements. According to the World Economic Forum's (WEF's) Global Information Technology Report 2014 issued last week, the top 10 countries embracing information technology are Finland, Singapore, Sweden, the Netherlands, Norway, Switzerland, the United States, Hong Kong, the United Kingdom, and South Korea, in that order. The report includes a "networked readiness index" that ranks countries based on an assessment of their digital infrastructure and ability to use information and communications technologies to grow, foster innovation, and improve the well-being of their citizens.
Between 2012 and 2014, India dropped in networked readiness from 69th to 83rd out of 144 countries. By comparison, China dropped from 51st to 62nd, and Brazil from 65th to 69th. The WEF report says that India continues on its declining trajectory - and, among other things, that despite competitive markets (24th) and the availability of the latest technologies (58th), its difficult business environment and lack of digital infrastructure (119th) reflect in deprivation in education, resulting in limiting the creation of a wide skill base (101st). Our information technology and business process management (IT-BPM) sector is still largely oriented to external markets. For the financial year 2014, export revenues are expected to have grown 13 per cent to $86 billion. This is almost five times domestic revenues, estimated to have grown at 10 per cent to Rs 1.15 lakh crore (just over $19 billion).
Clear, convergent objectives and task-oriented processes and systems are not really part of our culture or vocabulary, barring sectors oriented to external markets like IT-BPM, and some corporations and professionals. There are, of course, rare individuals who excel, such as the former head of Delhi Metro, E Sreedharan, who maintained his reputation from the Konkan Railway and before that, Indian Railways. But it's not as if getting it right is a foregone conclusion for countries with a far better record of good systems and high-quality delivery - as evidenced, for instance, by Germany's increasing problems after turning away from nuclear energy. So, the incoming government needs to focus on starting to do things right, and that is the best way to create opportunities that can make the most of our demographics, and the potential of our large and increasing markets. It must view any scheme as part of an integrated, overarching system, and apply itself from the very beginning with care and understanding to defining the aims, objectives, and detailed processes so that they mesh and converge with what else is there.
- An explanation of Aadhaar and NPR: http://egov.eletsonline.com/2012/04/there-is-actually-no-conflict-between-uid-and-npr/
- A discussion on systems aspects such as authentication and data security: "Do we need the Aadhaar scheme?", February 1, 2012, Business Standard (http://goo.gl/j3P5vf)
- "Reality check on the broadband dream", April 27, 2014, Business Standard (http://goo.gl/C9h4im)
- "Creating viable business models for inclusive growth through the National Optical Fibre Network": http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/KPMG_CII_Broadband_Report_Final.pdf
Extractive Charges on Spectrum & Petroleum
The article published in the Business Standard on March 5, 2014 was mirrored in Organizing India Blogspot on March 6, 2014.
spectrum auction last month ended with over Rs 61,000 crore (about $10 billion) bid for the 900 MHz and 1800 MHz bands. Everyone seems upbeat: the government at high bids, and operators at staking out spectrum so that they can continue offering their services. The public at large seems enthused. Is there reason for good cheer? Consider some of the outcomes and the likely consequences.
Outcomes
- Dominant operators, namely, Bharti Airtel, Vodafone and Idea, have won enough spectrum to continue building their businesses. So has a new potential contender, Reliance Jio.
- Winners must pay the amounts they've bid, in addition to making further investments in networks. Their financial compulsion will be to increase prices to amortise a payment of nearly Rs 18,300 crore, followed by the remainder to be paid in 10 annual instalments after a two-year moratorium. Competition will provide a countervailing effect against price hikes. The annual payment by all operators after two years will amount to about Rs 4,400 crore. To put this in perspective, Bharti's profits for FY 2013 were around Rs 5,000 crore and Idea's around Rs 800 crore.
- This perpetuates the approach of operators paying first for the right to use spectrum, then dividing available spectrum for their mutually exclusive use. The corollary is that unless operators choose to share some of their infrastructure, as some do for mobile towers, each operator must invest in its own infrastructure. In the absence of voluntary infrastructure sharing to the extent permissible, multiple investments are needed to build parallel networks. This is comparable to railways or transportation companies setting up multiple countrywide railroad and road networks, each for their own exclusive use. The result is a very capital-intensive approach requiring much more investment, while not being sufficiently remunerative.
Consequences
- To the extent that there are front-loaded government charges, operators have less capital for network investments.
- Resource constraints result in service deprivation in low-potential areas, as is prevalent now. In other words, urban areas may be well served, but not less densely populated rural areas where the majority reside. It is for the same reason that metro cities are better served by airlines or transportation services: the profit potential is higher.
- The lack of amenities in rural areas means there is continuing demographic pressure to migrate to cities. The overwhelming societal need for the provision-of-urban-amenities-in-rural-areas ("PURA") is entirely sidelined. Yet, these are the amenities people need most for economic empowerment, productivity and better living conditions.
Contrast this with Sweden's approach to broadband, for instance. Sweden is a pioneer in the use of 700 MHz for broadband. A loosely translated quote from Sweden's information technology minister reads: "A hundred years ago, it was the ability to build good railways, good roads and good physical infrastructure that laid the foundation for jobs and growth. Today it is also about fast enough build-out of good mobile telephony." [1]
Another instance of constructive intervention, and that too in a developed metropolis, is the London Enterprise Panel's approach, because London's broadband is considered insufficiently competitive. Funds "will be invested where the market is failing (particularly where this is proving a barrier to business growth)".[2]
In India, the efficient 700 MHz and 800 MHz bands have not yet been assigned except for limited 800 MHz spectrum for CDMA. These bands are most effective for broadband in rural and semi-urban areas. However, auctions and high reserve prices militate against their effective deployment at low cost, thwarting an apparent remedy for our deficient coverage. Also, GSM operators have just bid aggressively in the recent auction to survive, and are loaded with debt. Only the financially strong Reliance Jio, which has not bid as much, can offer high bids. Vodafone may also be able to do so. So, one problem is reduced bidding capacity, but a bigger problem is reduced investment capacity: the higher they bid, the less likely they are to provide countrywide broadband quickly at reasonable prices.
Petroleum Levies
Petroleum levies comprise another range of high government charges on critical inputs. In 2006, the taxes on petrol amounted to 52 per cent of the retail price, and on diesel, 30.4 per cent with Rs 45 to the dollar, (Delhi price: Rs 45/litre when Brent crude was $65/barrel). Tax collections now amount to around 30 per cent for petrol and 18 per cent for diesel, with Brent crude at around $110/barrel, and petrol in Delhi at Rs 74/litre. While the percentages collected are lower, the amounts collected are about 70 per cent higher than in 2006 because of the increase in the price of crude oil at a time when the economy is slumping.
There is a rationale for collecting reasonable charges to cover construction and maintenance, environmental impact mitigation and waste disposal (clean-up), and to provide incentives. But it's time our governments stopped being extractive, and rationalised charges based on objectives and policies in the public interest. Governments and politicians should be addressing these, instead of doles and giveaways. The aim should be to maximise life-cycle benefits, which can be optimised by reducing short-term capture in favour of longer-term accruals from growth, and from policies designed to deploy productive infrastructure including applying the principle of common carrier access.
[1]. "Digital TV [700 MHz band] will now provide frequencies for cell phones", writes IT Minister Anna-Karin Hatt - Dagens Nyheter, February 27, 2014: http://www.dn.se/debatt/digital-tv-far-nu-lamna-frekvenser-till-mobilerna/
[2]. London Enterprise Panel - 2014-2020 European Structural & Investment Funds Strategy for London, January 2014: https://www.london.gov.uk/sites/default/files/London LEP ESIF Strategy 2014-20 (1).pdf
Institute for Internet & Society 2014, Pune
Day One
February 11, 2014
Time |
Detail |
9.30 a.m. – 9.40 a.m. |
Introduction: Sunil Abraham, Executive Director Centre for Internet and Society |
10.00 a.m. – 10.15 a.m. |
Introduction of Participants |
10.15 a.m. – 12.00 p.m. |
Internet Governance and Privacy: Sunil Abraham |
12.00 p.m. – 12.30 p.m. |
Tea-break |
12.30 p.m. – 1.00 p.m. |
Keynote: Bishakha Datta, Filmmaker and Activist, and Board Member, Wikimedia Foundation |
1.00 p.m. – 2.00 p.m. |
Lunch |
1.30 p.m. – 3.00 p.m. |
Participant Presentations |
3.00 p.m. – 3.15 p.m. |
Tea Break |
3.15 p.m. – 4.45 p.m. |
Histories, Bodies and Debates around the Internet: Nishant Shah, Director-Research, CIS |
This year’s Internet Institute, hosted by the Centre for Internet & Society (CIS), kicked off in Pune to put a start to a week of learnings and discussions surrounding internet usage and its implications on individuals of society. Twenty two attendees from all over India attended this year, from backgrounds of activism, journalism, research and advocacy work.
Attendees were welcomed by Dr. Ravina Aggarwal, Program Officer for Media Rights & Access at the Ford Foundation, the event’s sponsor, who started off the day by introducing the Foundation’s initiatives in pursuit of bridging the digital divide by addressing issues of internet connectivity.
Internet Governance & Privacy, Sunil Abraham |
Each of these stories has one major thing in common: due to their nature of taking place over the internet, they are not confined to one geographic location and in turn, are addressed at the international level. The way by which an issue as such is to be addressed cuts across State policies and internet intermediary bodies to create quite a messy case in trying to determine who is at fault. Such complexity illustrates how challenging internet governance can be within today’s society that is no longer restricted to national or geographic boundaries.
Sunil also goes on in explaining the relationship between privacy, transparency, and power, summing it up in a simple formula; privacy protection should have a reverse relationship to power—the more the power, the less the privacy one should be entitled to. On the contrary, a direct correlation goes for power and transparency—the more the power, the more transparent a body should be. Instead of thinking about these concepts as a dichotomy, Sunil suggests to see them as absolute rights in themselves—instrumental in policies and necessary to address power imbalances.
The Web We Want, Bishakha Datta
The Institute’s kickoff was also joined by Indian filmmaker and activist, Bishakha Datta, who had delivered the keynote address. Bishakha bridged together notions of freedom of speech, surveillance, and accessibility, while introducing campaigns that work to create an open and universally accessible web, such as the Web We Want and Sexuality and Disability. Bishakha stresses how the internet as a space has altered how we experience societal constructs, which can be easily exhibited in how individuals experience Facebook in the occurrence of a death, for example. Bishakha initiated discussion among participants by posing questions such as, “what is our expectation of privacy in this brave new world?” and “what is the society we want?” to encompass the need to think of privacy in a new way with the coming of the endless possibilities the internet brings with it.
Histories, Bodies and Debates around the Internet, Nishant Shah
CIS Research Director, Nishant Shah, led a session examining internet as a technology more broadly, and our understandings of it in relation to the human body. Nishant proposes the idea that history is a form of technology, as well as time, itself, for which our understanding only comes into being with the aid of technologies of measurement. Although we are inclined to separate technology from the self, Nishant challenges this notion while suggesting that technology is very integral to being human, and defines a “cyborg” as someone who is very intimate with technology. In this way, we are all cyborgs. While making reference to several literary pieces, including Haraway’s Cyborg: Human, Animus, Technology; Kevin Warwick’s Living Cyborg; and Watt’s small world theory, Nishant challenges participants’ previous notions of how one is to understand technology in relation to oneself, as well as the networks we find ourselves implicated within.
Also brought forth by Nishant, was the fact that the internet as a technology has become integral to our identities, making us accessible (rather than us solely making the technology accessible) through online forms of documentation. This digital phenomenon in which we tend to document what we know and experience as a means of legitimizing it can be summed in the modern version of an old fable: “If a tree falls in a lonely forest, and nobody tweets it, has it fallen?”
Nishant refers to several case studies in which the use of online technologies has created a sense of an extension of the self and one’s personal space; which can then be subject to violation as one can be in the physical form, and to the same emotional and psychological effect—as illustrated within the 1993 occurrence referred to as “A Rape in Cyberspace.”
Attendee Participation
Participants remained engaged and enthusiastic for the duration of the day, bringing forth their personal expertise and experiences. Several participants presented their own research initiatives, which looked at issues women face as journalists and as portrayed by the media; amateur pornography without the consent of the woman; study findings on the understandings of symptoms of internet addiction; as well as studies looking at how students engage with college confession pages on Facebook.
Day Two
February 12, 2014
Time |
Detail |
9.30 a.m. – 11.00 a.m. |
Wireless Technology: Ravikiran Annaswamy, CEO and Co-founder at Teritree Technologies |
11.00 a.m. – 11.15 a.m. |
Tea-break |
11.15 a.m. – 12.45 p.m. |
Wired Technology: Ravikiran Annaswamy |
12.45 p.m. – 1.30 p.m. |
Lunch |
1.30 p.m. – 3.00 p.m. |
Network, Threats and Securing Yourself: Kingsley John, Independent Consultant |
3.00 p.m. – 3.15 p.m. |
Tea Break |
3.15 p.m. – 4.45 p.m. |
Practical Lab: Kingsley John |
4.45 p.m. – 5.00 p.m. |
Wrap-up: Sunil Abraham |
Day Two of the Institute entailed a more technical orientation to “internet & society” across sessions. Participants listened to speakers introduce concepts related to wired and wireless internet connectivity devices and their networks, along with the network of internet users and how one may secure him or herself while “online.” Wireless & Wired Technology, Ravikiran Annaswamy |
Network, Threats and Securing Yourself, Kinglsey John
An instructional session on how to protect oneself was given by Kingsley John, beginning with a lesson on IP Addresses—what they are and the different generations of such, and how IP addresses fit into a broader internet network. Following, Kingsley demonstrated and explained email encryption through the use of software, Kleopatra, and how it may be used to generate keys to encrypt emails through Thunderbird mail client.
Evening Discussion
A handful of participants voluntarily partook in an evening discussion, looking at the role of big players in the global internet network, such as Google and Facebook, how they collect and utilize users’ data, and what sorts of measures can be taken to minimize the collecting of such. Due to the widely varying backgrounds of interest among participants, those coming from this technical orientation towards the internet were able to inform their peers on relevant information and types of software that may be found useful related to minimizing one’s online presence.
Day Three
February 13, 2014
Time |
Detail |
9.30 a.m. – 11.00 a.m. |
Free Software: Prof. G. Nagarjuna, Chairperson, Free Software Foundation |
11.00 a.m. – 11.15 a.m. |
Tea-break |
11.15 a.m. – 12.45 p.m. |
Open Data: Nisha Thompson, Independent Consultant |
12.45 p.m. – 1.30 p.m. |
Lunch |
1.30 p.m. – 3.00 p.m. |
Freedom of Expression: Bhairav Acharya, Advocate and Adviser, Centre for Internet and Society |
3.00 p.m. – 3.15 p.m. |
Tea-break |
3.15 p.m. – 4.45 p.m. |
Copyright: Nehaa Chaudhari, Program Officer, Centre for Internet and Society |
The third day of the Internet Institute incorporated themes presented by speakers ranging from free software, to freedom of expression, to copyright.
Free Software, Prof. G. Nagarjuna
Chairman on the Board of Directors for the Free Software Foundation of India, Professor G. Nagarjuna shared with the Institute’s participants his personal expertise on software freedom. Nagarjuna mapped for us the network of concepts related to software freedom, beginning with the origins of the copyleft movement, and also touching upon the art of hacking, the open source movement, and what role software freedom plays in an interconnected world.
Nagarjuna looks at the free software movement as a political movement in the digital space highlighting the user’s freedoms associated to the use, distribution, and modification of software for the greater good for all. This is said to distinguish this movement from that of Open Source—a technical and more practical development-oriented movement. The free software movement is not set out to compromise the fundamental issues for the sake of being practical and in that sense, ubiquitous. Instead, its objective is “not to make everybody use the software, but to have them understand why they are using the software,” so that they may become “authentic citizens that can also resonate why they’re doing what they’re doing. We want them to understand the ethical and political aspects of doing so,” Nagarjuna says.
Open Data, Nisha Thompson
Participants learned from Nisha Thompson on Open Data; what it is, its benefits, and how it is involved in central government initiatives and policy, as well as civil society groups—generally for uses such as serving as evidence for decision making and accountability. Nisha explored challenges concerning the use of open data, such as those pertaining to privacy, legitimacy, copyright, and interoperability. The group looked at the India Water Portal as a case study, which makes accessible more than 300 water-related datasets already available in the public space for use from anything from sanitation and agriculture to climate change.
Freedom of Expression, Bhairav Acharya
Bhairav Acharya, a constitutional lawyer, traced the development of the freedom of speech and expression in India. Beginning with a conceptual understanding of censorship and the practice of censorship by the state, society, and the individual herself, Bhairav examines the limits traditionally placed by a nation-state on the right to free speech.
In India, modern free speech and censorship law was first formulated by the colonial British government, which broadly imported the common law to India. However, the colonial state also yielded to the religious and communitarian sensitivities of its subjects, resulting in a continuing close link between communalism and free speech in India today. After Independence, the post-colonial Indian state carried forward Raj censorship, but tweaked it to serve to a nation-building and developmental agenda. Nation-building and nationalism are centrifugal forces that attempt to construct a homogenous 'mainstream'; voices from the margins of this mainstream (the geographical, ethnic, and religious peripheries) and of the marginalised within the mainstream (the poor and disadvantaged), are censored.
Within this narrative, Bhairav located and explained the evolution of the law relating to press censorship, defamation, obscenity, and contempt of court. Free speech law applies equally online. Broadly, censorship on the internet must survive the same constitutional scrutiny that is applied to offline censorship; but, as technology develops, the law must innovate.
Copyright, Nehaa Chaudhari
CIS Programme Officer, Nehaa Chaudhari examined the concept of Copyright as an intellectual property right in discussing its fundamentals, purpose and origins, and Copyright’s intersection with the internet. Nehaa also explained the different exceptions to Copyright, along with its alternatives, such as opposing intellectual property protection regimes, including the Creative Commons and Copyleft. Within this session, Nehaa also introduced several cases in which Copyright came into play with the use of the internet, including Hunter Moore’s “Is Anyone Up?” website, which had showcased pornographic pictures obtained by submission bringing rise to the phenomenon of “revenge porn.” Instances as such blur the lines of what is commonly referred to as intellectual property, and what specific requirements enables one to own the rights to such.
Day Four
February 14, 2014
Time |
Detail |
9.30 a.m. – 11.00 a.m. |
E-Accessibility and Inclusion: Prashant Naik, Union Bank |
11.00 a.m. – 11.15 a.m. |
Tea-break |
11.15 a.m. – 12.45 p.m. |
Patents: Nehaa Chaudhari |
12.45 p.m. – 1.30 p.m. |
Lunch |
1.30 p.m. – 2.00 p.m. |
Fieldwork Assignment |
Day Four of the Internet Institute introduced concepts of eAccessibilty and Inclusion on the internet for persons with disabilities, along with patents as an intellectual property right. Participants were also assigned a fieldwork exercise as a hands-on activity in which they were to employ what they’ve learned to initiate conversation with individuals in public spaces and collect primary data while doing so. eAccessibility and Inclusion, Prashant Naik Prashant Naik started off the day with his session on E-Accessibility and Inclusion. Prashant illustrated the importance of accessibility and what is meant by the term. Participants learned of assistive technologies for different disability types and how to create more accessible word and PDF documents, as well as web pages for users. Prashant demonstrated to participants what it is like to use a computer as a visually impaired individual, which provided for an enriching experience. |
Patents, Nehaa Chaudhari
Nehaa Chaudhari led a second session at the Internet Institute on intellectual property rights—this one looking at patents particularly and their role within statutory law. Nehaa traced the historical origins of patents before examining the fundamentals of them, and addresses the questions, “Why have patents? And is the present system working for everyone?” Nehaa also introduced notions of the Commons along with the Anticommons, and perspectives within the debate around software patents, as well as different means by which the law can address the exploitation of patents or “patent thickets”—such as through patent pools or compulsory licensing.
Fieldwork Assignment, Groupwork
Participants were split into groups and required to carry out a mini fieldwork assignment in approaching individuals in varying public spaces in Pune in attempts to collect primary data. Questions asked to individuals were to be devised by the group, so long as they pertained to themes examined within the Internet Institute. Areas visited by groups included the Pune Central Mall, MG Road, and FC Road.
Day Five
February 15, 2014
Time |
Detail |
9.30 a.m. – 11.00 a.m. |
E-Governance: Manu Srivastav, Vice President, eGovernments Foundation |
11.00 a.m. – 11.15 a.m. |
Tea-break |
11.15 a.m. – 12.45 p.m. |
Market Concerns: Payal Malik, Economic Adviser, Competition Commission of India |
12.45 p.m. – 1.30 p.m. |
Lunch |
1.30 p.m. – 3.00 p.m. |
Digital Natives: Nishant Shah |
3.00 p.m. – 3.15 p.m. |
Tea-break |
3.15 p.m. – 4.45 p.m. |
Fieldwork Presentations |
Day Five of the Internet Institute brought with it sessions related to themes of e-governance, market concerns of telecommunications, and so called “Digital Natives.” eGovernance, Manu Srivastava |
Market Concerns, Payal Malik
Payal Malik, Advisor of the Economics Division of the Competition Commission of India shared her knowledge on market concerns of the telecommunications industry, and exclaimed the importance of competition issues in such an industry as a tool to create greater good for a greater number of people. She demonstrated this importance by stating that affordability as a product of increased access can only be possible once there is enough investment, which generally only happens in a competitive market. In this way, we must set the conditions to make competition possible, as a tool to achieve certain objectives. Payal also demonstrated the economic benefits of telecommunications by stating that for every 10% increase in broadband penetration, increase in GDP of 1.3%. She also examined the broadband ecosystem in India and touched upon future possibilities of increased broadband penetration, such as for formers and the education sector.
Digital Natives, Nishant Shah
Nishant Shah shed some light on one of the areas that the Centre for Internet & Society looks at within their research scope, this being the “Digital Native.” As referred to by Nishant, the Digital Native is not to categorize a specific type of internet user, but can be said for simply any person who is performing a digital action, while doing away with this false dichotomy of age, location, and geography.
Nishant examines varying case studies in which “the digital is empowering natives to not merely be benefactors of change, but agents of change,” from the Blank Noise Project’s “I NEVER Ask for it…” campaign in efforts to rethink sexual violence, to Matt Harding’s foolish dancing with groups of individuals from all over the world.
As occurrences in the digital realm, however, these often political expressions may be rewritten by the network when picked up as a growing phenomenon, in order to make it accessible to online consumers by the masses. In doing so, the expression is removed from its political context and is presented in the form of nothing more than a fad. For this reason, Nishant stresses the need to become aware of the potential of the internet in becoming an “echo-chamber”—in which forms of expression are amplified and mimicked, resulting in a restructuring of the dynamics surrounding the subject—whether it be videos of boys lipsyncing to Backstreet Boys in their dorm room going viral, or a strong and malicious movement to punish the Chinese girl who had taken a video of her heinously and wickedly killing a kitten after locating her using the Human Flesh Search Engine.
Fieldwork Presentations, Groupwork
To end off the day, participant groups presented findings collated from the prior evening’s fieldwork exercise, in which they were to ask strangers in various public places of Pune questions pertaining to themes looked at from within this year’s Institute. Participants were divided into four groups and visited Pune’s FC Road, Mahatma Gandhi Road, and Central Mall.
Groups found that the majority of those interviews primarily accessed the phone via the mobile. There was also a common weariness of using the internet and concern for one’s privacy while doing so, especially with uploading photos to Facebook and online financial transactions. People were also generally concerned about using cyber cafes for fear of one’s accounts being hacked. Generally people suspected that so long as conversations are “private” (i.e. in one’s Facebook inbox), so too are they secure. Just as well, those interviewed shared a sense of security with the use of a password.
Day Six
February 16, 2014
Time |
Detail |
9.30 a.m. – 11.00 a.m. |
Wikipedia: Dr. Abhijeet Safai |
11.00 a.m. – 11.15 a.m. |
Tea-break |
11.15 a.m. – 12.45 p.m. |
Open Access: Muthu Madhan (TBC) |
12.45 p.m. – 1.30 p.m. |
Lunch |
1.30 p.m. – 3.00 p.m. |
Case Studies Groupwork |
3.00 p.m. – 3.15 p.m. |
Tea-break |
3.15 p.m. – 4.45 p.m. |
Case Studies Presentations |
As the Institute came closer to its end, participants got the opportunity to hear from speakers on topics pertaining the Wikipedia editing in addition to Open Access to scholarly literature. Participants also worked together in groups to examine specific case studies referenced in previous sessions, and then presented their conclusions.
Wikipedia, Dr. Abhijeet Safai
The Institute was joined by Medical Officer of Clinical Research at Pune’s Symbiosis Centre of Health Care, Dr. Abhijeet Safai, who led a session on Wikipedia. Having edited over 3700 Wikipedia articles, Dr. Abhijeet was able to bring forth his expertise and familiarity in editing Wikipedia to participants so that they would be able to do the same. Introduced within this session were Wikipedia’s different fundamental pillars and codes of conducts to be complied with by all contributors, along with different features and components of Wikipedia articles that one should be aware of when contributing, such as how to cite sources and discuss the contents of an article with other contributors.
Open Access, Muthu Madhan
Muthu Madhan joined the Internet Institute while speaking on Open Access (OA) to scholarly literature. Within his session, Muthu examined the historical context within which the scholarly journal had arisen and how the idea of Open Access began within this space. The presence of Open Access in India and other developing nations was also examined in this session, and the concept of Open Data, introduced.
Case Studies, Groupworks
Participants were split up into groups and assigned particular case studies looked at briefly in previous sessions. Case studies included #thingsdarkiessay, a once trending Twitter hashtag in South Africa which had offended many Americans for its use of “darkie” as a derogatory term; the literary novel, The Hindus, which offers an alternative narrative of Hindu history had been banned in India for obscenity; a case in which several users’ avatars had been controlled by another in a virtual community and forced to perform sexual acts, referred to as A Rape Happened in Cyber Space; and lastly, a pornographic submission website, Is Anyone Up?, for which content was largely derived from “revenge porn.” Each group then presented on the various perspectives surrounding the issue at hand.
The Cyborg, Nishant Shah
Nishant Shah led an off-agenda session in the evening looking more closely at the notion of the human cyborg. Nishant deconstructs humanity’s relationship to technology, in suggesting that we “think of the human as produced with the technologies… not who produces technology.” Nishant explores the Digital Native as an attained identity for those who, because of technology, restructure and reinvent his or her environment—offline as well as online. Among other ideas shared, Nishant refers to works by Haraway on the human cyborg in illustrating our dependency on technology and our need to care for these technologies we depend on.
Day Seven
February 17, 2014
Time |
Detail |
9.30 a.m. – 11.00 a.m. |
Internet Activism: Laura Stein, Associate Professor, University of Texas and Fulbright Fellow |
11.00 a.m. – 11.15 a.m. |
Tea-break |
11.15 a.m. – 12.45 p.m. |
Domestic and International Bodies: Chinmayi Arun, Research Director |
12.45 p.m. – 1.30 p.m. |
Lunch |
1.30 p.m. – 3.00 p.m. |
Participant Presentations |
3.00 p.m. – 3.15 p.m. |
Tea-break |
3.15 p.m. – 4.45 p.m. |
Hot Question Challenge |
The last day of the week-long Internet Institute examined concepts of Internet Activism and Domestic and International Bodies. Some participants led presentations on topics of personal familiarity, before a final wrap-up exercise, calling upon individuals to share any new formulations resulting from the Institute.
Internet Activism, Laura Stein
Associate Professor from the University of Texas, Laura Stein, spoke on activism on the internet. Laura examined some grassroots organizations and movements taking place on the online and the benefits that the internet brings in facilitating their impact, such as its associated low costs, accessibility and possibility for anonymity. Despite the positive effects catalyzed by the internet, Laura stresses that the “laying field is still unequal, and movements are not simply transformed by technology.” Some of the websites exemplifying online activism that were examined within this session includes the It Gets Better Project, which aims to give hope to LGBT youth facing harassment, and the national election watch by the Association for Democratic Reforms. Additionally, Laura spoke on public communication policy, comparing that of the US and India, and how this area of policy may influence media content and practice. |
Domestic and International Bodies, Chinmayi Arun
As the Internet Institute’s final speaker, Research Director for Communication Governance at National Law University , Chinmayi Arun, explores the network of factors that affect one’s behavior on the internet—these including: social norms, the law, the markets, and architecture. In referring to Lawrence Lessig’s pathetic dot theory, Chinmayi illustrates how individual’s—the pathetic dots in question—are functions of the interactions of these factors, and in this sense, regulated, and stresses the essential need to understand the system, in order to effectively change the dynamics within it. It is worth noting that not all pathetic dots are equal, and Google’s dot, for example, will be drastically bigger than a single user’s, having more leveraging power within the network of internet bodies. Also demonstrated, is the fact that we must acknowledge the need for regulation by the law to some extent, otherwise, the internet would be a black box where anything goes, putting one’s security at risk of violation.
Hot Question Challenge
The very last exercise of the Institute entailed participants asking each other questions on demand, relating back to different themes looked at within the last week. Participants had the chance, here, to bridge together concepts across sessions, as well as formulate their own opinions, while posing questions to others that they, themselves, were still curious about.
An Introduction to Spectrum Sharing
The Current Scenario – Wi-Fi, GSM and CDMA: A Primer from the Perspective of Spectrum Coordination
Sharing spectrum is not a radically new idea: it's probably being shared in many places in your living room. Your family's phones could be communicating with your laptops using Bluetooth; your Wi-Fi router is sharing Wi-Fi spectrum with your next door neighbor's. There is no central brain that tells each device how to share spectrum, but each device pair (phone+laptop, for example) has some unique identifier (a code) that enables them to hear each other over the “noise” created by the other devices, as though they were speaking different languages. Each device can access the same frequencies at the same time and place, but does not know in advance which other devices are going to use them, and as long as there aren't too many such devices close to each other, the scheme works well.
From a technological standpoint, this is one of two kinds of spectrum coordination that's currently in wide use: the second is where each device is given a narrow sliver of frequency to itself for a specified period of time.[1] This is what happens with GSM cellphone technology: the service provider's tower allocates frequency — from the pool of frequencies available — to users on a per-call basis: this is called Frequency Division Multiple Access, or FDMA. GSM further divides access between different users in the same frequency channel in the time domain with bursts of data of the order of milliseconds, something called Time Division Multiple Access or TDMA; you'd be sharing your frequency channel with up to seven other people[2] and your content would be sent in sub-millisecond bursts approximately every five milliseconds.
Code Division Multiplexing, or CDMA, Is concept that assigns a user a 'code' for the duration of her call that effectively makes interference from other users, with other codes, appear as noise. The following picture illustrates FDMA, TDMA and CDMA:[3]
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The preceding discussion would suffice for a single cell tower, alone in a desert. In the real world, there's more than one tower, so we'll have to create a system so that no two adjacent towers end up allocating the same frequency at the same time. The simplest way to do that, and the only one currently used, is splitting the available spectrum such that the range of frequencies available to a tower does not intersect with that available to any of its neighbors, ever – that way, a tower can only allocate from its own set of frequencies, but it need not concern itself with what its neighbors are doing. If adjacent towers were to share spectrum, then the preceding condition only needs to apply at that exact moment in time – at that precise instant a tower should be aware of the frequencies being used by all towers that are close enough to interfere with it, and pick a frequency outside that set, which it can use for the duration of a call.
Frequency Reuse
When there weren't so many cellphones crowding up the spectrum, it did not make economic sense to invest in the extra infrastructure required to make neighboring towers 'talk' to each other with low latency, so the solution we have now, even within the towers of a single service provider, is that any tower's neighbors do not intrude upon the spectrum assigned to that particular tower — what a neighbour is in this statement is qualified below. To start with, let's look at how towers could ideally be placed. We want to place towers on the ground in some regular pattern that makes them end up equidistant from each other: there are as many ways of doing that as there are of tiling a plane, which you can think of as tiling a bathroom with regular shapes (called 'regular polygons' by the pedantic).
Starting from the simplest, we can do it with tiles shaped like triangles, squares or hexagons, and a little thought will convince you that these are the only choices. Since a tower's signal would be 'strong enough' only up to some maximum radius, we'd ideally like to tile our plane with circles, but if we settle for the next best thing, the closest shape to a circle with which to tile the plane is a hexagon, in a honeycomb pattern; if you're looking at it from above, the towers would be placed as in the diagram below.[4]
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This is just a part of a much larger honeycomb on the ground; the towers go in the center of the hexagons, where the numbers are; why the numbers are as they are will become clear in a couple of lines. Let's focus at tower 1 in the center of the diagram for our example. If the signals decay slow enough — so that the signals radiated from the nearest neighbors (towers surrounding 1, i.e. 2 through 7) and the next-nearest neighbors (towers two steps away from 1, with numbers from 2 through 7), interfere significantly with tower 1 in the center, but the next-to-next-nearest neighbors (three steps away from 1) do not, then the frequency reuse pattern can be like what we see in the diagram above, with towers denoted by the same number (and only the same number) using same exclusive set of frequencies. In this example, the closest towers with the same frequency as the central tower are the 1's in the hexagons at the edge – the frequency reuse factor is 3 (see footnote). In this diagram, the ordering of the numbers makes no difference – the situation would be the same if we exchanged the position of every, say, 1 and 3.
In reality the grid of towers of a particular operator covering a city is rarely hexagonal, due to local constraints, so what needs to be taken care of is not to use the frequencies that the nearest neighbors, next-nearest neighbors and so on are using depending upon the frequency reuse factor.[5] It's clear that without the towers being able to communicate in near-real time, with and FDMA/TDMA system like GSM, this is the optimal — and, in fact, the only — way to go.
Neighbouring towers sharing spectrum
Everything changes, though, if the towers can communicate and coordinate fast enough — in theory, at least, all the service provider's towers could pick spectrum from a common pool.[6] In fact, every service providers could put their spectrum into a common pool from which frequencies can be allocated to users as before. This would increase trunking efficiency and thereby the maximum number of users per tower dictated by quality of service limits (both terms are defined in the next section), making more efficient use of the spectrum.
The Current Trade-off between Trunking and 'Economic' Efficiency: The Principal Argument for (Inter-operator) Shared Spectrum
Imagine the following scenario:
- We have 5 MHz of spectrum split it into five channels of one MHz each;
- Five thousand people own cell phones and each is assigned a channel so that there are a thousand cellphone users per channel;
- People call infrequently: calls are randomly distributed but on average, in each channel, five people attempt to make a call every minute and each call is ten seconds long.
In this way, a lot of people can use a few channels with a reasonable hope that their calls will be connected, a phenomenon called 'trunking'. Chances are high, however, that at least one person's going to make a call before the previous caller on her channel is done, and end up being blocked. The probability that a call will go through is factored into the Quality of Service (QoS) through the Erlang B Formula; roughly speaking, the less chance there is of a caller being blocked, the higher your QoS. It's essentially a question of queuing: the same logic can be applied to beds at a hospital. The number of hospital beds in a town would be much fewer than the number of people, but it works because everyone's not sick all the time; if people are sick more often, or for longer durations, the chances that someone won't get a bed would be higher:[7]
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Suppose someone own an Airtel phone and Airtel's channels are all in use, but Vodaphone has a channel free at the time. Let's look at two alternatives:
a) she's not allowed to switch, and cannot make her call;
b) she's allowed to switch to the empty channel, and her call goes through.
Clearly, the second choice is better — and it has greater trunking efficiency.
In the current scenario, service providers get exclusive rights to chunks of spectrum. Naively, the more competitors (in this case, service providers like Airtel and Vodaphone) you have in a market, the better the competition. This, unfortunately, leads to a decrease in trunking efficiency — it's inversely proportional to the number of players in the market because every chunk of frequencies split between two service providers (every successive split) increases the chances for an event such as the one described above happening. The question that logically follows is: what is the optimal number of service providers for the Indian market? This is hard to find, and differs depending on who you ask — incumbents, for instance, may quote a smaller number, whereas prospective new entrants may quote a larger one. The number is controversial within policy-making circles as well, and is being debated as this article is being written. We note in passing that the number of competitors — and thus fragmentation of spectrum — is higher in the Indian market than most others.
If spectrum were shared, however, all this would be moot. This, therefore, is the primary argument towards spectrum sharing: better trunking efficiency as well as more competition — you can , in this instance, have it both ways.
CDMA and Spectrum Sharing
GSM is a simple example, where both the difficulty and the benefits of intra-operator spectrum sharing are readily apparent. Things get more difficult conceptually if we talk about newer technologies, so we'll have to get a little deeper into the technicalities. Code Division Multiple Access, or CDMA, allows phones to communicate using the same frequencies at the same time and place, but differentiated by codes — similar to WiFi but using different encoding schemes and technology. CDMA might look (from the analogy with Wifi) to require no central planning, but quality of service guarantees require that various phones in a 'cell' coordinate, and the coordinating agent happens to be that cell's tower. Two things need to happen: one, the code allocated to each phone needs to be sufficiently different,[8] at least with respect to other nearby phones, which means the tower has to allocate codes. Additionally, the distance involved between cellphone and tower (as against laptop and router) causes the near-far problem.[9]
For synchronous CDMA, the concept analogous to frequency reuse is code reuse — a tower needs to take into account the codes being used by its nearest neighbors, next-nearest neighbors and so on, which might be easier than coordinating timing in a TDMA system. For asynchronous CDMA (the most commonly used variant), even that is not required — the low cross-correlation pseudorandom codes that are used have so many possibilities that the likelihood of a collision would be small, though other users would appear as gaussian noise, so just like GSM, the number of users is limited by QoS limits. This makes intro-operator sharing of spectrum between adjacent towers easier and asynchronous CDMA ends up with a frequency reuse factor of 1, meaning that a tower can access the same set of frequencies as its (intra-operator) neighbor, hypothetically making it easier to use in a shared-spectrum system.
LTE
LTE uses Orthogonal Frequency Division Multiplexing, or OFDM, which can be – very roughly — thought of as combining ideas used in FDMA as well as CDMA, in that information is redundantly split between several frequencies ('subcarriers' in the literature) and each frequency can have more than one channel, using an orthogonal coding schemes like (synchronous) CDMA, where, as mentioned earlier, a mobile phone can distinguish its channel by its code. As it's an FDMA system, the benefits of frequency sharing for LTE can be inferred as above for GSM.
The Regulatory Perspective
The European Commission has this to say about shared spectrum:[10] “From a regulatory point of view, band sharing can be achieved in two ways: either by the Collective Use of Spectrum (CUS), allowing spectrum to be used by more than one user simultaneously without a license; or using Licensed Shared Access (LSA), under which users have individual rights to access a shared spectrum band”.
CUS is how unlicensed spectrum like Wi-Fi is currently used, which does not require a central 'brain' allocating spectrum to users. It requires no setup or organization before or during use. LSA is what shared spectrum would have to be like when used by service providers: it requires setup and organization but could offer better efficiency and quality of service because the central 'brain' — in this case the CPU at the cellphone tower — can figure out the most efficient way to allocate spectrum to users, just like a city's traffic lights coordinate the flow of traffic to prevent jams, and for that multiple towers — or multiple transmitters on a single tower — would have to coordinate somehow. In other words, you don't require approval before setting up your Wi-Fi router in your living room, but (depending upon the router, how many neighbors have routers, how close they are, and how far you are from your router) your connection might get dropped; this kind of thing is okay because there usually aren't that many people with routers living that close to each other, though that's fast changing. The 2.4 GHz Wi-Fi band is further crowded in by other microwave radio technologies, like Bluetooth and microwave ovens. Cellphones are a different thing altogether, because you wouldn't want your cellphone to stop working in the middle of a crowded bus if you're late en route to meeting someone at a coffee shop, or if you're being mugged and need to call the police. Therefore it is the service providers' and regulatory agencies' responsibility to provide a high (minimum) quality of service. This classification is symbolized by the following diagram:[11]
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CUS falls on the left, being contention-based – that is, different user devices (eg, laptops) could contend with each other for the attention of the base station (eg, Wi-Fi router — random access, CSMA), whereas LSA is conflict-free (which would be the case if the router decides, period). The potential for conflict exists in CUS, there being multiple devices asking for spectrum, whereas for LSA, a central authority decides which device to allocate spectrum to at any particular point in space and time. CUS isn't total chaos, however: it would now be appropriate — taking a leaf from ex-FCC chief technology officer Jon M. Peha – to introduce the concepts of coexistence and etiquette.
In our Wi-Fi example, the Wi-Fi routers merely coexist, and the technological standard allows them to try and use the codes/spectral bands that are in their best interests, to best communicate with their client devices (though actual Wi-Fi routers also follow some sort of etiquette with other routers). One could additionally introduce some sort of etiquette into the equation by requiring that one router should, for example, “wait in the cue” for another — and vice versa — as and when required, as well as other requirements for cooperation depending upon the technology used. This minimal cooperation would be enough for them to, in Mr Peha's words, “greatly improve efficiency if and only if designed appropriately for the applications in the band” - depending upon the technology used, being too 'polite' could cause longer wait times that decrease efficiency. The situation is complicated by the existence of multiple technologies at the same spot – for example, your Bluetooth receiver, two-way radio and Wifi router working in the same room. If there is potential for interference, common communication protocols could be implemented to enable all those devices to 'talk' to each other and effectively follow some form of wireless etiquette so that they can cooperate and not get in each others way. This is all the more important as Wi-Fi will become an essential part of the cellphone communication network for 4G.
To conclude, there are many ways shared spectrum technology could hypothetically work, and in practice the core technologies that are used would dictate the details of the spectrum sharing solution. Spectrum sharing would reduce the regulatory conundrum that is spectrum allocation, and make more efficient use of spectrum — most obviously through trunking efficiency, though there may be other technological benefits depending upon the core technology used. For maximum efficiency and robustness, there would have to be some kind of rules followed, so that devices apply for spectrum like people in a cafeteria queue as opposed to the scrum you might find trying to get into an Indian bus; the etiquette we were talking about earlier should be baked into the design of the communication infrastructure. Some services (like voice calling) by their nature, need a guaranteed high QoS — need to be conflict-free — and therefore need Licensed Shared Access. Others need a minimum of regulation — but with the movement of what used to be CUS-appropriate devices (In many plans for 4G LTE-Advanced, specifically Wi-Fi) towards LSA-appropriate applications, a careful optimization needs to be done in deciding where to draw the line.
The Big Question: Infrastructure Sharing
We've gone through a thought experiment on intra- and inter-operator sharing of spectrum for the particular case of mobile towers in adjacent cells, and come to the general conclusion that the solution is in principle a question of fast and efficient coordination between the geographically separated towers, toward which there are two driving forces at present: the demand for more efficient use of spectrum by a growing body of users with growing data needs, and the supply of low latency, cheaper and higher bandwidth communication options using fiber-optic cables.
There are essentially two parts to the big question we're going to ask: one, what happens when there are multiple operators serving the same geographical area, and two, is it necessary to have multiple towers standing right next to each other for multiple operators?
To answer the first question, one could have a 'roaming' agreement between multiple operators at the same spot: if all the channels of one operator are busy, the user just has to switch to a channel of an operator which isn't. For the second, a single tower (the physical tower structure as well as the transmitting equipment on it) could serve any operator, who could rent it's usage on a per-call basis. That, in fact, already seems to be the case: Airtel and Vodaphone, for instance, each own a 42% share in India's largest tower corporation Indus Towers, the remaining 16% belonging to Idea Cellular. |
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Infrastructure sharing will be explored further in a forthcoming post.
Coarse-grained Spectrum Sharing
For completeness, we should point out that there are more course-grained (simpler but less efficient) means of sharing in time as well as geography: the appropriate thought experiment is to imagine a radio station at the base of a hill that only has two shows, one for breakfast and one for dinner. Using its radio spectrum on the other side of that hill, or beyond the area it serves, would be fine at anytime; using it's spectrum in between the morning and evening shows would be fine anywhere.
Caveats
It must be emphasized at this point that the above is a purely hypothetical scenario, and not a prescription. Getting this to work would involve technical hurdles that a brief overview such as the one above could not bring up, that could only be discovered in the process of bringing the technology to market. Each technological solution – GSM, CDMA and LTE – would present its own difficulties, which may become apparent only when the product is shipped, so to speak. Fine technical judgments would need to be made: an example of the difficulty involved could be gauged from the early debates comparing the first CDMA standard (IS-95) with GSM at the time.
The economic model to use for shared spectrum and shared infrastructure is also something under intense discussion right now, and a number of scholarly papers have already been written up.
[1]. This is what you'd get in your first few Google search results when you look for “shared spectrum”, because the former has become so widely accepted that it's now part of the linguistic background.
[2]. Explained on http://www.radioraiders.com/gsm-frequency.html, referring to 3GPP spec http://www.3gpp.org/ftp/Specs/latest/Rel-7/45_series/45005-7d0.zip
[3]. From http://www.umtsworld.com/technology/cdmabasics.htm
[4]. From Mike Buehrer, William Tranter-Code Division Multiple Access (CDMA)-Morgan & Claypool Publishers (2006).
[5]. There are multiple definitions; the simplest one is “how many steps (in cells) that you have to walk from the tower before you can reuse the frequency”, which will suffice for us.
[6]. Of course, it's going to be messier in practices.
[7]. From http://www.vumc.com/branch/PICA/Software/
[8]. Orthogonal for synchronous CDMA, or 'sufficiently' orthogonal for asynchronous CDMA
[9]. Remember that the receiver on the tower has to demux (split) the signals received from many cellphones, and while a Wifi router would perhaps service multiple laptops in the same building, a CDMA tower has to work for a couple of hundred phones at varying distances – some a building-length away and some, many kilometers away. Every receiver has its own maximum signal to noise ratio, where the strength of the signal received has to be more that a certain fraction (which can be quite small, for a good receiver) of the strength of the electromagnetic (radio) noise it receives from other sources; cellphone towers have to deal with much larger signal to noise ratios than Wifi routers. For an FDMA or TDMA system, different users' data arrives at different frequency or time-slots, so as long as those slots are properly differentiated, one user's signal won't be another user's noise. For the commonly used asynchronous CDMA system, however, this is not the case, so at a receiver on a tower, the signal transmitted by a distant cellphone could be swamped by that from a much closer phone. The way this is dealt with is to have phones closer to the tower decrease their transmission power. So even in CDMA, the tower is still telling the phone what to change, only in this case it's the transmission power as opposed to the exact frequency and time.
[10]. http://ec.europa.eu/digital-agenda/en/promoting-shared-use-europes-radio-spectrum
[11]. From Mike Buehrer, William Tranter-Code Division Multiple Access (CDMA)-Morgan & Claypool Publishers (2006)
Centre- or State-Driven Development?
Shyam Ponappa's article was published in the Business Standard on February 5, 2014, and in Observer India Blogspot on February 7, 2014.
There are opposing views on the merits of centrally driven development compared with states developing on their own approach. At one level, some corporate leaders as well as politicians and members of civil society exhort states to compete for capital investment. This debate extends beyond states going their own way, to community-level local government, as in the Aam Aadmi Party's (AAP's) "Swaraj" through mohalla sabhas (town-hall meetings or open assemblies) for local government.
Basic Weakness: Lack of Organization & Coordination
While the benefits of community-led initiatives for local issues are indisputable, advocates emphasising decentralisation perhaps overlook some fundamental aspects of our reality. These are the extent of the inadequacies in our infrastructure networks, our organisational set-up, and in our ability to achieve effective coordination. Years ago, when Swaran Singh was food and agriculture minister in 1964, he reportedly said that one of our basic weaknesses was "lack of adequate administrative coordination and absence of a unified set-up at different levels" and that it should be "possible to achieve more rapid and lasting progress through a comprehensive and integrated approach than through uncoordinated and isolated efforts of different agencies and organisations operating at different levels…." [1] He couldn't have been more right, even today.
Result: Poor Infrastructure
The lack of unified organisation and effective coordination has a direct bearing on infrastructure. This is what people really need, no matter what else they might want. Take the current focus in Delhi on water and electricity. To these two, we must add roads, transport and communications as elements of essential first-order infrastructure services. People everywhere in the country need these services. Likewise, their second-order service needs include healthcare, education and finance. All these services are subject to network economics, and no local community can be self-sufficient without integration with external linkages. At the appropriate levels ("centres") of city, region, state and country (for example, for national highways or communications networks), these services need "centrally" organised supply and coordinated distribution for effective and efficient delivery. Aside from problems related to corruption, it is in ignoring organisation and coordination, or in handling them ineptly, that our governments fail. Centrally driven development is not just an option we fail at, mostly; it is an absolute necessity to empower ourselves, and until we get it right, we will be hamstrung by this deficiency.
Oblivious to Sewerage & Sanitation
As an aside, another major failure in not appreciating the systems required for basic infrastructure is in ignoring the linkage of water supply with sewerage and sanitation, historically and even now. Sewerage is concomitant with water supply; having water entails having to deal with sewage. Water and sanitation systems need significant "central" design - in the sense of overarching integrated systems at the appropriate level - with expert inputs in system development and implementation. This is usually not feasible at the local-community level alone. Ignoring this results in open sewage, polluted water bodies, unhygienic conditions and stinking surroundings. In this context, while building new smart cities is good, the dire need is to upgrade the systems in our existing cities, towns and villages, so that we live better. Such steps may not grab the headlines, but this is the stuff of our lives.
Virtual Mohalla Sabhas (Townhall Meetings)
Next, consider the approach to community participation in local government. There is certainly considerable potential for community participation, but not through methods like the "janata darbar" open assembly last month by the AAP in Delhi, or the Nationalist Congress Party's limited online interaction sessions. Doing so effectively and with efficiency is likely to require well-designed and deployed processes using Web-based technologies and methods, rather than, by way of example, the AAP's approach of live mohalla sabhas. Press reports suggest the AAP plans 2,700 mohalla sabhas in Delhi, the idea being that government representatives will attend these open assemblies, where issues will be discussed and resolved.[2] This seems like it would be very difficult, if not impossible, to achieve in practice. Instead, if the proponents of these ideas adopted the approach of online town-hall meetings or virtual mohalla sabhas, governments could design and implement Internet-based systems using asynchronous communications - eliciting inputs and recommendations from domain experts and discussion by citizens for decision making by authorised functionaries. Such systems could also allow for realistic project time frames and ensure follow-ups on water and sanitation, electricity, transport, health, education, or whatever else. If political parties, especially the experienced administrators and engineers/MBAs supporting these parties, bend their minds to these tasks, we are likely to have better systems with more impressive results on the ground.
For instance, take garbage clearing. This might well improve if ward committees oversaw the work of sanitation workers, as mentioned here [3]; but the prerequisite is a system-wide design in place with processes that work, as suggested in this broad critique. [4] These services need overarching system design and implementation far beyond the scope of any mohalla sabha, except at the local deployment level.
Internet-Based Systems & Procedures
Many political parties use Internet technology for fund-raising and membership mobilisation. It should be feasible for them to consider extending this to governance - although this will be quite a stretch in terms of their understanding and adopting the principles of organisation, logical processes and systems when compared with the relatively simple tasks of membership drives and fund-raising. But this is how our politics and governance need to evolve. We need systematic processes using the Internet. This could facilitate and channel discussions to explore and define objectives, generate and evaluate alternatives, make trade-offs, order priorities, and arrive at actionable decisions implemented over an extended period, with sound project management methodologies and tools. There's off-the-shelf software available, such as Microsoft's TownHall and others like OnlineTownHalls and MindMixer. Perhaps there's scope for systems developed specifically for our purposes. What's needed is to adopt this systems approach, regardless of the software.
[1]. Lack of coordination", Swaran Singh, 1964, The Hindu: http://www.thehindu.com/todays-paper/tp-miscellaneous/this-day-that-age-dated-february-4-1964/article5651028.ece
[2]. http://indianexpress.com/article/cities/delhi/aap-plans-2-700-mohalla-sabhas-in-city/99/
[3]. http://m.ibnlive.com/blogs/vivianfernandes/1878/64973/can-aam-aadmi-partys-mohalla-sabhas-work.html
[4].http://www.ndtv.com/article/opinion/op-ed-the-problem-with-aap-s-mohalla-sabhas-467074
For a Telecom Revival
This was published in Organizing India Blogspot on December 5, 2013. The article originally appeared in the Business Standard on December 4, 2013.
There are some major pluses: increased spectrum made available, and higher market shares allowed through acquisitions. Less constructive for the sector are decisions like acquirers having to pay for spectrum above a floor (4.4 MHz for GSM and 2.5 MHz for CDMA) at market rates unless the spectrum was won through auctions. While there are positive decisions, more are needed for true resurgence in this sector.
Perhaps there's also a need to curb the inappropriate application of direct-democracy to complex issues. This refers to choices influenced by uninformed but vociferous public opinion, whereas the requirement is for logical conclusions based on knowledge and understanding of the facts, domain expertise, and skill in problem formulation, solution design and implementation. The underlying constructs may include factors like technology; economics and its dissimilar sibling, finance; society's organisation, capacity and inclinations; and the law. This is especially true for infrastructure, a recognised weakness in our economy. The issue is that misdirected policies can result from the indiscriminate application of old frames of reference, customary practices, or just following the herd.
Consider the state of telecom and broadband: how bad our services are, and how badly the sector is doing, despite the enormous potential. Decisions on spectrum have profound effects on how these services affect productivity and living standards, with inappropriate policies resulting in impediments and misdirection. This is especially important in developing economies because the opportunity losses are unaffordable, and recovery is difficult in the absence of robust institutions and processes. Negative examples like the drive to refarm 900 MHz spectrum and maximising short-term government revenues from spectrum make a mockery of government-for-the-people. "Refarming" refers to mobile operators having to give up most of their 900 MHz band holdings for redeployment of newer technology, primarily because more developed economies did so. Existing operators would lose much of this spectrum, unless they win it back through auctions or acquisitions. This is like taking away captive mines from established steel manufacturers to create a "level playing field".
There are differences, of course, between spectrum and mineral resources. Unlike minerals, spectrum is not depleted by usage, the time taken to develop a new mine is usually more than to deploy a new network, and so on. But refarming will entail significant costs for new networks with many more base stations. This will take years, requiring interim arrangements to avoid service disruption to existing users. It seems like an enormous burden, in effect cross-subsidising newer technology for the high-end user segment.
How bad is the situation for the industry? Take indicators like profitability, debt, and spectrum costs. Chart 1 shows Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) as a percentage of revenue for mobile network operators in India, Indonesia, Malaysia, China, Thailand and Singapore, with India being lowest at 20 per cent.
Chart 1: Mobile Network Operators’ Profitability - APAC |
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Source - GSMA + BCG: http://www.gsmamobileeconomyindia.com/GSMA_Mobile_Economy_India_Report_2013.pdf |
Regarding indebtedness, two Indian operators have Debt/EBITDA ratios at 4 and 6, well above acceptable levels. Others, whose debt is in line with Asian operators, are less able to service it because of lower revenues. While some urge that leveraged companies in difficulties be allowed to fail, the magnitude is such that there is a serious risk of destabilising the economy.
Spectrum reserve prices in India are much higher than in other countries (Chart 2), despite the average revenue per user (ARPU) being much lower in terms of purchasing-power parity (PPP), rendering investments unattractive.
Chart 2 |
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Source - GSMA + BCG: http://www.gsmamobileeconomyindia.com/GSMA_Mobile_Economy_India_Report_2013.pdf |
It is because of this stressed situation that the authorities, the industry, and the public need to reconsider their basic approach to spectrum needs. One reason for the forced refarming is supposedly that 900 mHz spectrum is needed for more efficient technologies. Another is that some operators with no 900 mHz spectrum are at a genuine disadvantage in terms of in-building coverage. Of course, the most compelling reason may be simply the government's need for revenues to cover its deficit, despite the enormous negative consequences to the long-term public interest. The question is whether there have been adequate efforts to explore less disruptive alternatives to achieve the objectives of reliable, inexpensive communication services.
Spectrum Bands & Ecosystems
As of May 2013, the prevalent frequencies in LTE networks in Asia were as shown in Chart 3.
Chart 3: Spectrum Bands in LTE Networks (Asia) May 2013 |
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Source: Wireless Intelligence http://www.mobileworldlive.com/asias-apt700-band-plan-leads-the-way-to-large-scale-4g-lte-growth |
The most common were 1800 MHz and 2.6 GHz networks. The 2.3 GHz band used in India (and China) is not very widespread, while 900 MHz is barely there. Bands that are not widely used are unlikely to benefit from scale economies. From this perspective, it is more logical to refarm 1800 mHz for LTE rather than 900 MHz, and the now widely adopted 700 MHz band.
The adoption of the APT700 band across Asia (including India), Latin America and Europe opens up the possibility of evolving into the largest LTE ecosystem with significant scale economies. As Verizon's established 700 MHz band in America differs from the APT700 band, the availability of devices may be a concern.
However, the fact that many countries have adopted the APT700 band improves the chances of quick development of equipment, starting with Telstra's planned trials in December 2013/January 2014.
For the resurgence of telecom and widespread access to broadband, the current positive moves to cut reserve prices somewhat, allow spectrum trading and consider uniform spectrum usage charges are not enough. Public opinion tends to view these steps as favouring telecom operators, or as sops to one operator or group. However, policies need to be formulated from considerations of the public interest, including that of users, the industry, and the government. Regarding auctions, there needs to be rethinking on the lines of the Swedish approach of bids for network investment and rollout, perhaps with incentives for faster delivery.
Predictability in Infrastructure
The article first appeared in the Business Standard on November 6, and was cross-posted in Organizing India Blogspot on November 10.
Problems related to projects in infrastructure and manufacturing are either predictable or unpredictable. For the type of problem that is more predictable, the "known known", we need to apply ourselves to facilitate productivity across sectors. An example of the unpredictable variety is in the developments dogging the erstwhile Dabhol project.
Until we plan and build infrastructure systematically, our current account deficit will continue to overshadow our economic prospects, including our ability to increase exports. The United States' easy-money policy is no more than a stopgap thumb-in-the-dyke. While unpredictable infrastructure problems require crisis management, no amount of clever short-term measures can substitute for timely, co-ordinated actions that are within the controllable domain. Whether it's power generation and distribution, telecommunications and broadband, the railways, or air travel, any form of infrastructure - apart from exceptions such as the Delhi Metro - suffers from our inability or unwillingness to plan and execute systematically.
The Unpredictable: Dabhol
Consider the continuing, unforeseen problems with the Dabhol project. This power plant with a separate liquefied natural gas (LNG) terminal nearby is going through yet another crisis. The owner and operator is Ratnagiri Gas and Power Private Limited, owned by public sector units, the state and banks. This joint venture - between the National Thermal Power Corporation (NTPC), Gas Authority of India Ltd (GAIL), the Maharashtra State Electricity Board, and some banks - was constituted to pick up the pieces after Enron. Yet, the Maharashtra State Electricity Distribution Company Ltd (called MahaVitaran), after taking most of the plant's output, is significantly behind on payments. Second, after the drop in gas production by the supplier, Reliance Industries' KG D-6, gas supplies have been reduced and are now cut off. The plant has been running well below capacity because of limited gas supply since 2012. Imported gas prices are so high that the Maharashtra State Electricity Distribution Company Ltd refuses to buy power at prices nearly double that of domestic gas, so the plant may have to be shut down.
There we have it: a potentially valuable asset providing a critical resource, electricity, with a substantial, untidy set of problems that have dragged on for a decade. It's ironic that desperately needed energy assets were shut down because the output was deemed too expensive at first and then restarted without the "rapacious" private sector - only to run short of fuel, with state payments in arrears, and now close to another shutdown. This kind of problem needs hard decisions like getting state entities to pay on time, and the capacity to devise creative solutions and co-ordinated execution to tide over the crisis in the long-term public interest. Unless we muster the resolve to deal with such unforeseen, unstructured problems through hard decisions, Dabhol will continue to sap national resources.
Yet, when Chandrababu Naidu as chief minister in Andhra Pradesh dared to attempt rational tariff increases in 2004, the electorate swept him aside for the populists, who gleefully reverted to unsustainable free electricity and other handouts. More recently, the Aam Aadmi Party's plank in Delhi's state elections included lower-priced electricity, triggering another unsustainable race to the bottom. But there is a public outcry against accepting hard decisions in governance - and a consequent political unwillingness to deal with them, or to display the leadership to create public awareness. Raucous public opinion is not a substitute for knowledgeable and informed inputs and judgement. Until we break out of this self-abasing, illogical spiral of seeking instant gratification or short-term gains over balanced, reasoned, deferred gratification, the race to the bottom will continue.
Predictable Infrastructure: Telecom, Power, Railways, Airlines…
There's the other kind of problem, the one that is amenable to forward-planning, but doesn't seem to get it. The kind that it is impossible to put in place without comprehensive, integrated planning and execution. The classic cases from the 1990s have been telecom and power.
In telecom, the recent emergence of three national operators with smaller, localised successes reaffirms the oligopolistic structure of this sector. Three operators account for 67 per cent of the market in India, 82 per cent in Brazil, 90 per cent in the US, and 98 per cent in the UK; in China, two operators have 99 per cent. If policymakers accept this principle regarding market structure, the refrain that more competition is always better can be jettisoned in favour of delivery and results, with the objectives of quality services at reasonable prices. Once the focus is on these objectives, the primacy of delivering services over collecting government revenues becomes apparent, except from narrow "fiscal deficit" considerations. The point is that planning and project management have to be done upfront to be effective, and are much less powerful when retrofitted to problematic situations, as in stranded power generation or telecom services.
However, even with the best of intentions and skills, there can be mistakes requiring course correction in predictable processes. A good example is South Korea's adoption of WiMAX and the attempted creation of their own standard, WiBro. While successful initially, it turned out to be inferior to a newer technology, LTE. What South Korea has done after evaluating its alternatives is to abandon WiBro in favour of LTE. This is the approach and capacity that we must strive to cultivate. To be unafraid to commit - but equally, unafraid to retract and change tack if and when a choice proves inappropriate.
By recommending reduced reserve prices in auctions, the Telecom Regulatory Authority of India has indicated for the first time that delivery and price may be acceptable as concomitant goals alongside government revenues. Meanwhile, the department of telecommunications is reportedly considering lower levies on operators, although insisting on higher reserve prices, perhaps because of the finance ministry and/or public opinion. What is unclear is how public opinion will react to the focus on delivery and price. Contrarily, it favours auctions of inputs like coal mines and spectrum, but lower tariffs for power and telecom/broadband; auctions will have the opposite effect. Populists are more likely to go with public opinion, instead of analysing and resolving logical contradictions.
Every situation need not result in a crisis and firefighting. Systematically addressing end-to-end processes beforehand with those involved and experts can help in the resolution of a large set of predictable processes in areas like infrastructure and manufacturing.
Regrouping for Growth - Interest Rates - III
This article by Shyam Ponappa was originally published in the Business Standard on September 4, 2013 and mirrored in Organizing India Blogspot on September 6, 2013.
What are possible ameliorative steps for India's economy? Taking stock, are we overreacting to our economic woes? Second, do our problems have global origins? To the extent they are home-grown, what were the missteps? How can they be corrected?
The answers to the first and third (overreaction, policy errors) depend on whether one takes a "static" or "dynamic" view. Static views compare measures at points in time to arrive at an assessment of better or worse. Dynamic views, by contrast, emphasise system-wide flows and consequences, as in financial simulation models, with the focus on outcomes. The real question is whether we can grow sufficiently so that foreign and domestic funds cover imports and build manufacturing, or shrink and risk a deluge.
Risk assessment
From a static perspective, the present situation is nowhere near the dangers of 1991. Flows, however, highlight the potential for danger of slow growth: a demographic bulge with high aspirations and low opportunities; and a large, low-skilled population. What's worse is that foreign investment-fuelled growth rode a wave of imports without sufficient development in direct manufacturing. This imbalance is heightened by the stoppage of iron ore exports and the slump in coal production because of mining scandals, aggravated by high coal and gold imports. The problems - in telecom, mining, aggressive environmentalism, retrograde tax impositions, inadequate manufacturing - are all self-generated except for oil prices and the Syrian crisis. They stem from abdication of governance, overreach, or greed, compounded by judicial and citizen backlash. Only the triggers are external - from capital flowing in to the signal of a cutback.
Policy missteps 1: Interest and profits
The left side of the chart below shows interest expenses and profits for several thousand listed companies over the last four quarters. In terms of flows, higher interest rates curtailed demand as intended, so lower revenues and higher costs reduced profits - all while supply-constrained inflation continued.
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Above: chart depicting the rising interest and declining profit. Picture by Organizing India Blogspot |
Some experts maintain that rate cuts won't affect growth, citing the lack of a clear correlation; or the insignificant share of interest in total costs (reportedly three per cent); or that rates drive savings or consumption, but not investment. Clear correlations are unavailable because credible research must cover all major variables and interrelationships; simplifying them can distort conclusions. The research must also include how the effects of changes vary for rising or falling, large or small economies at different stages of development. The other reasons appear to ignore aspects of flows like momentum and turbulence - or even the data. And aggregates and averages can be misleading, as detailed below.
Interest costs in 850 non-financial companies went up by 40 per cent as a share of earnings before interest, taxes, depreciation and amortisation over three years. While Ebitda roughly doubled, interest costs nearly tripled(http://articles.economictimes.indiatimes.com/2012-10-25/news/34729789_1_inflation-control-potential-growth-rate-capital-formation).
Interest costs in 2,242 companies reportedly doubled from 2.3 per cent to 4.2 per cent of revenues over two years. Costs two years earlier were 16 per cent of Ebitda, whereas in the quarter ending December 2012, costs were 34 per cent of Ebitda. Analysts attributed this to low demand, and expect worse in 2013-14 unless demand improves (http://articles.economictimes.indiatimes.com/2013-02-18/news/37160258_1_interest-outgo-rise-in-interest-expenses-interest-cost).
In July 2013, earnings of 85 out of 600 listed non-financial companies did not cover interest payments, up from 61 the year before; another 43 were at risk compared with 36 a year earlier, and non-performing loans were increasing (http://www.thehindubusinessline.com/companies/debt-traps-india-inc-as-profits-fail-to-cover-interest-outgo/article4889184.ece).
Aggregate costs and averages sometimes conceal problems. Credit Suisse reports that the aggregate interest cover for 10 large, overleveraged industrial groups has dropped from 1.6 last year (borderline) to 1.4 (inadequate). For four of these groups, interest costs exceed profits. Rejoicing in the woes of "profligates" is inadvisable, however, because a collapse affects everyone.
Policy missteps 2: Sustainable profits and stability
Profits are essential for savings, investment, stability and order. This is why sustained profitability is of paramount importance for India. Provided industrial relations are harmonious and demand is resilient, that is, momentum is positive, lower interest costs within reason can sustain positive sentiment, resulting in higher profits up to a point (see chart - right). This has been a matter of incomprehension or denial for government (central and states), the Reserve Bank of India, the judiciary, and many citizens.
Instead, we have populist handouts to capture treasuries, and irresponsibility in replenishing them. What started with cheap rice in the 1980s has degenerated into a free-for-all, promising a distribution from the treasury contingent on capturing it for aspirants, or recapturing it for incumbents: vote us in, and you'll get these spoils.
Plausible remedies
- Lower rates: A number of experts in India and abroad recommend a reversal of monetary tightening and reduced interest rates. Some aver that the biggest risk is stifling growth by raising rates, eg, Paul Krugman and Ryan Avent (http://krugman.blogs.nytimes.com/2013/08/22/generation-b-for-bubble/). Others, unfortunately, suggest confusing strategies, including raising rates to contain inflation, despite this not having worked and been shown to be detrimental.
- Fiscal responsibility: A second requirement is fiscal responsibility in trade-offs for resources, betrayed by all parties in the impractical Bills on food security and land acquisition. This is a crucial requirement from both the government and the Opposition. For example, an effective step would be to raise diesel prices by Rs 5 a month for three months (which the government could evaluate using simulations).
- Manufacturing: Another requirement is action supporting manufacturing. A National Manufacturing Plan has been mentioned for years, but only coherent action will change the perception of yet another plan on the shelf. For instance, the government has resiled on the preferential marketing access for telecom equipment, which will increase imports.
- Stalled projects: There have been future-oriented announcements, eg, on fuel supply for power projects, but no demonstrable actions and results.
In sum, a rate cut combined with consistent actions on fiscal responsibility, disentangling projects, manufacturing, and stop-gap measures like swap facilities for oil companies and "stretching" imported coal may provide a breather. These could have a stabilising effect on the rupee, improve sentiment, and re-establish India's growth potential.
TRAI Consultation Paper on Spectrum
Q.1. What method should be adopted for refarming of the 900 MHz band so that the TSPs whose licences are expiring in 2014 onwards get adequate spectrum in 900/1800 MHz band for continuity of services provided by them?
Comments on Spectrum Refarming
1. Arbitrary Policies & Their Consequences
The proposed manner of refarming the 900 MHz spectrum is perceived to be as arbitrary as, for instance, the tax claims against Vodafone after the courts upheld its refutation of these claims. Such actions contribute to India’s very low rating on contracts (184 out of 185 countries in enforcing contracts in 2013: http://www.doingbusiness.org/data/exploreeconomies/india/), and for being a very difficult place to do business.
2. Legitimacy Of Terminating 900 MHz Holdings Starting 2014
One question is whether a refusal to renew existing spectrum holdings in the ordinary course is legitimate, or if it needs to be tested for breach of contract in the courts. This proposed manner of withholding access to assigned spectrum is also contrary to prevalent practice, as well as to the logic of spectrum being essential to the delivery of services of a wireless operator as a going concern.
3. Must All Spectrum Be Auctioned?
a) Another question is whether the Supreme Court order requires that all spectrum must in fact be auctioned. If this is so, the auction of all spectrum is necessary when it becomes available.
b) This is so damaging to the public interest, however, that all reasonable efforts must be made once again to inform the Supreme Court of the facts, i.e., the technological reasons against splintering bandwidth, and the financial reasons against extracting payments that would otherwise be invested in the essential infrastructure of broadband. If the facts are presented clearly and persuasively, there may be a reconsideration of the ruling to auction all spectrum in the light of these facts, as against continuing with this ruling based on miscommunication or misinformation.
c) If there is no alternative to auctions, to succeed, the reserve price needs to be relatively low, and bidders in difficult financial circumstances must be convinced they have no better option. Perhaps one way of ensuring this is to auction for a shorter period, e.g., five years, while simultaneously laying out the path for transitioning to shared spectrum. This is because parallel developments in spectrum sharing for Authorized Shared Access and Licensed Shared Access that are being pursued in the US and the EU are likely to be deployed by then.
4. Net Benefits of Refarming
Given the stage of evolution and coverage of networks in India, their technological level and usage, refarming should be held in abeyance until our markets are in a position to benefit from them. This is because the detrimental effects if the 900 MHz band is cleared in the proposed manner are likely to far outweigh the benefits, as explained below.
5. Purpose of Refarming
What is the purpose of refarming? If the answer is the potential benefits of services from 4G technologies and products, consider the likely nature of these benefits in India. The purpose of refarming in OECD countries is to use 900 MHz for 3G and LTE for high-speed data. This is appropriate for developed economies that have large numbers of data users. In India, high-end users comprise only a niche segment (15.09 million broadband users in April 2013, despite over 725 million active wireless subscribers). Developed economies have refarmed the 900 MHz band because 3G and 4G assume widespread use of data services in the entire network. In other words, if India had a large base of high-data users, 4G networks would be required to deliver high-speed traffic. Also, such users would presumably be (a) willing and (b) able to pay [for the expensive equipment required] for these services.
6. No Economic Basis for Refarming in India
a) The reality is that there are insufficient data users with the willingness and ability to pay for the higher level of throughput. The present state of the economy and its trajectory pose additional constraints. More important, existing technologies are capable of delivering data services at lower cost. The priority is for access networks at lower cost, e.g., wireless middle-mile and last-mile that will enable large numbers of users to access data services at a reasonable price (“reasonable” in the cost structure of India comparable to TV services, and not in cents/minute comparable with OECD countries).
b) That said, a possible consideration is whether and how certain advanced technologies, such as “supplemental downlink” or “carrier aggregation” for augmenting capacity, may be made usable in our circumstances, and whether if certain bands are earmarked for them, such solutions can be introduced here.
7. Need: Low-Cost Last-Mile & Aggregation/Backhaul Capacity
How can networks be built at reasonable cost that have the capacity to deliver data services more comprehensively in India? By providing much more wireless access for the last-mile, and more middle-mile capacity (in combination with existing wired networks). This is where policies can facilitate network build-out and service delivery at lower cost. The nature of required reforms are: reduced front-end charges for wireless last mile access; reduced microwave charges (administered prices) for aggregation and backhaul; incentives for broadband delivery, and perhaps higher incentives for rural broadband delivery. Also, a whole host of initiatives can be orchestrated, as in South Korea, for instance, or Sweden, which contribute to the development of broadband services and usage.
a) South Korea*
South Korea’s digital economy resulted from a combination of macroeconomic, supply-side and demand-side policies and programs, with the government stimulating broadband adoption, particularly in the early years. For example, Korea’s response to the financial crisis of 1997-1998 was to increase the export strength of key sectors such as electronics. There was also a thrust on consumer credit, facilitating the purchase of consumer goods and electronics-related services such as broadband. The initiatives to push broadband deployment and adoption included tax incentives, rural deployment and R&D grants, building certification incentives, and applications support. There were also mistakes, as in the government’s choice of WiBro technology.
By way of illustration, a set of Korean initiatives are detailed below:
Table 5: Selected Korean Supply-Side Broadband Subsidy Programs
Infrastructure Deployment
- Tax benefits (credits, accelerated depreciation, exemptions, etc.) for broadband deployment
- Backbone provision or subsidy for broadband deployment (KII-Government program providing funding for operators to reach 40,000 govt. locations as well as rural districts)
Technology Support
- R&D grants and tax credits
- Applications support (KOREN—Korean Advanced Research Network or KII-Testbed) Building Certification & Codes
- Requiring or encouraging the pre-equipping of new buildings with fibre and/or broadband access points (e.g. DSLAM)
- Institution of certification programs for broadband readiness of MDUs (multi-dwelling units, based on three classes of transmission speed)
Source: Kalba International, Inc., 2012. Ovum Consulting, Broadband Policy and Development in the Republic of Korea
b) Sweden*
Sweden's regulator demonstrated a strong commitment to cover low-density areas, and one of the ways was to foster network sharing. The government promotes a broadband strategy with incentives for all stakeholders. State authorities are actively involved in the Digital Agenda for Sweden, a national initiative. In education, for instance, about 25% of all students rely to some extent on distance education. Open access policies and competition have had a significant impact on the development of broadband.
* Source: Digital Scotland 2020
Achieving World-Class Digital Infrastructure
21st December 2012
http://www.scotland.gov.uk/Resource/0041/00414982.pdf
8. Shared Facilities
One way that delivery costs can be reduced is if operators share networks, so that all operators can access these networks where they are licensed to do so. This would be feasible if there were practical ways of structuring “common-carrier” or network-neutral access (as in roads, rail, flight paths and airports, ports, oil pipelines, etc.). This would require a buy-in by service providers for radical changes in approach and policies, followed by radical changes in operating networks. It is possible that open consultation with TSPs, other stakeholders, and specialists, done with the help of one or more expert facilitator/s, could yield such a solution. If this were to happen, the process of organizing structures at (a) the wholesale (network services) level, and (b) the retail (user access level) could be addressed collectively.
9. Extend Voluntary Infrastructure Sharing to Mandatory Sharing
We already have consortiums for passive sharing of wireless towers. This needs to be extended from voluntary commercial associations to mandatory, “common-carrier” access, after putting in place suitable commercial arrangements through negotiation. Such commercial arrangements exist for oil pipelines and for oil exploration and production, and can be structured in like manner for facilities and spectrum. They need the appropriate financial structuring with the help of financial specialists, in addition to the engineering solutions.
10. Shared Spectrum: Pool New Spectrum
a) An evolutionary step in this direction is to pool all available, unallocated [unassigned] spectrum, so that it can be shared by [existing] service providers. This is being pioneered in the so-called TV White Space bands in the USA, the EU, the UK, and Singapore. It can be extended to other bands here. This could be a transitional step in evolving a shared facilities model. Provided the stakeholders agree, and an equitable structure and process is devised, this will relieve the present constraints on spectrum availability by providing a common pool of spectrum.
b) Shared spectrum is an alternative that is technically feasible and economically far more viable than fragmenting available spectrum for the exclusive use of our many operators. This also provides for complete transparency, as well as much lower capital and operating costs for society as a whole. The implication is that broadband could be made available more widely at lower cost, leading to much better productivity and payoffs.
c) Many of the questions and associated problems would be resolved. For instance, open access would allow for each operator to choose any technology that is compatible and that does not create interference. Fees could be determined in the same manner as for taxes in inducing investment for manufacturing, as was done in South Korea. It would need a whole range of supportive measures as in the case of South Korea, and if done right, could result in tremendous gains as an organizing force in society.
11. Some 900 MHz Access (Common-Carrier) For All TSPs
If a portion of the 900 MHz band is set aside for shared access, it may resolve one of the most contentious problems between the GSM and CDMA operators, of access to the highly advantageous 900 MHz for its low-cost equipment and ability to penetrate buildings, i.e., better delivery. This step may create conditions that allow for stakeholder engagement for an overall resolution, including ultimately, shared infrastructure.
12. Revenue-Sharing & Consumer Surplus From Shared Spectrum/Networks
India’s experience with revenue-sharing after NTP-99 has shown that collections are far in excess of up-front revenues forgone. Building a sound broadband service with a combination of incentives and forbearance will lead to much greater economic benefits overall, as well as much higher collections by the government over time. The sector can once again prosper and be an engine of productivity.
Shyam Ponappa
Centre for Internet and Society
August 21, 2013
Breaking into the Closed Circle: Domestic High-Tech Manufacturing Needs Access To Markets
The article by Shyam Ponappa (originally published in the Business Standard on July 31, 2013) was cross-posted in Organizing India Blogspot on August 1, 2013.
There are compelling reasons for supporting domestic manufacturing capacity in India, and high-tech products deserve high priority. Examining the elements of the proposition for developing our high-tech manufacturing and the state of its capacity may help clarify where and how policies should be heading. If domestic electronics production does not increase significantly, India's electronics requirements will be choked by high imports in excess of even oil imports.
The Bogey of Protectionism
The aim of the PMA policy is to give technically qualified domestic manufacturers access to otherwise closed domestic markets. It only provides an opening, and does not provide any protection or price preference. The notification states explicitly that technically qualified domestic manufacturers are eligible only if they match the lowest bid; if there are no qualified local manufacturers, or if qualified vendors don't match the lowest bid, entire orders may be awarded to the lowest-priced vendor/s (from abroad). Perhaps there is some confusion arising from the nomenclature, as "PMA" usually refers to international vendor access to domestic markets. The notion that the PMA is protectionist and shields domestic suppliers from competition is incorrect.
Deferring PMA to Assess Domestic Capabilities
The government's deferral of the PMA pending assessment of domestic manufacturing capabilities appears unreasonable, as there are already qualified manufacturers in India, several of them transnationals, producing high-tech products for global markets. The top 10 global fabless design companies and the top 25 semiconductor companies operate in India. In 2010, revenues were estimated at $7.5 billion, and in 2012, over $10 billion. India is reportedly among the top countries for fabless design skills, and has the critical ingredients for the growth of fabless companies as start-ups slow in the West: design service companies, design engineering expertise and innovation, returning entrepreneurs, and educational facilities. What they need for scale is local market access, equity funding, good logistics, and effective infrastructure. These are the areas where the government can facilitate matters. Deferring access to local companies at a time of rapid growth in networks will entrench foreign products, providing them with an undue advantage against local producers. Instead, we should be capitalising on our domestic strengths.
Closed Circle of Buyers & Sellers
In high-technology procurement, large international vendors, of whom there are relatively few, form long-term relationships with the relatively few large buyers in oligopolistic markets in telecommunications or electricity. This holds whether the buyers are government entities, state-owned enterprises, or private sector companies. Often, the international vendors have strong home government support. This is why domestic manufacturers need mandatory access to break into a closed circle. There is no ambiguity in this, nor is it protectionist, and there are no price preferences - in contrast to the 15 per cent allowed by the World Bank, or 10 per cent for minority-owned businesses in the United States.
Markets & Demand
Of the many reasons for developing electronics manufacturing capabilities in India, a compelling one is our level of demand for electronics. A task force comprising government and industry participants estimated in 2009 that demand in 2009-10 was around $45 billion, going up to $70 billion in 2012, and projected at $400 billion by 2020 (see chart), with government's share being 40 per cent.
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Source: http://deity.gov.in/hindi/sites/upload_files/dithindi/files/Task_Force_Report-new_21211.pdf |
Domestic production was at $20 billion in the financial year 2009 while imports were $25 billion, projected to rise to over $300 billion by 2020 if domestic production maintained its trend to reach $104 billion. However, with appropriate policies including the PMA for local manufacturers, in the best case, domestic electronics manufacturing was estimated to increase to over $300 billion. If this could be achieved, India's electronics imports would amount to about $100 billion. Without it, imports of $300 billion may be needed, exceeding even estimated oil imports.
Security Screening/Auditing of Imports
High-security applications in the US, Japan, Israel and China are procured from trusted domestic manufacturers. The US Congress monitors high-tech imports for strategic reasons. The UK is conducting an investigation into whether its broadband networks have been compromised by foreign suppliers, although malware is very difficult to detect, and can be downloaded after security audits. High-tech supplies need to be from trusted sources.
Domestic Producers vs Other Lobbies
In effect, it would seem that the operators and foreign vendors have railroaded the government into perpetuating the status quo of foreign-dominated electronics suppliers in India. Facilitating access to local markets for domestic manufacturers is the kind of support that many governments provide. Take the case of the "Buy American" provisions of the American Recovery and Reinvestment Act of 2009. Recovery Act funds used for the construction, alteration, maintenance or repair of public buildings and public works must procure all iron, steel and manufactured goods produced only in the US, with a price preference of 25 per cent. The exceptions are non-availability, prices of over 25 per cent, or where applying the provisions is against the public interest. The objectives were to save and create jobs, to give relief to those affected by the recession, and to invest in infrastructure, education, health and renewable energy. The estimated cost is $831 billion between 2009 and 2019.
Remedial Action
What's needed is for the government to take unequivocal action without delay on enabling policies for domestic high-tech producers. The sooner this is done, and the more sustained support that is provided, the better. Too many confused signals are being sent out on investments.
Institute on Internet & Society: Event Report
A total of 20 participants spent the seven days in a residential institute, learning about the fundamental technologies of the Internet and topics on which CIS has expertise on such as Accessibility, Openness, Privacy, Digital Natives and Internet Governance.
The participants belonged to various stakeholder groups and it provided a common forum (first of its kind in India) to discuss and share ideas. Twenty-four expert speakers from various domains came to share their knowledge and speak about their work, so as to encourage activity in the field and supply resources from which participants could learn to increase their accessibility, range and funding possibilities, as well as network with the speakers and amongst themselves.
The Institute has triggered a number of follow-up events — those that the participants organized themselves with the help of CIS staff, including Crypto Parties in Bangalore, Delhi and Mumbai, that taught netizens to keep their online communication private. In addition to that, the CIS Access2Knowledge (A2K) team could rope in eight new Wikipedians who will contribute to Wikipedia in Indic languages.
The day wise talks and activities that took place are listed below:
Day 1: June 8, 2013
The seven day residential Institute began on Saturday, the 8th of June with a warm welcome by Dr. Ravina Aggarwal and Dr. Nirmita Narasimhan. They outlined the purpose of the residential institute and briefly went over the topics which would get covered over the week long duration. This was followed by each of the participants introducing themselves briefly and also stating their expectations from the Institute, why they were attending the same and what they hope to get at the end.
Session 1: History of the Internet
(by Pranesh Prakash and Bernadette Längle)
Above is a picture of Pranesh Prakash |
The Institute proceedings kicked off with the first session, History of the Internet by Pranesh Prakash and Bernadette Längle. Participants learned where the Internet originally came from and how it is organized, as well as different technologies surrounding the Internet. Pranesh Prakash and Bernadette Längle set the start point of the Internet in the late 50's when the Russians send the first satellite in space (Sputnik) and the US founded the DARPA(Defense Advanced Research Projects Agency), a research agency that was tasked with creating new technologies for military use. DARPA is credited with development of many technologies which have had a major effect on the world, including computer networking, as well as NLS, which was both the first hypertext system, and an important precursor to the contemporary ubiquitous graphical user interface (GUI). A few years later the first four computers were connected to a network. |
After the Network Control Protocol (NCP, later replaced by the TCP/IP) was invented in 1970, the first applications were made: email (connecting people), telnet (connecting computers) and the file transport protocol (FTP) (connecting information) — all of these are still in use today. Participants were surprised to learn that the Web, most commonly used today, known to be invented by one single person in the 90's, actually existed for a long time prior to the '90s.
VIDEO
Session 2: Domestic Bodies and Mechanisms
(by Pranesh Prakash)
After lunch, Pranesh Prakash led the second session about Domestic Bodies and Mechanisms and he started with some of the problems associated with the Domestic Regulatory Bodies:
- Lack of coherence and consistency in Internet related policies
- Rather than co-operating, the different agencies compete with each other.
- Communication with the public is of different degrees and openness of different agencies varies.
- Department of Electronics and Information Technology (DEITY), is one of the most important public agencies & the CERT-in focuses on issues like malware and content regulation. There is also the STQC (Standard Setting and Quality Setting Body).
- The work of these organizations is to govern the Internet, bring about better privacy policies and ensure freedom of speech.
- Other governing bodies include DOT (Department of Telecommunications) which governs the telecom and internet policies of India. In India, certain content regulation takes place under a notification as part of the IT Act, 2003.
- TRAI (Telecom Regulatory Authority of India) also looks into the tariff, interconnections and quality of telecom sector, spectrum regulation and so on.
- The USOF (Universal Service Obligation Fund) seeks to provide funds for setting up telecom services in rural areas.
- Ministry of Information and Broadcasting (MIB) has been extending copyright restrictions to online publications.
VIDEO
Session 3: Emerging trends in Internet usage in India
(by Nandini C and Vir Kamal Chopra)
Emerging Trends in Internet Usage with specific focus on BSNL offerings (by Vir Kamal Chopra)
Some of the salient points discussed were:
- In 1995, the VSNL provided internet in 4 metros of India, by 1998 DOT had provided internet in 42 cities.
- Some of the facilities internet provides include Tele-education, Tele-medicine, mobile banking, payment of bills via mobile internet, etc.
- BSNL has got maximum broadband market share in India.
- Present Scenario, there are 900 million mobiles in India, 430 million wireless connections with capability to access data.
- The total broadband connections are 15 million in country, 10 million provided by BSNL.
- Total internet users are 120 million with a growth rate of 30%.
- Public access is not only about network intermediaries but about info-mediaries who understand internet.
- BSNL lost Rs 18,000 crores from 3G license.
- 2G to 3G shifting is not seamless and leads to lot of packet loss, and 3G coverage is not as extensive as 2G. Thus 3G is not efficient however; the government has made a lot of money from selling 3G licenses.
- Future trends include technology trends for internet access, optical fiber technologies, fiber to the curb, fibre to the home, metro Ethernet, etc.
- Internet has created an online Public sphere.
- In 2000 Parliament passed the Information Technology Act 2000 and the dot.com boom is seen.
Making internet access meaningful in the Indian Context (by Nandini.C)
(Click to see the presentation slides)
Some of the salient points discussed were:
- Status of internet access today sees low level of overall penetration of internet, high rate of household mobile penetration and huge rural-urban divide in internet access.
- Relationship b/w women and internet in India
- 8.4% of women in India have access to internet in India and 43% of women using internet in India perceived it as being an important part of their life.
- Some area of concerns include ensuring adequate access of internet for the women, entrenched patriarchies, contextual relevance, the imaginary of ‘public access’.
- The importance of an existing strong social support network, ITC itself cannot open up economic/social empowerment opportunities for women
- ICT-enabled micro-enterprises may also force the burden of double work on women, who undertake both productive activities for the micro-enterprise and re/productive activities for the household.
- The Internet today has created an online public sphere.
- Countering the threat of online violence.
- Censorship and content regulation.
- Women’s rights and the spaces of internet governance.
- Arbitrary censorship and self-regulation by the corporate and slide towards an illusory freedom; state is used as a bogeyman by corporate to create an online culture that is suitable to the corporate values.
VIDEO
Day 1 featured an interesting activity called the Creative Handshake. The goal of the game was to teach the participants the concept of "Handshake" in Internet terms and why it is important to make sure that integrity of data transferred is maintained.
Day 2: June 9, 2013
The focus of the second day was more on the nuts and bolts behind the working of the Internet by Dr. Nadeem Akhtar, Wireless Technologies and a case-study in Air Jaldi by Michael Ginguld, Collaborative Knowledge base building by Vishnu Vardhan and Affordable Devices on the Internet by Ravikiran Annaswamy.
The salient points of each of the talks are listed below.
Session 1: How Internet Works
(by Nadeem Akhtar)
Click to read the presentation slides
- Internet structure and hierarchy:
- Data Networks comprise of set of nodes, connected by transmission links, for exchange of data between nodes.
- Some of the key principles which underpin data networks include digital transmission, multiplexing and data forwarding/routing.
- Data networks through ownership include public and private networks.
- Data networks through coverage include local area networks (small area), metro area networks (may comprise of a city) and wide area networks (wide geographic area across cities).
- Protocols include:
- Open systems interconnection (OSI) model divides a communication system into smaller parts. Each part is referred to as a layer. Similar communication functions are grouped into logical layers.
- OSI model defines the different stages that data must go through to travel from one device to another over a network & this enables a modular approach towards developing complex system functionality i.e. functionality at layer X does not depend on how layer Y is implemented.
Above is a picture of Dr. Nadeem Akhtar speaking on the working of the internet on Day 2 - Internet networks or connections.
- Internet backbone refers to the principal data routes between large, strategically interconnected networks and core routers on the internet and these data routes are hosted by commercial, government, academic and other high-capacity network centers, the internet exchange points and network access points. The internet back bone is decentralized.
- Transit Service - Passing information from small ISP to large ISP.
- Peering Service - The passing of information between two similar ISP’s os similar size to let network traffic pass.
- Three levels of network Tier1, Tier2 and Tier 3. TATA Company is the only Tier 1 Indian Company.
- Backhaul- Transport Links which connects access edge networks with the ‘core’ network. The transmitters have to be mounted on a high level.
VIDEO
Session 2: Wireless Technologies
(by Michael Ginguld)
Click to read the presentation slides
- We are surrounded by electromagnetic radiation
- All about transmission waves and there are both advantages and disadvantages of the same:
- Pros: higher reach for lower price, overcomes topographic challenges, lower maintenance, less to damage/lose
- Cons: limited resources, maintenance (energy), physical limitations to transfer rates.
- Satellite/VSAT is a very small aperture tech: a small satellite dish that connects to a geo-static satellite.
- Strength: globally usable, can connect from anywhere.
- Weakness: signal problems, relatively high installation charge, upstream connection is lower than the downstream, transmitter on satellite is extremely expensive, hence limitation on transmission capacity of the satellite.
- VSATs are not scalable. It is a dead-end tech for usages where data transmission volume is expected to grow.
- 2G Technology for mobile connection.
- Limitation in transfer of data, due to technology and encryption limitations but great availability and reasonable price.
- 3G Technology has a problem in India; low uptake, leading to low investment, leading to low speed, leading to low uptake. The technology allows for high-speed data transfer but the market condition in India still does not make adequate infrastructural support feasible.
- 4G license auction.
- A company bought the country-wide 4G license in the auction. Mukesh Ambani bought the company after some days.
- The present legislation does not allow for VoIP-based Telco operation but that is expected to change soon.
- Wifi technology is wireless technology. It is low cost wireless transfer of data. The Public dissemination of the ranges in which data transfer using the WiFi protocol can take place. It was made public in India in January 2005.
- Limitations: needs line of sight, limit to data transfer.
- Strength: cheap, de-licensed spectrum usage, easily deployable.
- 2G spectrum, 3G spectrum and now 4G spectrum all are part of the wireless technology.
- Air Jaldi started in Dharamshala; building wifi connection spanning campuses.
- Three types of consumer categories: (1) no coverage, (2) under-served, and (3) ‘deserving clients’. #2 is the most common group. #3 are people who should be served but cannot pay fully for the service, hence are cross-subsidised by group #2.
- Deployed and managed by local staff, trained by AirJaldi.
- Customer premise equipment: Rs. 3-4k.
- User charges: Rs 975 per month for 512 kbps, Rs 1500 per month for 1 mbps.
- Content: by and large, AirJaldi brings infrastructure on which content can ride on, teams with various content providers (like e-learning, rural BPOs, local e-banking etc) for the content side. The biggest drivers are local BPO, banking and retail. The next big driver coming up is entertainment.
- WiMax includes 4g spectrum.
VIDEO
Session 3: Building Knowledge Bases and Platform via Mass Collaboration on the Internet
Click to read the presentation slides
The session started off with some physical activity in the form of "Kasa Kasa Warte, Chan Chan Warte" to break off the lunch induced sleep and a mental activity where the participants were divided into two groups and both the groups were asked to collect information on "Water". One group was left to itself while the other had some expert inputs from Vishnu Vardhan on how to collaborate and organize the data. After the activity, both teams presented the information that they had collected on "Water". The benefits of collaborative authoring such as "everyone's voice is heard", "various inputs leading to a multi-dimensional thinking" etc were evident as against a single dimensional thought process that was seen from the group that was un-assisted. |
![]() Given above is a picture of the participants involved in a group activity |
Salient points discussed during the presentation:
- The Concept of Knowledge today is not something of modern phenomena, but it is something which has been existent since print culture was developed. Print technology shapes what we consider as knowledge, and hence as knowledge platform
- Techno-sociality of knowledge production
- The Concept of Knowledge today is not something of modern phenomena, but it is something which has been existent since print culture was developed. Print technology shapes what we consider as knowledge, and hence as knowledge platform
- Techno-sociality of knowledge production
Examples of knowledge platforms:
- Baidu baike
- English wikipedia
- Hudong
- Catawiki
- Wikieducator
- Open street map
- Pad.ma
- Sahapedia
- Internet archive
- Jstor
- Dsal
- Dli
- In 1994 Cunningham developed the ‘Wiki Wiki Web’ also known as the ‘Ward Wiki’. Basically it is a knowledge platform.
- Internet since then has been used for dissemination of information especially in the education sector. Digital Archived have developed over the years which provide information across various platforms like Wikipedia.
- The spread of the internet has made possible the building of knowledge bases by seamless and mass collaboration.
Generic challenges for Wikipedia
- Quality, relevance, consistency of knowledge
- Suitable motivation of the contributors
- Another issue is the scalability
Some of the problems faced by Indian Wikipedian pages:
- Technical infrastructure for Indian languages
- Typing in the regional language
- OCR: complexity of Indian language scripts
- Various other technical troubles like browser compatibility, font display, etc., which deter new users
- Dearth of quality content available in digital format
- Different standards/formats/generations (gov.in/DLI)
- Relative lack of research/academic standards, which is transferred on to Indic wikipedias.
- Lack of knowledge sharing culture.
- Building a mass knowledge platform is the need of the hour.
- The platform should be user friendly, easily available and adoptable; offline outreach is key to effective use of online platforms.
- The programme should have feedback loop key, behavior statistics data, reinvent and replicate the programme, multi-channel awareness, ‘user connect’ programmes.
- The people should communicate knowledge sharing objectives, make knowledge sharing fun, appoint ambassadors; virtual volunteer community building looks simple but its complex and leads to failure.
VIDEO
Session: 4 Affordable Devices to access the Internet
(by Ravikiran Annaswamy)
Click to read the presentation slides
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Given above is a picture of the speaker Ravikiran Annaswamy giving a demo of the low cost Akash tablet. |
- Overview of Affordable Mobile Phones such as Lava Iris, Karbonn A1, Nokia Asha, etc.
- Overview of Affordable Tablets such as Aakash, Ubislate, Karbonn Smart A34, etc.
- The number of Internet users in India is expected to nearly triple from 125 million in 2011 to 330 million by 2016, says a report by Boston Consulting Group.
- How Internet Penetration impacts society.
- Demo of the devices.
- Need for Mobile Internet
- Sugata Mitra & Arvind Eye Care examples.
VIDEO
Day 3: June 10, 2013
The third day of the Institute focussed on Wired means of accessing the Internet, the technology involved followed by an assignment time where the participants were introduced to 2 topics and asked to work on an assignment. This was followed by a site visit in the afternoon to MapUnity. MapUnity develops technology to tackle social problems and development challenges. Their GIS, MIS and mobile technologies are used mostly by government departments and civil society organisations and in the R&D initiatives of commercial ventures.
Session 1: Wired Access Technology
(by Dr. Nadeem Akhtar)
Click to read the presentation slides
Some of the salient points discussed were:
Wired and Wireless
Wired:
- Separate communication channel for each users
- Low signal attenuation
- No interference
- Fixed point-of-attachment
Wireless:
- Shared medium of communication
- Signal is attenuated by a number of factors
- Interference between adjacent channels
- Points-of-attachment can be changed on-the-fly
Ethernet:
- A family of computer networking technologies for LANs which was Invented in 1973 and commercially introduced in 1980. The systems communicating over ethernet divide a stream o data into individual packets called frames. Each frame contains source and destination addresses and error-checking data so that damaged data can be detected and re-transmitted.
- Ethernet, by definition, is a broadcast protocol
- Any signal can be received by all hosts
- Switching enables individual hosts to communicate
Digital subscriber line (DSL):
- DSL uses existing telephone lines to transport data to internet subscribers and the term xDSL is used to refer to a number of similar yet competing forms of DSL technologies which includes ADSL, SDSL, HDSL, HDSL-2, G.SHDL, IDSL, and VDSL. DSL service is delivered simultaneously with wired telephone service on the same telephone line and this is possible because DSL uses higher frequency bands for data.
Asymmetric DSL (ADSL):
- ADSL is the most commonly installed technology and an ADSL tech can provide maximum downstream speeds of up to 8 mbps.
Modem and router:
- Modem is specific to a technology
- Modem is de/modulator, it takes bits coming from one protocol/technology, demodulates it (converts it into original data), and re-modulated the original data to another protocol/technology.
- Router allows creation of a local area network, allowing multiple devices to connect to the network and access internet together through the router. It has very high bitrate DSL (VDSL) and goes up to 52 mbps downstream and 16 mbps upstream. The length of the physical connection is limited to 300 meters and the second generation VDSL (CDSL2) provides data rates up to 100 mbps simultaneously in both direction, but maximum available bit rate is still achieved about 300 meters.
Cable:
- Cable broadband uses existing CATV infrastructure to provide high-access internet access; uses channels specifically reserved for data transfer
- Support simultaneous access to broadband and TV programs
- Cable access tech is built for one-way transmission; hence some congestion takes place for bi-way data transfer, leading to much lower upstream connection relative to downstream connection for data.
Fiber:
- It is a generic term for any broadband network architecture using optical fiber; fiber to the neighborhood; fiber to the curb; the street cabinet is much closer to the user’s premises, typically within 300m, thus allowing ethernet or radio-based connection to the final users; fiber to the basement; fiber to the home (BSNL already providing); fiber to the desktop
- Passive optical networks (PON)
Advantages of fiber:
- Immunity to electromagnetic interference.
- Provides very high data rates at long distances.
- When network links run over several 1000s of meters (e.g., metro area networks), fiber significantly outperforms copper.
- Replacing at least part of these links with fiber shortens the remaining copper segments and allows them to run much faster.
- The data rate of a fiber link is typically limited by the terminal equipment rather than the fiber itself.
Assignment
Participants were given two options for an assignment to work on in the coming days and they could choose either one.
Assignment A
The Universal Service Obligation Fund of India has put out a Call for Proposals under two schemes:
- Mobile Connectivity and ICT related livelihood skills for womens’ SHGs (http://www.usof.gov.in/usof-cms/pdf21may/Concept_Paper.pdf), and
- Access to ICTs and ICT enabled services for persons with disabilities in rural India. (http://www.usof.gov.in/usof-cms/usofsub/Concept%20paper_USOF%20Scheme_PwDs_A.G.Gulati.pdf)
Your NGO is committed to the task of facilitating access to the Internet for women/ persons with disabilities in rural parts of Kerala and wishes to submit a proposal/ project idea in partnership with a service provider to the USOF.
Assignment B
You are a member of the ancient tribe of Meithis residing in Manipur. Over the years, there is a strong feeling in your community that although the Government has rolled out projects to connect the rural areas throughout India, these have not been successful for your tribe and there is still even a lack of basic fixed telephony, let alone mobile and broadband services. You have hence come to the conclusion that there is a need for focused efforts to target such communities as yours and have decided to submit a concept note to the USOF requesting that ‘ethnic and rural tribal communities’ be specifically included within the mandate of the USOF’s activities by defining them as an ‘underserved community’.
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Given above is a picture of the participants engaged in a discussion. |
Field Trip - Destination: MapUnity.
MapUnity develops technology to tackle social problems and development challenges. Their GIS, MIS and mobile technologies are used mostly by government departments and civil society organisations, and in the R&D initiatives of commercial ventures. MapUnity presented their product offerings to the participants.
VIDEO
Day 4: June 11, 2013
Session 1: Universal Access
(by Archana Gulati)
Click to read the presentation slides
![]() Given above is a picture of Archana Gulati speaking on Universal Access. |
Tuesday revolved around questions of access and openness. The day kicked off with Archana Gulati, a policy expert in access to ICTs for people with disabilities talking on Universal Access.
Ms. Gulati stressed the importance of ICTs for social development. ICTs are a necessary aid in development structures including education, health and increased citizen participation in national affairs & they provide crucial knowledge inputs into productive activities. However, even with the Telecom boom, there still exists an access gap in India, which cannot be covered by commercially viable systems.
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This 'actual access gap' exists because of geographic (scattered population, low income, low perceived utility of service, lack of commercial/industrial customers, lack of roads, power, difficult terrain, insurgency), economic (urban poor) and social inequality (gender, disabilities) differences. To achieve Universal Access or Universal Service, additional efforts must be made, so as to include these groups. However, Universal Access and Universal Service, while they may imply the same thing, are very different approaches to deal with the problematic access gap.
Universal service, a term coined by Theodore Vail, president of AT&T in 1906, argued that the government should enforce the usage of only one network. This approach suggests a monopolization of the market and goes against the liberal market principle.
Universal access on the other hand suggests cross-subsidizing the low and no profit service areas by high profit service areas. However, this results in the urban population to get over-charged while the rich rural areas benefit from rural subsidizing.
So how do we enable a fair and inexpensive network to be able to create access for a large number of people equally?
Ms. Archana Gulati went on to introduce the Sanchar Shakti scheme as a contribution to national access in India. It was initiated with the objective of improving rural SHG access skills, knowledge, financial services and markets through mobile connections and involved several stakeholders like NABARD, handset/modem manufacturers, DoT USOF, Mobile VAS Providers, Lead NGOs, Mobile Service Providers.
This scheme shows how important is, for the commercial, private and public sector to work together on obtaining accessibility to ITCs.
Session 2: Free and Open Internet
(by Pranesh Prakash)
The following session by Pranesh Prakash on Free and Open Internet showed how the internet can still be a restrictive place which does not allow for internet equality. His talk focussed on the concepts of free and open Internet. Prakash started by stating the Freedom of Speech and Expression Article of the Indian Constitution and in an interactive round it was discussed, how these articles are fundamental for securing other basic human rights. This was demonstrated by an example in which the distribution of food did not proceed equally, as misinformation and restrictions led to an inappropriate hoarding of goods. Therefore, it is important for everyone to have that right. In fact, the Indian constitution formulates Article 19 in a positive way, implying not only everyone should have that right, but that the government must promote the upholding of these rights.
However, in the case of Article 66a, the law actually caused a problem with freedom of speech in itself, as it penalizes sending false and offensive messages through communication services. This is a massive impediment on free speech, as outsiders decide upon what is offensive and what is false.
The other side of freedom of speech and expression is censorship. Online, the removal of websites and editing of content often happens quietly and obscures the fact that someone or something is being censored. Unlike book burnings in the past, which were always made a big political spectacle, often websites are simply removed without a trace, or one is faced with a 404 error, when trying to access it. Because of the offensive content law, journals and magazines are quick to remove supposedly offensive content, as it seems more difficult to engage in argument with the people claiming offense. The CIS proposed a counter-law to secure for this to happen less, as freedom of speech includes the freedom to receive that speech.
VIDEO
Session 3: Openness
(by Sunil Abraham)
Next to ensuring freedom of speech and access, the third session of the day focussed on Openness in terms of Open Source software. Sunil Abraham, CIS executive director, stated the importance of free software and open access of data, as they ensure what he called the four freedoms of internet usage, namely the freedom to use for any purpose, the freedom to study, to modify and to share (freely or for a fee). Proprietary software imposes on these freedoms, as it only has restrictive use and a strong copyright. However, there are alternatives that have moderate copyrights, or so-called copy centred perspectives, or even copyleft, including the above mentioned rights into the terms of the software usage. |
![]() Above is a picture of Sunil Abraham speaking on Openness |
In alignment with Sunil Abraham’s talk Pranesh Prakash criticized copyright law cutting into accessibility rights, as copyright infringements include translation into other languages, audio versions and also integral parts of education. The key is not to have a "one size fits all" copyright solution, as it is impossible to treat twitter content the same as a blockbuster movie. However, the government of India is doing exactly that and needs to interlink questions of access with copyright law.
VIDEO
Session 4: Open Content
(by Prof. Subbiah Arunachalam)
Prof. Subbiah Arunachalam, who led the next session, discussed Open Content. He had seen during the course of his experience India's poor performance in Science & Technology and outlined the reasons for the same. The lack of access to information essential in scientific research and knowledge production, he said, was the major limiting cause.
VIDEO
Session 5: Quick Talk on Copyright Law and Access
This short session dealt with implications of copyright law on internet access.
Activity
The participants were divided into two groups, and they were asked build as huge a network as possible with their personal belongings and present their creations. The participants had good ideas. One group placed their mobiles and laptops into the network to have them as nodes. The other group implemented the re-routing around censorship.
VIDEO
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Given above is a picture of the participants in an activity making the longest network possible with their personal belongings. |
Day 5: (June 12, 2013)
Session 1: Privacy on the Internet in India
(by Sunil Abraham and Elonnai Hickok)
Click to view the presentation slides
Given above is a picture of Elonnai Hickock speaking about privacy |
The following day, June 12th started off with “Privacy” as the theme. The session Privacy on the Internet in India was led by CIS privacy experts Sunil Abraham and Elonnai Hickock. In an exchange of anecdotes, it was made clear how there needs to be a certain degree of state surveillance to secure the citizens safety. This can happen through off air interception and active or passive cell phone towers that can track mobile devices. However, encryption is an important tool to secure one’s own privacy against cyber espionage. |
Some of the salient points discussed were:
- Off-the Air Interception
- Possible to set up active or passive cell phone tower.
- The signal strength will be strong and everyone looks for it.
- Capacity to identify itself as a service provider.
- Interception can begin with encryption Technology today used by security agencies.
- NTRO- national technical Research Org and Outlook
VIDEO
Session 2: E-Accessibility
(by Nirmita Narasimhan)
Click to view the presentation slides
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Given above is a picture of Dr. Nirmita Narasimhan speaking on e-accessibility |
The second session was on “E-Accessibility” led by Dr. Nirmita Narasimhan. Some of the salient points discussed were:
- Problems arising out of disability
- Accessibility-Infrastructure and ICT
- Assistive technologies for PWD’s.
- Reasonable accommodation (not available or cannot be and requires extra effort and putting up an accessible copy up) and universal Design (for both for PWD’s and non-PWD’s).
- Web Content Accessibility is operable and easily understandable.
- Accessibility standards include; Daisy (6 types of books including audio and text books) is all about marking up the documents. Really a good way to read but is expensive and time consuming, also need Daisy tools and player to make it work.
- In 1808 the first typewriter was developed to help the blind.
- Considerations involved in Web Accessibility
- Overlap b/w mobile accessibility and web accessibility.
- Example- Raku Raku phone captured 60% of market share in Japan. It has many assistive features.
- Relay Services has a middle man who passes on the message b/w different PWD’s in many countries, but it is not yet available in India.
- PWD’s communicating with customer care – the issues involved.
- Accessibility Policy- very few people are adopting accessible technologies. There is a need to have a strong policy. U.K. and U.S. already have strong policies related to accessible and assistive technology for PWD’s.
Video
Session 3: International Bodies and Mechanisms
(by Tulika Pandey and Gaurab Raj Upadhyay)
Activity
Gaurab incorporated an Activity into his talk to enable the students to have a clearer understanding of International Bodies and Mechanisms.
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Given above is a picture of the speaker Gaurab Raj Upadhaya explaining the International Bodies and Mechanisms |
Some of the salient points discussed during his talk were:
- Definition: “Internet Governance is the development and application by Govt., the private sector and civil society, in their respective roles, of shared principles, norms, rules, decision-making procedures and programmes which shape the evolution and use of internet.”
- It should be multilateral, transparent and democratic
- Enhanced cooperation means to enable govt…
Technical issues to keep in mind while talking about internet:
- Critical internet resources
- Root server locations
- Open Standards (CIS leads the initiative)
- Interoperability
- Search Engines
- Internationalized Domain names (in own script & language)
- Content
- Virtual yet real space and most important question to be understood is that whether, the governance of internet is possible?
- Public Policy- to monitor cross-border data flow, Openness vs Privacy
- India’s Outlook in internet policies-Pillars of Internet which is not fully addressed by the Indian government today.
- Established an Inter- Ministerial Group by including various government departments into the arena.
- Layer 0-7 Names and Numbers
- Layer 8 and above
- Applications and Usage
- Legal business, policy, etc.
Session-4: E-Governance
(by Tulika Pandey and Sunil Abraham)
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Given above is a picture of the speaker Tulika Pandey speaking about e-Governance |
Some of the salient points discussed were:
- Making policies in India is difficult because the population is huge and implementation at rural level is difficult.
- Bombarded by Techno utopians- who believe in technology’s ability to change lives.
- Techno determinants- Corruption solved through technology through open government data. More technology is better, the most sophisticated ones are the best are gross misconceptions.
- Bhoomi project tried to deal with corruption at village level. Important policy change made all paper work illegal and digitized the land records etc. every action and request will be logged. But this led to creation of new corruption. Bribes were taken even before data was logged!
- UID Project (Cobra Post Scam) around 20 public sector and 30 private banks were involved in money laundering scams.
- People who design the systems in Delhi prepare sub-contracts.
VIDEO
Day 6: (June 13, 2013)
Session 1: Critical Perspectives of the Internet
(by Dr. Nishant Shah)
Click to view the presentation slides
The sixth day of the Institute kicked off with Nishant Shah, director of research at CIS, looking into Critical Perspectives of the Internet. Nishant made a very important distinction between the internet as infrastructure and as social network constructing alternative universes. Nonetheless it was important to stress that technology should not be alienated in the process of this separation but seen as an integral part of it, as the digital is as much part of reality as any other technology and has become essential as a technology of change that it brings about not only in scientific but also in social development. Quoting Michel Foucault, Shah argued that technology becomes influential when it changes life, labour and language, which is why research in the field should involve critical ways of thinking about body, space and community. | ![]() Above is a picture of Dr. Nishant Shah speaking on Critical Perspectives of the Internet. |
The body perception can be perceived through the way bodily agencies change through technology. Technology does not necessarily taint or corrupt the body, but can also be a way to escape its confines. To put it to a point, we are all born into technology and cannot free ourselves from them, as for example pregnancy already starts with nutritional supplements, regulatory diets and exercise and essentially ends with birth technologies that do not necessarily involve only the digital - we must remember, speech is one of the oldest technologies available today.
VIDEO
Session 2: Strategies for Policy Intervention
(by Chakshu Roy)
The second session on “Strategies for Policy Intervention” was led by Chakshu Roy. This session dealt with various ways in which policy intervention can be made and the various factors necessary to successfully engage in policy forums.
VIDEO
Session 3: Profile of Internet Service Providers
(by Satyen Gupta)
Click to view the presentation slides
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Given above is a picture of Satyen Gupta speaking about Internet Service Providers |
Satyen Gupta during his talk on “Profile of Internet Service Providers” discussed the nature, offerings and profile of various ISPs in India, their market share and dynamics.
The salient points discussed were:
- National Broadband Plans
- Spectrum Issues “Management”
- Reality check of Indian ISPs
- Broadband Definition & Penetration
- Roadblocks for Broadband in India, Governments Role, Regulation
- Institutional Framework for the Indian Telecom
- Broadband Access in India- Technology-Neutrality
- Satellite based DTH Services offer alternate for the Broadband via Receive Only Internet Service (ROIS)
- Broadband using DTH for Receive-only Internet
- VSAT has the potential for significant impact on Broadband Penetration in Remote Areas
- Fixed Wireless Access- an important access technology
- Facilitating Radio Spectrum for Broadband Access
- Fiscal measures to reduce the cost of access devices, infrastructure and broadband service
- Reduction in the cost of connectivity
- National Internet Exchange of India (NIXI) -National Internet Exchange of India (NIXI) has been set up on recommendation of TRAI by DIT, Government of India to ensure that Internet traffic, originating and destined for India, should be routed within India.
- Emerging Broadband Services
- Broadband Commission for Digital Development (BCDD)-UN Targets for Universal Broadband,2015
- NOFN India-Existing Fiber Infrastructure and Coverage by Various Service Providers
- National Telecom Policy (NTP) 2012- Salient Features
- State of Internet Services and ISPs in India:
- India’s Ranking on Key Broadband Indicators
- Regulator’s Report – Growth of Internet in India
- Internet Subscribers Base & Market share of top 10 ISPs
- Technology trends for Internet/Broadband Access
- Internet/broadband Subscribers for top 10 states
- Tariff Plans for USO funded Broadband
- Contribution of Telcos in Development of Internet Services
- Incumbent’s Role in Growth of Broadband
- Plugging rural missing link- BBNL
- Internet Subscribers Base & Market share of top 10 ISPs
VIDEO
Session 4: Competition in the Market by Helani Galpaya
Helani Galpaya during her talk on “Competition in the Market” discussed about what competition meant, Herfindahl–Hirschman Index to measure how competitive a market is, what are the dangers of monopoly markets and the landscape of the Telecom market in India.
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Above is a picture of Helani Galpaya speaking about Competition in the Market |
Day 7: (June 14, 2013)
The final day of the Institute focussed on how the Internet can be used to effect change on society – Activism was the theme.
Session 1: Leveraging Internet for activism
(by Ananth Guruswamy)
Click to read the presentation slides
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Above is a picture of Ananth Guruswamy speaking during the session on leveraging internet for activism |
Some of the salient points discussed were:
- Digital Activism
- Target Omar Abdullah. It is about an act called Administrative detention Act. One can be detained without act i.e. The Preventive Detention Act. He directly responded to the threat.
- Twitter seems to be a place where the political leaders are actually accessible. This kind of access was not possible in day to day life earlier if one was a common man. This phenomenon is developing. Even in Corporate setup writing a mail directly to the CEO seems possible.
- Strengths: Wide reach, Freedom of speech, Data collection is made easy, Issues can be tackled swiftly, Global communities, singular identities have lot of power. Eg: 190 Million people stood up against Poverty; this kind of mobilization impossible without internet.
- Besides local issues even Global issues are addressed an collection of funds becomes easy. Onion.com once a struggling publication in U.S., but now with a global audience it is thriving and it has a healthy reader base today.
- The Earth Hour helps people connect across space and time.
- Weakness: More popularity, more attention; Traditional/Real Protest has become rare and a threat; There is no real action beyond internet, threat of movement is low, there is no real commitment involved in digital activism and just one click is enough to make one ‘feel good’.
- Opportunities: Recruitment of protestors for real protests. Diff. b/w real and virtual blurred; anything that affects the mind space is real. The intersection is interesting.
- Threats: Total removal of privacy, Government intervention in private issues and there could be misinterpretation of people’s thoughts by certain people.
- Traditional vs Digital activism: Traditional fails to provide results whereas clicking a button is as easy as wearing a badge.
- Facebook activism: ‘Like Buttons’, People moving away from reading emails, a shift towards use of facebook; creates a sense of belongingness which the traditional activism failed to achieve.
- India against Corruption: used mobile phone effectively.
- Social Media has changed the way protests happen globally and in India, one example is Twitter. Change.org is a website which gives freedom to anybody to start a petition without any external source; Awaaz.org another such petition website.
- Green Peace launched a Green peace X which was a runaway success. YouTube is another platform for the masses. People today are more interested in watching rather than reading.
- Pakistan in 2007: “Flash protests”; Free Fraizan Movement on Twitter.
- Something to keep in mind regarding while launching a campaign online is to think who the audience is and what we want them to do and how will the campaign help our objectives?
- How to measure success of a social media campaign?
- Reach
- Engagement- likes, tweets, comments, etc.
- Influence
- Attrition Score
VIDEO
Session 2: Internet Access Activism
(by Parminder Jeet Singh)
The next session on “INTERNET ACCESS” ACTIVISM by Parminder Jeet Singh dealt with how people can contribute to initiatives for improving internet access amongst masses.
VIDEO
Session 3: Ensuring Access to the Internet
(by A.K. Bhargava)
Click to view the presentation
The last session on “Ensuring Access to the Internet” by A.K. Bhargava discussed strategies to enhance access to the Internet in India with special focus on National Optical Fibre Network.
The salient points discussed were:
- Role of Broadband in Nation Building
- Policy Aspiration of Broadband - How do we meet aspiration?
- Telecom Network Layers‐Gaps in OFC Reach
- BBNL Interconnection
- NOFN - Bridging The Gap
- Digital Knowledge Centres (DKCs)
- Architecture of BBNL
- NOFN Impact
- Societal
- Bridging the digital divide
- Business
- Job creation, indigenous industry growth
- Sectoral
- Improved connectivity, data growth
- Technological
- Differentiators
VIDEO
Speaker Presentation Slides
All the presentation aids/slide shows barring a few have been uploaded to the website at http://internet-institute.in/repository
Presentation of Assignments
The participants presented their assignments which were given to them to work on the 3rd day. The participants were presented with Wikipedia T-Shirts as a token of appreciation.
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Given above is a picture of the participants presenting their assignments |
Participant Feedback
All participants were asked to fill a "Session Feedback Form" for each of the sessions and also an "Overall Feedback Form". They were also constantly encouraged to come up with suggestions and inputs on how to make the Institute more interesting.
The key findings from the Quantitative Feedback provided are:
(The figures below are averaged scores (out of 5) provided by participants in the Overall Feedback Forms)
S.No. | Parameter | Score (Out of 5) |
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1 | Relevance of Content | 3.6 |
2 | Comprehensiveness of Content | 3.44 |
3 | Easy to Understand | 3.55 |
4 | Well Paced | 3.33 |
5 | Sufficient Breaks | 3 |
6 | Duration of Talks | 3.2 |
7 | Mix between Learning & Activities | 3 |
The key findings from the Qualitative Feedback provided are:
S.No. | Points observed |
---|---|
1 | Presentations – Participants felt sessions with accompanying slides/aids were most helpful. Some felt that accompanying notes could also be useful for future reference. |
2 | Use of Examples/Case Studies – Participants felt concepts can be better assimilated if case-studies/examples are used. Some also felt that for the technological advancements discussed, it would have been better had the social/economic impact of the same was discussed too. |
3 | Implementation Gaps– One participant, who is working at the field level in Kolkata had a specific thing to say about the talk about BSNL and its offerings– Although BSNL has so many options available on paper to connect to the Internet, common service centres in West Bengal are mostly run on Tata Indicom’s network even though the board outside says “BSNL” etc. She felt that the reality is far different from what exists on paper. |
4 | Interactive sessions were most appreciated than speaker led sessions. |
5 | There were many responses to the question “How will you apply this new information in the future” and it is very encouraging. People have given thought to contributing to Wikipedia in their mother tongue, take the knowledge to the field work that they are associated with, continue with their research, change their Internet connections, to help file RTIs, to adopt more open source software, sharing with students, advocacy efforts, etc |
6 | The responses to the question “What did you learn from the session/workshop that was new?” elicited more responses for the following sessions
|
7 | Field Trip – One participant said “One or two of the persons from MapUnity could have made the presentation at the institute venue itself. A visit to an underserved or un-served community with interactions with the people there could also have given a good understanding of on-ground challenges and needs.” |
8 | Follow-up Session –One participant had ideas about having a follow-up session “A follow-up call [webinar?] after 6 months to see if any of these concepts were useful would be an interesting exercise to take up” |
9 | Assignment – Participants felt that the assignments were good but they needed more time to work on the same. |
Other Feedback:
- The food and the facilities were enjoyed and appreciated by all.
- The remote location of the Golden Palms Resort was a concern for most of the participants.
Participation Certificates
Participation Certificates (template shown below) have been mailed to all the participants in the third week of July 2013.
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Given above is the certificate declaring the successful completion of the event |
Institute Expenses
A total of Rs. 19, 91,889 (Rupees nineteen lakhs ninety one thousand eight hundred and eighty nine only) was spent towards organizing and conducting the Internet Institute. A breakup of the Institute Expenditures is given below:
S.No. | Type of Expense | Description | Total |
---|---|---|---|
1 | Venue – Golden Palms Resort | Accommodation for participants, speakers and food | 12,91,176 |
2 | Travel | Cost of Air tickets | 2,94,515 |
3 | Local Travel | Airport Pickup/Drop, Local City Travel | 1,41,001 |
4 | Gifts & Printing | Gifts for speakers and ad hoc document printing charges | 24,000 |
5 | Infrastructure | Telephony, Audio, Video, Stage | 1,05,000 |
6 | Participant Bags | 10,650 | |
7 | Reimbursements | Reimbursements to participants and speakers | 1,25,547 |
Total Expenses | 19,91,889 |
What the participants had to say
Sangh Priya Rahul – “One of my organisation's work is more or less related to empowerment of rural areas so knowledge about USOF will be useful there.” (On USOF)
Rashmi. M – “Makes me more sensitized towards the disabled people.” (On e-Accessibility)
Preethi Ayyaluswamy – “Would help me in strategically planning for an online campaign” (On digital activism).
Conclusion
The Institute was highly engaging and enabled the participants to explore the various facets of Internet & Society. As was evident from the feedback forms, participants had given thought to contributing to Wikipedia in their mother tongue, take the knowledge to the field work that they are associated with, continue with their research, change their Internet connections, help file RTIs, adopt more open source software, sharing with students, advocacy efforts etc. There was a very high level of expertise amongst speakers at the Institute which was apparent from the participatory discussions and a lot of insightful perspectives were brought forth. There was a common consensus amongst all participants that inclusive growth across all dimensions would take efforts from all stakeholders.
We hope to learn from the findings of this Institute and work towards a better second Institute.
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Above is a group picture of all the participants and the organizers |
Building Up vs Tearing Down
This article by Shyam Ponappa originally published in the Business Standard on July 3, 2013 was also mirrored in Organizing India Blogspot
Many economies around the world are in an unenviable state. India too has lost another chance at breaking out of its self-limiting mould of haphazard divergence and fractious irresponsibility. These constraints are exemplified by the ruling party's overindulgence in populist and crony handouts, such as ill-considered Mahatma Gandhi National Rural Employment Guarantee Act or food security initiatives, or the latest gas pricing decision, apparently without any sense of responsibility for the detrimental consequences, including for cash flows. The sole criterion is to somehow stay on top. Alas, they are matched by the unmitigated confrontationism of a flailing Opposition. As a consequence, we remain a land of unrealised potential, our energies focused on hindering or tearing down instead of building up. Lack of credible enforcement is hampering development, and the two are becoming mutually exclusive.
To a considerable extent, the troubles worldwide, including our own, appear to have resulted from excesses of some sort, whether of dishonesty or destructive activism. Is a sense of decline because of the economic downturn, or are there genuine negativities in our times? Is there an inevitable slide to dishonesty, as Plato concluded - reaffirmed in more recent works across cultures, such as Corruption Cycles by Cristina Bicchieri and John Duffy? [1]
The distribution of personal attributes in any large set of people ensures that there will always be some who will try to cheat, even in the elevated domain of scientific research. A consideration of two instances, one global and the other local, may provide some indicators.
Misconduct in Research
Consider the retraction of scientific papers. The title of a report published in October 2012 says it all: "Misconduct Accounts for the Majority of Retracted Scientific Publications". [2] First, there has been a rising trend in the 2,047 retractions since the first in 1977 (there's a puzzling caveat about retractable offences not being necessarily new). Second, the rise since 1977 has been almost tenfold. Third, over two-thirds were attributable to misconduct, including intentional falsification or fabrication of data. Almost half of all retractions (43 per cent) were for fraud, suspected or actual; duplicate publications were 14 per cent, and plagiarism almost 10 per cent. The report concludes that for articles for which the reason for retraction is known, three-quarters were for actual or suspected misconduct, while errors accounted for only a quarter (Chart 1).
Chart 1
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Geographic Spread
Of the retracted articles from 56 countries, three-quarters of fraud or suspected fraud were from the United States, Germany, Japan, and China. India's share in plagiarism and duplicate publication is relatively high; its share in fraud, also relatively high, is lower than in the other two (Chart 2).
Chart 2
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India's research papers in science, social science, and economics/business for the period 2000 to 2010 and their share in world citations were as follows:
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The Science Watch website provides details for each field. To quote from it: "For the period 2000-2010, India ranked 11th in output, 17th in citations received, and 34th in citations per paper (among nations publishing 50,000 or more papers during the period) across the science and social sciences fields surveyed in Essential Science Indicators." By way of comparison, the US published nearly 3,050,000 papers (11 times as many) from 2001 to August 2011, while China was second with about 8,37,000 (three times as many). [3]
These data show that the loss of innocence is global and rising, but that we have a disproportionate share: 11th in output, but sixth in fraud, fifth in plagiarism and sixth in duplicate publication.
Improved Indian Highways
At the local level, press reports seemed to indicate that our highways programme was faring badly. A few, like the Greater Noida Expressway near Delhi, the Yamuna Expressway to Agra, and the Jaipur-Agra highway appeared to be exceptions. Last month, however, our 3,000-kilometre drive from Delhi to Coorg averaged 600 km a day on mostly good roads. Some stretches in Northern Karnataka were breathtaking, and the feeder roads alongside were particularly impressive. Something is really happening in road construction (see http://www.nhai.org/allphase.htm, on a well-presented website).
This demonstrates the possibility of achievement despite evident deficiencies and alleged corruption, even though much remains to be done to make the road system genuinely world-class.
Less Cheating, More Fair Play
So how can we tackle corruption while pursuing development? The trick is to devise processes and institutions that favour equitable outcomes, or less cheating and more fair play rather than the opposite, without obstructive policing. If the processes have incentives and penalties that are credibly administered, perhaps we'll get the desired results. One essential requirement is of universal acceptance, and inculcation of these processes as an obligatory aspect of citizenship. Impartial and systematic enforcement has to be the norm - perhaps the hardest step for us - without recourse to the imposition of parallel bureaucracies of elaborate policing mechanisms, street demonstrations, or handouts of free electricity, food, TVs, computers and the like. Credible enforcement could allow us the opportunity to focus on building pleasant, productive communities with decent living standards with systems against corruption, preventing the expending of discretionary effort on such matters at the cost of development.
But the prerequisite is to get those in power to allow the trick. If we could learn to apply standard operating procedures to incentives and punishments, the fight against corruption and progress in development need not be mutually exclusive.
[1]. http://www.anth.ucsb.edu/faculty/gurven/anth169/bicchieriduffy1997.pdf
[2]. http://www.pnas.org/content/109/42/17028.full.pdf
(Ferric C Fang, R Grant Steen, and Arturo Casadevall; Proceedings of the National Academy of Sciences, US, September 2012)
[3]. http://sciencewatch.com/articles/top-20-countries-all-fields-2001-august-31-2011
Law & Order through Traffic Systems
Read the original column published in the Business Standard. This was cross-posted in Organizing India Blogspot.
India coasts on a post-feudal-colonial mélange of currents and tides, with the brigandage of opportunistic politics fed by our (the voters’) greed for short-term benefits. The result is grotesque populism and corruption in lieu of the deferred gratification of pleasing cities and countryside with the appurtenances of proper governance: sidewalks and drains, toilets, transport, administration and order. We must develop solutions with an integrated, problem-solving approach, not just wait.
In such chaotic times, should we even consider minor themes, like trying to bring order to our traffic, and our behaviour on our roads? Yes, if one accepts that turmoil and crises provide opportunities as much as threats, and because these areas are among the few in which there may be chances of success if there are well-directed efforts. Instead of passively being buffeted by fate, we can do something about it: analyse the causes of our horrific traffic, devise an approach to mitigate or contain some factors, and formulate and implement solutions. Also, the technology is readily available, and the solutions need not be all-encompassing efforts on a countrywide scale, or not at all. Hence this pitch for a technology- and institution-driven, systems approach to traffic management that could potentially change the way we are. The big assumptions are: (a) that systems can induce order and law-abiding behaviour on our roads, for a start, and (b) that this will reduce traffic accidents. Let's consider how.
Traffic Accidents & Deaths
Information on traffic accidents is available from the National Crime Records Bureau at the ministry of home affairs. The latest report available is for 2011. There were 473,084 reported traffic accidents in 2011, comprising 440,123 road accidents, 2,385 "rail-road accidents" and 30,576 "other railway accidents". The figure for accidental deaths from unnatural causes was 367,194, of which traffic accidents accounted for 165,072. The latter included road and rail accidents, but excluded deaths from drowning and accidents involving aircraft. Road traffic accidents and deaths countrywide and for the Union territory of Delhi for the last five years are shown in the graphs below.
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While frightful enough, the graphs do not quite convey the horrid rough-and-tumble unpleasantness of our roads. Could there be some way to bring order to this aspect of our lives? Perhaps, if we can imagine better scenarios, and then apply ourselves to act collectively to achieve them. It may be possible to introduce systems that elicit better governance and behaviour, as in the following instances.
Wireless smart grids and TV white space
An early example of augmenting existing communications networks with TV "white space" (ie, the unused TV spectrum) devices was implemented in America, in the city of Wilmington in North Carolina and its environs of New Hanover County. The City of Wilmington has about 100,000 people in about 105 square kilometres, while the county has a population of nearly 200,000 in an area of about 515 square kilometres. [1]
Because of the distance between localities, the extent of wetlands and waterways, and the dense foliage, extending broadband coverage to all its residential areas was difficult and expensive. In January 2012, Spectrum Bridge helped with installing a wireless overlay in three locations using TV white spaces to provide broadband connectivity. Additional equipment enabled real-time traffic monitoring to improve efficiency, reducing congestion and travel time, as well as aiding in law enforcement, in disaster management such as hurricane evacuations, and in enabling broadband connectivity for public schools. The coverage extended to the parks and recreational areas, providing better facilities for citizens, as well as more efficient environmental monitoring. The point is that communications can be effected much more effectively and efficiently through using TV "white space" bands.
In April 2012, a different group including Google, Microsoft, the BBC, and so on set up a smart grid in the university town of Cambridge in England, using TV white space in six locations covering a radius of about 6 km, comparable to central New Delhi. This network covers a population of about 125,000 and enables the management not only of services like electricity meters, but also of air quality sensors, street lights, traffic management, and parking spaces.[2]
Traffic and law enforcement systems for India
Now consider New Delhi and the National Capital Region. While it has a huge population over an extensive area, central New Delhi covers a radius of some 6-7 km, as do other localities in the city and its environs. Apart from the scale of population and geography, there are also the differences in culture or ethos with the instances mentioned earlier.
Yet, if our authorities could pull together a coordinated effort to develop and implement a network that would support wireless webcams, it may well provide a basis for governance that could work. If initiated for traffic and area management, there could be major improvements in bringing order through non-discretionary traffic management, as also in upholding law enforcement for the safety of citizens.
There may be an outcry from civil liberties champions, but residents will likely welcome the benefits, although they might cavil at unpopular but essential disciplines like system extensions to electricity and water metering. It will also bring about the cutting of the knot of India's welter of unimplemented laws.
The elements of this system would have to consist of really good overall design for the wireless overlay using TV white space bands, initially for a system of web cameras. These spectrum bands are unused despite being very effective for long-range communications. There would need to be some form of automated action report generation systems - for example, penalties for traffic violations. Also needed would be appropriate institutional support so that violators cannot ignore penalties, like fast-track collection processes that do not require recourse to an overburdened and dilatory judicial system. In addition, some degree of surveillance for crisis detection and rapid response would be necessary to deal with law enforcement.
The actual implementation could be modular by location and purpose while maintaining an integrated systems approach, so that areas of action as well as locations could be phased and need not be done simultaneously on a massive scale. In other words, it need not have the ab initio monumental scale of the UID, and could perhaps avoid some of the controversial design issues confronting the latter. It needs the approach, coordination and effort that achieved the Metro.
[1].http://www.spectrumbridge.com/ProductsServices/WhiteSpacesSolutions/success-stories/wilmington.aspx
[2].http://gigaom.com/2012/04/25/brits-score-white-space-first-with-city-wide-network/
Configuring a 'Non-Toothless' Regulator (TRAI)
Shyam Ponappa's column was published in Organizing India Blogspot on May 10, 2013 and in the Business Standard on May 9, 2013.
On April 27, this newspaper carried a report on the department of telecom's proposed amendments to powers of the regulator in the Telecom Regulatory Authority (Amendment) Bill. These amendments are remarkable, because they are an institutional evolution of the kind that we have rarely experienced, but need much more. Such salutary changes are heartening at a time of perceived drift in governance and stalled decisions. They are also important for our institutional development as examples of change initiated from within for legacy systems.
According to the report, the Telecom Regulatory Authority of India (Trai's) role will be extended to include the power to:
- impose penalties on operators for non-compliance with its orders and regulations;
- determine how to address consumer grievances and implement a plan; and
recommend how spectrum should be audited for efficient usage, and penalise transgressors for inefficiencies.
In addition, Trai is to be on a par with other independent regulators.
The right to impose penalties reflects a sea change for the better in the government's approach to regulation. It is especially significant because of the difficulties in setting up the regulator years after privatisation began, as well as in the period thereafter. This amendment has the potential to correct many deficiencies, provided it is implemented properly. Good outcomes, however, are not a foregone conclusion because outcomes require a combination of properly designed systems, people with the required skills in place and functioning well in circumstances that are not adverse.
Together with the other changes, namely, addressing consumer grievances and recommending how spectrum should be monitored for optimal usage, with the stipulation of penalties for inefficiencies, Trai will be empowered to facilitate usage and access.
The question is whether these changes sufficiently empower our regulator for our communications needs. The recommendations are good, but do they need improvement? Ideally, what should be the structure, function and powers of the agency in practicable terms, without making the "best" the enemy of the "good"? To formulate answers to these, it is useful to consider relevant benchmarks and markers. Some of the following material is derived from the ICT Regulation Toolkit of the International Telecommunication Union.
Scope
Some countries have a single-sector regulator for telecommunications, as in Botswana, Spain and Peru. Others have multi-sector regulators, with responsibility over utility sectors that typically include telecommunications, water, electricity and transportation, such as in Jamaica, Costa Rica, Germany, Latvia and Panama. More recently, there has been an increase in "converged regulators" with responsibility over broadcasting, telecommunications and information technology. Today, such regulators are found in most European Union countries, including Finland, Italy and the UK, as well as in Australia, Hong Kong, China, Malawi, Malaysia, South Africa and Tanzania. This is because such structures are considered to be better equipped to address convergent environments where different services are offered over the same platform. Such a move also facilitates the transition to modern, packet-switched "Next Generation Networks".
Responsibilities
Regulators in several countries, such as the US, the UK, and Malaysia, are the designated authorities responsible for spectrum allocation and management for the government; they do not only make recommendations. Should Trai have such a role and responsibility? To understand why the answer needs to be worked out thoroughly, read on.
Spectrum monitoring and management undoubtedly need modernised capabilities to provide information and decision support. This includes the use of online tools such as user-friendly databases and graphical user interfaces, and public access in areas not related to security or defence. These technological aspects are one dimension of need.
A different dimension is that of institutional readiness and interfaces, and the state of institutional development in counterparty agencies. In other words, it is not simply a matter of elegant logic and organisational design, but also culture and work processes that fit as well as the interrelationships, such as between telecommunications, broadcasting and competition laws, that will ultimately result in effective governance in our context.
Qualifications
What are the desirable qualifications for the head of the regulatory agency? The requirement is for coordinating interdisciplinary issues effectively, in addition to integrity, intellectual capacity, and governance/administrative ability. The first Trai was headed by a judge; thereafter, there was a banker, then people from the Indian Administrative Service. In the US, lawyers head the agency, while in the UK, it is economists; both have very different cultures and institutions from ours. In addition to experience in administration and contracts, knowledge of economics, commercial dealings and coordination using multiple inputs is desirable. Technical expertise, while essential as an input, may not be a key criterion for effective regulation and oversight.
Here are some examples of national anomalies:
- In Canada, spectrum matters are addressed by Industry Canada rather than by the regulator, the Canadian Radio-television and Telecommunications Commission, or CRTC.
- In Singapore, the Infocomm Development Authority has responsibility over telecommunications and information technology matters, but the Media Development Authority licenses over-the-air television and regulates content.
- In Australia, the communications regulator has no authority over competition issues, whereas in the UK, Ofcom has jurisdiction concurrently with the Office of Fair Trading.
For all these reasons, to properly configure Trai's role and powers, a consultative process is advisable (i.e., solutions collectively formulated that are likely to work) with the help of experienced facilitators who can help elicit convergence through stakeholder interactions. Such issues are ill-served by consultations in the form of a quasi-judicial hearing, which is predicated on the "rightness" of a position in the law.
From Open Citizen Radio Networks to the Race for .RADIO gTLD
On the afternoon of April 11, 2013, the president of the National University of Athens (NTUA) ,Simos Simopolous ordered the university’s Network Operations Centre (NOC) to pull the network plug off the IndyMedia Athens server that shared the university’s network infrastructure. With it went down the Internet radio stream of Radio98FM, an independent radio station broadcasting from within NUTA along with Radio Entasi. The takedown as it were later revealed, was an order by the Minister of Public Order, Nikos Dendias followed by the MP Adonis Georgiadis of the New Democracy Party tweeting in praise of the Minister’s decision. (Translate Tweet here : http://bit.ly/ZiBDuR ) Indymedia Athens still continues to be accessible through the Tor network at http://gutneffntqonah7l.onion/
The choice and use of broadcast networks in political and citizen uprisings have had a culturally specific side to it. The massive 2006 democracy movement in Nepal was fuelled entirely by pirate FM radio broadcasts, as most mountainous regions have no access to telephony, Internet or print news delivery services. Recently the world saw the power of social media , youtube and Twitter -- in Iran after the police killed student activist Neda and later in the landmark crisis of Tunisia.
By combining the power of seamless accessibility that the audio medium provides by allowing the user to multi-task, along with the viral broadcasting ability of the Internet, we indeed have an effective tool for networked citizen science. Are there popular models that the community can emulate, and what are the barriers to entry in a trans-medial paradigm such as Internet audio re-transmission?
An Overview of Open Radio Networks
Let’s a take a quick peek into the wireless radio –VoIP service named ECHOLINK that I am fortunate to have had access to, over the last decade. Available to only ‘licensed’ and verified amateur radio operators, one maybe rest assured that strict legalities have unfortunately made such an open and transparent trans-medial global networked infrastructure impossible for commercial deployment or of use to the common citizen.
The ECHOLINK network was made possible thanks to the relentless efforts of amateur radio operators from around the world. It has enabled numerous wireless VHF local repeaters and links around the globe to be accessible over the Internet from practically any remote machine/device connected to the Internet, for both transmission as well as reception.
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A memorable event was when I connected to a local Florida repeater from my bedroom’s PC and ended up conversing with an amateur radio operator who was driving around in his car through the Hurricane Katrina flooded streets with a VHF Handheld FM Transceiver, limited food supply and a gallon of reserve fuel canned in his backseat. Despite this, there was a sense of brethren and calm in his crackling radio voice that made it to the Florida repeater and then all the way to my home-station in Bangalore.
More recently, after the Fukushima Tsunami and Nuclear fallout, we observed that the Japanese government had jammed almost every radio repeater link, including the Emergency Amateur Radio service in Japan as they did not want any international contact to be made regarding the situation. Nevertheless after hours of trying, I intercepted a number of conference link nodes in Japan with people passing on information to each other about the deteriorating conditions in various prefectures. Below is a recorded excerpt from a conversation between two concerned citizens that I intercepted:
The Internet Radio Linking Project (IRLP) was a precursor to the Echolink network, invented by Dave Cameron (Callsign: VE7LTD) who installed the first three Windows O/S based IRLP nodes in Vancouver, British Columbia in 1997, followed by a more reliable Linux Node (VE7RHS) in 1998, after which the IRLP network soon spread worldwide. Amateur Radio operators with a VHF handheld transceiver and a custom (also DIY) IRLP interface hardware could connect to any local node within their RF Range and by using particular DTMF codes could establish a connection to any other node in the world by referring to a global list of node numbers. (http://status.irlp.net/).
ECHOIRLP enables Radio network node owners to support both IRLP as well as ECHOLINK networks on their repeater. A publically open trans-medial network such as this would certainly transform global information dissemination and accessibility, citizen journalism, community networks as well as disaster management.
Impedances and Emerging Trends in Commercial radio webcasting:
Similar radio network paradigms, albeit highly commercial, already exist within the mobile phone infrastructure, and with location-based services and audio databases like Spotify and audio detection apps like SoundHound on the rise, one could expect a huge boom in Internet radio services with contextual advertising on personal devices in the coming years. As with the press wars during the early 1930s in America, when newspapers viewed radio broadcasting as a formidable competitor, various impedances have kept Internet streaming away from the space that local wireless broadcasters and telecommunications networks have enjoyed for so long.
Unlike in the US or EU Copyright law, in India, there is currently no copyright law that clearly regulates Internet webcasting and radio retransmission on the Internet. In the United States however, webcasting of copyrighted audio content as well as internet retransmission of over-the air FM and AM radio broadcasts are subject to a per-performance royalty and an ‘ephemeral’ license fee. For the royalty calculations, transmission to each individual recipient is considered to be one ‘performance’. Estimating the market value of a ‘performance’ however is tricky, and the standing example that served as a reference, was the agreement reached between the RIAA (Recording Industry Association of America) that represents a majority of record labels that own copyrighted sound recordings and YAHOO! Inc , a then major webcaster and Internet re-transmitter. The RIAA-Yahoo! Agreement involved a lump sump payment of USD 1.25 million for the first 1.5 billion transmissions that amounted to about 0.08 cents/performance. The initial proposal by the CARP (Copyright Arbitration Royalty Panel) however, set this at 0.14 cents/performance for pure internet webcasts and 0.07 cents/performance for over-the air retransmissions, which later was rejected and equalized to 0.07cents/performance for both, after another recommendation by the Register of Copyrights was accepted by the Librarian of Congress.
In addition to this, an ephemeral license fee has to be paid by a webcaster and is currently set to be at about 8.8 per cent of the gross performance fee. ‘Ephemeral recordings’ in traditional broadcasting refer to the temporary copy made off a phono-record to facilitate transmission of the final studio mix. The twist in webcasting however is that temporary server copies necessary for Internet retransmission are subject to this ephemeral license fee.
Another limitation is bandwidth. Unlike wireless radio broadcasting that has a radial spread over line of sight depending on the wattage of transmission, the number of listeners that a server’s Internet radio streaming can tend to simultaneously, depends on the available bandwidth at the transmitting end. For instance, a 128kbps homebrew audio transmitted over a 1Mbps line using ShoutCast or Icecast, could probably support no more than 10 listeners although the advantage that listeners maybe geographically disparate cannot be overlooked.
The possibility of having a central webspace that provides access to streams of re-transmission of say, every FM news channel across the world still remains unfeasible. The logical next step would be to install multiple repeater servers that can access radio Internet servers located in different parts of the world retransmitting both commercial FM broadcasts as well as independent radio broadcasts, and constructed similar to the Echolink infrastructure. Ofcourse this would only be possible with a community-funded initiative led by the global amateur radio community in tandem with commercial pubic service broadcasters who agree to sacrifice on re-transmission royalties in view of mass accessibility. This collaboration now seems very possible with the latest .RADIO gTLD community based application that was filed by the EBU in 2013.
The .RADIO TLD competition
With ICANN launching the gTLD program, a notable contest has started for ownership of the .radio gTLD. The latest applicant is the Eurovision Broadcasting Union (EBU), the largest international association of broadcasters with supporters including the World Broadcasting Unions (WBU) and the Association Mondiale des Radiodiffuseurs Communautaires (AMARC). The EBU has filed for a ‘community based designation’ application, a move that has been actively supported by the International Amateur Radio Union (IARU), (http://goo.gl/H23YF), the founding fathers of the global amateur radio community. The European Broadcasting union, created in 1950, is a not-for-profit association and is one of the key sector members and technical advisors of the International Telecommunications Union. It’s primary function has been to advocate and negotiate the interests of European public broadcasters.
But three other standard applications for the .RADIO domain have been made to the ICANN as early as in 2012 by – BRS Media, AFILIAS and Tin Dale (LLC) all of whom have decried the latest application of EBU. BRS Media, as early as in 1998, entered into an ingenious agreement with the Federated States of Micronesia (country code .FM) and Armenia (country code .AM) and began offering the pricey .FM and .AM domains to Internet radio broadcasters and media services. AFILIAS Inc., who own the .MOBI and .INFO top level domains with it’s employees and investors in the ICANN Board have applied for 31 additional TLDs apart from .RADIO.
The ICANN reviews each applicant on the basis of descriptions of their mission and purpose of interest in the .RADIO TLD. While all the others allow ‘Open registrations’ of second level .RADIO domain-names by any organization, the EBU application entails a much more restrictive registration process where the initial round of registrations shall be limited to existing broadcasters, trademark owners, internet radio, amateur radio broadcasters and radio professionals.
The support of AMARC as well as the International Amateur Radio Union (IARU), (http://goo.gl/H23YF), has helped EBU to fulfill ICANN’s important pre-requisites for a community-based TLD application – that is “to substantiate its status as representative of the community it names in application by submission of written endorsements in support of the application.”
Does this mean that we shall finally see the dawn of widely accessible Internet radio and digital re-transmissions of over the air broadcasts, with the amateur radio networks working in tandem with commercial public service broadcasters? Will the EBU truly be a representative of the global broadcasting community and will it treat US counterparts no different from EU and rest of the world? And finally, what impact shall all this have on Internet governance, dissemination of public opinion and citizen interventions? These are but some of the burning questions that shall surface in the near future.
Key References
- http://www.echolink.org
- http://www.irlp.net/
- Summary of the Determination of the Librarian of Congress on Rates and Terms for Webcasting and Ephemeral Recordings (http://goo.gl/xPEj8)
- http://newgtlds.icann.org/en/
- http://www.arrl.org/
Prioritizing Communications & Energy
Shyam Ponappa's article was published in the Business Standard on April 4, 2013 and mirrored in Organizing India Blogspot.
A difficult aspect of addressing our economy, apart from necessary firefighting, is that of prioritisation, whether it is through organisation (or reorganisation), management and execution, or all these combined with policy reforms. With infrastructure growing for years at only about half the rate that gross domestic product has, crisis and turmoil are inevitable without systemic remedies. How should the authorities address the many deficiencies if our need is comprehensive, integrated improvement in systems?
Prerequisite: control expenses
First, a caveat: meta-processes such as managing cash flows and the balance of imports to exports, our most urgent problems, must be dealt with as a prerequisite. Giving out more cash than receipts has to stop. Many countries have come to grief on welfare spending before they could afford it, and no one has found a magical way out. India is not likely to find one either, so we do have to end this unsustainable indulgence. Second, hard as it is, without investment in capacity augmentation and system building, we cannot escape the cycle of deficiencies and crises. If we can get help from the International Monetary Fund now, that's what we should seek, and use it judiciously.
Communications and energy
Communications is a compelling priority, because of the bang for the buck it provides, compounded by correcting past mistakes. Other infrastructure deficiencies, while equally critical or even more so - think energy, water, sanitation and transportation - require much more by way of capital, human resources, and organisation, and generally do not yield as much return as quickly. Also, other sectors often require co-ordinated action by state and local governments in concert with the central government.
There are areas that need central policy correctives, too. For energy, an urgent requirement is a solar energy policy to induce the spread of equipment. The policy should include tax rebates and the concept of Net Energy Metering, as in California, that facilitates selling excess power to the grid. In the US, for instance, of the new capacity commissioned in 2012, nearly half was from renewable energy - of which 40 per cent was from wind, with a substantial share from solar. We have to find a balance between the inducements that led to overbuilding in Spain and our own backward-leaning policies, as we have abundant sunshine that is not adequately used as well as high energy imports. Italy, Spain and Australia are apparently close to price parity in solar and conventional fuels; perhaps there's scope for selective adaptation of some of their policies.
The difficulty with communications alone, however, is evident from the growth of mobile telephony in India. The proliferation of networks and equipment with the need for standby generation because of unreliable grid power has resulted in:
- higher oil imports for diesel for generating electricity;
- a multiplicity of networks, towers and radio transmission equipment, with substantial investments in spectrum, resulting in a huge drain on capital, in addition to the environmental impact of excessive materials used, high electromagnetic radiation, and a blight on the urban landscape.
Energy for communications
According to a recent statement in Parliament, the annual diesel consumption in 585,000 towers is estimated at over five billion litres. This underscores the need to develop our own approach to the whole range of requirements, from network architecture and organisation to equipment, even as we re-evaluate how to provide countrywide broadband access. The existing paradigms will result in escalating capital cost, operating expenses, and fuel import patterns that are unsustainable.
Our approach to voice and data communications itself has to evolve. In a way, communications services are an enabler and force-multiplier for other infrastructure, providing a framework and facilitation for structured development. Also, if a systematic approach that serves our needs evolves for this sector, it could provide a template for integrated, goal-directed development of other sectors, starting with the verticals to deliver reliable power to users.
This undertaking is especially complex in India because of our fragmented organisational structure, with no apparent co-ordination mechanism. Another aspect of the problem is reflected in this quotation from a McKinsey report: “Delays in building ‘hard’ infrastructure often stem from a lack of ‘soft’ infrastructure, such as educated, skilled workers with project-management capabilities.”* There is also a lack of effective institutions and processes for the organisation and management of human and material resources. For instance, fuels such as coal and oil are under different ministries, power generation and distribution; alternative energy and nuclear energy are all separate ministries, as are the railways that transport coal; while another ministry evaluates the environmental impact. Nothing is going to work if each one acts independently without co-ordinating with the others. It’s as though we have not understood the importance of organisation and co-ordination to achieve results, or are consciously ignoring this in an opportunistic free-for-all.
Finding our own way
Google Chairman Eric Schmidt observed recently that India lagged behind the rest of the world in adopting the Web services model and in harnessing the power of the internet, attributing this to failure to invest in high-speed networks, perhaps through complacency because of a strong IT sector. While this could be interpreted as self-serving, our needs would be very well served if the authorities focused on correcting this through policies that induce private sector investment in networks and service delivery, in data centres, and in terrestrial links to supplement our submarine cables. In communications, as in other sectors, we have to fashion our own way because cut-and-paste solutions won’t work, as the contexts are too different. We must explicitly address developing local data centres; terrestrial links with other countries, if feasible; our own designs for rural broadband including common facilities, with efficient, low-powered elements to the extent possible; use renewable energy; explore small-cell architecture in urban settings; and devise policies that facilitate investment in ubiquitous internet access, including spectrum reforms like allocating more bandwidth for Wi-Fi. It would be in our interest to focus on doing what it takes to achieve top-tier Web services in the next five to 10 years.
*“Can India lead the mobile-Internet revolution?”, Laxman Narasimhan, February 2011
https://www.mckinseyquarterly.com/Marketing/Digital_Marketing/Can_India_lead_the_mobile-Internet_revolution_2746
Are India's Glory Days Over?
The blog post was published in Organizing India on March 8, 2013. Originally published in the Business Standard on March 6, 2013.
Underlying the varied narratives on the Budget is the persistence of structural inflation, especially in food items. India has sunk in an inflation quagmire, moving from a ranking of around 60th until 2008 to about 120th since then, with lower rankings indicating worse relative inflation. Most analysts opine that growth will be slow, and agree that the revenue deficit needs to be reduced much more than in the Budget. The planned reduction of expenditure or increase in revenues needs to be something like five times the budgeted half a per cent of GDP to reduce the risk of the external account imbalance.
Slow growth is inevitable
This year's Budget, according to one commentary from the Heritage Foundation, "leaves India on the same, failing course it's been on of undisciplined spending and unrealistic expectations". The report goes on to mention high expenditure, inadequate revenues and very high consumer inflation, with no reforms.[1]
Another
analyst articulates a different view that in fact actually demands low growth. Focusing on the balance of payments risk because of a current account deficit, he argues that the Budget had to constrain growth, or risk triggering a crisis. This view suggests that we cannot export more until the world recovers and can buy more, and until it does, our unfavourable external balance puts us at risk.[2]
Or is it?
There's no denying the conclusion of the Heritage report, although there may be disagreement about some of the professed remedies, like opening up banking and insurance to foreign direct investment (FDI). However, the gap arising from the trade imbalance, while making India's economy more vulnerable, doesn't preclude interim strategies and limit our options to necessarily constraining growth. The current account deficit calls for convergent management of expectations that result in unrestricted foreign capital inflows, not the scattershot confusion of mixed signals. To what extent this should be at the cost of the growth that is so essential for the stability of our social fabric is debatable.
For instance, is there the possibility, as in tourism-driven economies, that there could be a consistent inflow of capital to tide over the deficit until exports recover, ie, traditional export markets recover? Or that if we shifted to an unambiguous emphasis on FDI over time instead of encouraging short-term, anonymous, even incognito, inflows through Participatory Notes, that the gap could be bridged? Or that if our enterprises could start designing and manufacturing new products for sectors such as broadband and wireless communications, we might develop new markets in more growth-oriented areas in Asia, thereby improving our trade balance?
Infrastructure : the enabler and multiplier
No matter what direction we take, unless our governments - the non-monolithic, disparate powers that operate in the states or at the Centre - start dealing with realities, our glory days are over for years together. For instance, unless radical action is taken to increase food production and distribution, the curse of inflation will stunt growth, and hamstring our ability to improve infrastructure. In all this, the centrality of infrastructure as enabler and multiplier cannot be overemphasised.
Within infrastructure, there's little doubt about the crippling of telecommunications, now reduced to a shambling wreck by misconceived policies to capture revenues for the treasury, whether by governments' greed, or by the clamour of ill-informed and irrational public opinion, or courts misinformed by self-proclaimed guardians of the public interest whose ignorance overwhelms their good intentions by far.
Meanwhile, at the Mobile World Congress at Barcelona
Around the same time, half a world away in Barcelona, there was an annual convention on mobile communications. People from companies around the world congregate for the Mobile World Congress, which ran from February 25 to 28 this year (for the first day's highlights, see: http://www.mobileworldlive.com/mwc-2013-day-1-opening-highlights-feature). This convention drew over 70,000 people, where Samsung and Nokia made their announcements about new smartphones, as did LG, Huawei, Intel and a host of others. It is also where the producers of systems for the delivery of these services, such as Qualcomm, Ericsson, and Nokia Siemens Networks, showed what they were doing to prepare for the vast anticipated increase in mobile broadband.
The Mobile World Congress has relevance to India because our Trai and the DoT representatives were there, studying developments in managing spectrum and communications. If they're allowed to formulate solutions to solve some of our problems, instead of being restricted by ignorant litigants through the courts to incur more self-inflicted harm, their actions could revolutionise India's approach. Of particular interest for India were Ericsson's "Supplemental Downlink", which uses access to a predefined spectrum band to augment existing licensed capacity, and Nokia Siemens Networks' "Authorised Shared Access", which enables access to spectrum assigned to a primary holder, government in this case, to be used commercially without compromising the existing incumbents.[3]
Need for capacity and productivity hikes
Major structural changes are required to create conditions to move India out of its growth doldrums. Take the collapse in the telecommunications sector. The first step is to give network owners the benefit of infrastructure status to lower borrowing costs. Radical changes to spectrum and network management to maximise service delivery while reducing costs, including extending the principle of revenue sharing from licences to spectrum use, can further improve outcomes with the same input. Also, sustained efforts to support the design and manufacture of products - whether through FDI in joint ventures or licensed local manufacturing, or the creation of products from scratch - could reduce the trade burden of ICT imports, which otherwise threaten to exceed our oil imports over time.
Our authorities must now develop ground rules that can lead to a potential revival, while corporations and the government work together to ensure success. Apart from this, sectors that can help with the balance of payments, like tourism, and domestic coal for power, must get focused solutions. Such developments are required in diverse sectors to break out of our tailspin.
[1]. "India Stays on Path to Economic Failure", Derek Scissors, The Heritage Foundation: http://blog.heritage.org/2013/02/28/india-stays-on-path-to-economic-failure/
[2]. "Budgeting in hard times", T C A Srinivasa-Raghavan,
The Hindu: http://www.thehindu.com/business/Economy/budgeting-in-hard-times/article4472061.ece
[3]. (a) Supplemental Downlink and (b) Authorised Shared Access:
a) http://www.qualcomm.com/media/documents/files/benefits-of-hspa-supplemental-downlink.pdf
b) http://www.nokiasiemensnetworks.com/sites/default/files/document/authorised_shared_access_apr_2012_0.pdf
Who Minds the Maxwell's Demon (Revisiting Communication Networks through the Lens of the Intermediary)
It is unfair to contextualize the history of the Internet without looking at how analog information networks like cable and wireless telegraph and later, the telephone, almost coincidentally necessitated the invention of automated networks for remote machine control and peer-to- peer communication over the Internet that promised to drastically reduce intermediary overheads. While the whole world was fraught in patent wars over wired private networks, the first nodes of the ‘open’ internet were built in a two-week global meeting of computer scientists who were flown down to simply prepare for ‘a public exhibition’ of the ARPANET in 1971.
While India only received it’s first telephone in New Delhi late into the 20th century, “Telegraph Laws” to most of the Indian working class always remained an ominously urgent telegram that brought the news of a dear one who had taken seriously ill. And so, on a lateral note, it is apt to bring to light the life of one Mr Almond Brown Strowger, wherein the idea of an automatic telephone exchange was given birth to by the ‘business of death’.
The Automatic Telephone Exchange
Almond Strowger was an undertaker based in Missouri, in a town where there was yet another undertaker, who’s wife incidentally was an operator in the then manual telephone exchange. Strowger came to believe the reason he received fewer phone calls was that his business competitor’s wife ended up preferentially routing all callers seeking Strowger’s funeral services to her undertaker husband instead. Strowger conceived the initial idea in 1888 and patented ‘The Automatic Telephone Exchange’ in 1891. http://goo.gl/oieIJ
Popularly known as the ‘Strowger Switch’, the Step-by Step switch (SXS switch) consisted of two interfaces – One at the customer’s end that used telegraph keys (and later a rotary dial) to send a train of electric current pulses corresponding to the digits 0 -9 all the way to the exchange. The actual Strowger switch at the exchange, used an electromechanical device that could move vertically to select one of 10 contacts, and then rotated to select one of another 10 in each row – a total of 100 choices. Consequently was formed in 1892, the Strowger Automatic Telephone Exchange Company at Indiana with about 75 subscribers. Strowger later sold his patents for $10,000 in 1898 to the Automatic Electric Company, a competitor of Bell System’s Western Electric. His patents were eventually acquired by Bell systems for $2.5 million in 1916, showing just how much growth and investor interest the telephone industry had gained by then.
Switching Paradigms
The architecture of global communication was headed towards different ideals and directions. Most media historians contrast these methodologies into ‘circuit switching’ and ‘packet switching’, or a connection-oriented fault intolerant system on one hand and another connection-less fault tolerant protocol respectively, both of which were being developed concurrently. In reality however, a major driving factor were the stakeholders backing the infrastructure of the rapidly growing communication industry, who were looking for growing returns on their investments. And hence these parallel ramifications may also be looked at through the lens of closed proprietary and medium specific networks versus an open, shared, medium in-specific paradigm of information theory.
Circuit switching relied on an assured dedicated connection between 2 nodes, and was especially patronized by the industry that saw telecommunication as the latest fad in urban luxury (a key factor in the distinction of suburban areas as the affluent moved into urban areas that were ‘connected’ by telephone). Owners and manufacturers of the hardware infrastructure became the most significant stakeholders. The revenue model was based on the amount of time the network was used and hence was popular in analog voice telephone networks. The entire bandwidth of the channel was made available for the duration of the session along with a fixed delay between communicating nodes. Therefore, even if there was no information being transmitted during a session, the channel would not be made available to anyone else waiting to use it unless released by the previous party. Early telephone exchanges relied on manual labour to facilitate switching until the automated exchange came about.
Packet switching on the other hand, leaned towards the paradigm of shared bandwidth and resources, and more importantly approached communication with complete disregard to the medium of transmission, be it wired or wireless. Furthermore, it also disregarded the content, modality and form of communication with an objectified data-centric approach. Information to be transmitted was divided into structured “packets” or “capsules”. These packets were all ‘thrown’ into the shared network pool consisting of numerous other such packets, each with its own destination, to be carefully buffered, stored and forwarded by intermediary routers in the network. Apart from occasional packet loss, the time taken to send a message is indeterminate and is dependent on the overall traffic load on the network at any given time.
INTERFACE MESSAGE PROCESSOR and the ICCC ‘Hackathon’
Plans forged on into the early 1960s towards the development of an open architecture to enable network communication between computer systems, culminating in the invention of the ‘interface message processor’ that promised to herald the coming of an era of packet switching by enabling the ARPANET (Advanced Research Projects Agency Network), the first wide area packet switched network – and precursor to the world wide web as we know it today.
While the Information Processing Techniques Office (IPTO) had previously contracted Larry Roberts who in 1965 developed the first packet switched network between two computers , the TX-2 at MIT with a Q-32 in California, a growing need was felt to have a centralized terminal with access to multiple sites that would enable any computer to connect to any site. The first IMP was commissioned to be built by the engineering firm BBN (Bolt, Beranek and Newman, a professor student trio from MIT).
(The very first Interface Message Processor by BBN: Courtesy: http://goo.gl/tvo8n)
By 1971, the four original nodes that connected the ARPANET (viz, UCLA, Stanford Research Institute, University of Utah and University of California at Santa Barbara) had expanded to 15 nodes, but the lack of a common host protocol meant that a full-scale implementation and adoption of the ARPANET was far from complete. The time had come to allow the public to engage with the promising future that the Internet held. What entailed was the organization of first public International Conference on Computer Communication (1972) (http://goo.gl/PFhtL) under the umbrella of the IEEE Computer Society at the Hilton Hotel, Washington D.C. In many ways the event was the original version of a modern day new media art ‘hackathon’ and involved about 50 computer scientists who were flown in from around the globe alongside the likes of Vint Cerf and Bob Metcalfe. The deadline of a public demonstration provided the much-needed impetus to drive the network to functional completion. Exhibits included a variety of networked applications like the famed dialogue between the ‘paranoid patient’ chatbot PARRY and doctor ELIZA, motion control of the LOGO ‘Turtle’ across the network and remote access of digital files that were printed on paper locally. A milestone in distributed packet switching had been achieved and the stage had been set to compete with the archaic paradigm of circuit switched networks, even as delegates from AT&T (incidentally one of the funders of the event) watched on with the hope that the demonstration would run into a fatal glitch.
Who Minds the Maxwell's Demon
It may not be boldly evident from the vast corpus of policy research surrounding the regulation of communication networks (be it the issues of network security, privacy, anonymity, surveillance or billing systems) that key-points in the control system where dynamics play at large, are at the interfacing nodes and data/signal switches at either transceiver nodes as well as intermediary nodes. This is further underlined by the historical fact that the invention of the automatic telephone exchange was fuelled by the necessity to ensure a paradigm of unbiased circuit switching within the context of a networked business.
Just a glimpse at the number of patents that directly or indirectly refer to the Automatic Telephone Exchange patent shall bring to light myriad applications that range from “Linking of Personal Information Management Data”, “Universal Data Aggregation”, “Flexible Billing Architecture”, ”Multiple Data Store Authentication” , “Managing User to User Contact using Inferred Presence Detection” to various paradigms surrounding distributed systems for cache defeat detection, most of which are part of PUSH technology services that manage networked smartphone applications from instant messaging to email access. Other proposed systems for spectrum management and dynamic bandwidth allocation, such as policy alternatives to spectrum auction that entail frequency hopping at the transmitter level shall invariably depend on a centralized automated intermediary who shall in theory have transparent access to data flow. The role of routing intermediaries with specialized access, poses many interesting questions with regards to policy issues that surround network privacy and security.
This brings us back to the seemingly comical reference that this article makes to a mysterious entity named the ‘Maxwell’s Demon’. A thought experiment proposed by James Clerk Maxwell, involved a chamber of gas molecules at equilibrium that was divided into two halves along with a ‘door’ controlled by the “Maxwell’s Demon”. The demon had the ability to ‘open’ the door to allow faster than average molecules to enter one side of the chamber while slower molecules ended up on the other side of the chamber, causing the former side to heat up while the other side gradually cooled down, thereby establishing a temperature difference without doing any work, and thus violating the 2nd Law of Thermodynamics. The parallel drawn in this article between networked switching intermediaries and the Maxwell’s demon does not go beyond this simple functional similarity.
However for the ambitious reader, it maybe interesting to note that ever since the invention of digital computers, scientists have actively pursued the paradox of Maxwell’s demon to revisit physical fundamentals governing information theory and information processing, which has involved analyzing the thermodynamic costs of elementary information manipulation in digital circuits – A study that probably constantly engages Google as they pump water through steel tubes to cool their million servers.
We shall save all this for another day, but on yet another related note, everytime say an email sent to an invalid address bounces back to your inbox as a “Mailer Daemon”, let it be known that the “Daemon” in Operating System terminology that refers to an invisible background process that the user has no control over, infact directly owes it’s etymology to the paradox of ‘Maxwell’s Demon’.
The Supreme Court & Spectrum Management
Shyam Ponappa's column was published in Organizing India Blogspot on February 14, 2013. Originally published in the Business Standard on February 6, 2013.
Last week, the department of telecommunications initiated another spectrum auction, as directed by the Supreme Court. The auction of 800, 900, and 1800 MHz is to end in March. The winners, if any, must pay in 10 days a third of the amount bid for 1800 MHz, and a quarter for 800 and 900 MHz.
If there are high bids, why should it bode ill for communications services for education, training, health care, commerce, and for future productivity? Because many years must pass for the results to show.
Fallout of auctions: many years away
The expiry of 900 MHz rights starts from December 2014 in Delhi, Mumbai and Kolkata; others will do so only from 2016-2024. The table shows the assignments in each circle, and the market share of revenues in July 2012. The colour of each cell indicates the expiry period.
The first assignments of 900 MHz spectrum to private operators in Delhi, Mumbai and Kolkata expire in November 2014. The second will take up to five years longer, ie, from 2015-2019, eg, Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Vodafone in Tamil Nadu, etc. The third will take even longer. Hence, forcing auctions does not provide a near-term solution.
Technical inputs to judges
Operators with more spectrum or access to more bandwidth can offer higher capacity and data rates at lower cost. Operators try to get as much spectrum as their competitors, because having less spectrum means deploying more cell sites for the same capacity, which means greater capital cost. Hence, in India, pooling and sharing spectrum among operators – providing greater bandwidth dynamically to each operator on demand – will result in better coverage and higher capacity at lower cost. If operators pay only for using the spectrum on demand and do not incur high costs to acquire spectrum rights, they can invest more capital in the “superstructure” of their services, while maintaining lower tariffs. Acting in the public interest, the government should, therefore, keep spectrum costs low for better coverage and services at lower prices. If informed by knowledgeable, unbiased experts, the Supreme Court is likely to accept this conclusion.
The Supreme Court upheld these principles for natural resource allocation on the Presidential Reference. The reference excluded how spectrum should be assigned. A logical extension of these principles requires that spectrum assignment, as for other resources, is for governments to decide.
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Spectrum sharing
Developments in spectrum sharing augur a new, collaborative approach, and a change from exclusive rights apart from unlicensed spectrum for Wi-fi. While spectrum sharing was pioneered by the US and the UK, it is being pursued widely, as in trials in Finland for the European Union, and in Singapore, Japan and Korea in Asia. Shared spectrum standards under development for years are now coming to a head. Standards can lead to large volumes resulting in low prices, as for Wi-fi.
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A standard has already been established for long-range TV white space (TVWS) for rural broadband (802.22). This year, another is expected for short-range TVWS (802.11 af). Finland is conducting a commercial trial covering some 300,000 people. Another Finnish trial will address dynamic access to pooled spectrum, or authorised shared access.
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Large-scale deployments of TVWS are beginning in America, with two commercially licensed TVWS administrators, Spectrum Bridge and Telcordia, about to deploy networks. In the UK, the regulator is likely to issue rules shortly, after the extensive Cambridge White Spaces Consortium trials of 20111.
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In America last August, the Federal Communi- cations Commission (FCC) allowed T-Mobile to test spectrum sharing in the 1755-1780 MHz band with federal agencies using this band. Also, the US Congress directed the National Telecommunications and Information Administration (NTIA), responsible for government and defence spectrum, and the FCC to examine whether additional spectrum could be opened to sharing by unlicensed devices. Last week, the NTIA proposed that unlicensed devices be allowed to operate from 5150 MHz to 5925 MHz. This wide band will facilitate gigabit throughput on a new wireless standard, 802.11 ac. Routers are available for this draft standard, although they are expensive at around $200 (Rs 10,600), because of the low starting volumes.
While it may take a year or more to get lower priced spectrum-sharing devices, the fallout of the auctions and their impact will take very much longer to settle. Further, the “eviction” from 900 MHz of GSM service providers like Bharti and Vodafone through refarming may result in chaos and service deprivation for millions of GSM users, unless they win bids to keep their spectrum. In other words, while trials will take some time to conduct in India to prove that pooling spectrum to share among operators is practicable, they are likely to converge far quicker than the disruption by forcing auctions and the likely litigation, apart from being much more beneficial and orderly.
An approach to corrective action
There is an inspiring example from Bihar of how such issues can be addressed through concerted action by stakeholders. The example is from the districts where the Bill & Melinda Gates Foundation works on mother and child care. Something amazing has apparently happened: the various agencies are collaborating, whereas they worked in silos before. Auxiliary nurse midwives, anganwadi workers and accredited social health activists (ASHA) are co-ordinating their activities to achieve better results. There’s a communications angle, too: five major operators (Airtel, Idea, Tata, Reliance and Vodafone) have partnered with the Foundation and reduced tariffs to make their services affordable.
There is something that stakeholders can do for spectrum (the honourable judges, DoT, the Telecom Regulatory Authority of India, other agencies, operators, and independent experts): they can bring their expertise and discretion to bear for beneficial solutions. These may include short-term steps, like more 2.1 GHz to create a pan-India 3G network instead of the CDMA 19003 MHz, apart from exploring possibilities for more unlicensed bands, and other forms of spectrum sharing.
What's Needed Is User-Centric Design, Not Good Intentions
Shyam Ponappa's column was published in Organizing India Blogspot on January 6, 2013 and in the Business Standard on January 3, 2013.
Things That Work…
Simple aspects of everyday living that actually work in India can leave one wonderstruck. Like the daily newspapers, organised and delivered seamlessly, reasonably early in the day, almost regardless of where one lives provided it’s a city or town. Or the availability of milk, eggs, bread, vegetables, fruit, and whatever else for daily provisions. And this despite the supposed shortcomings of our logistics and organisation in the context of wholesale and retail markets. Some of the revolutions that we’ve lived through in the last two decades include the manifestation of such wonders, like the phenomenal and ubiquitous growth in the supply of dairy and poultry products.
On a different plane, as it were, are the changes in the quality of automobiles and the improvements in India’s roads, although patchy and considerably lagging. Likewise, there have been revolutions in mobile communications and in air travel, disregarding anomalies such as the horror of Mumbai airport on private airlines, with its incompetent cab mafia on arrival, and a disorganised and demeaning crush on departure, squeezing past crowded boarding gates. (This is the state of the commercial capital? Woe betide us — but I digress...) Another source of wonder is the performance of the Indian Railways. Much abused by exploitative politicians, given short shrift on everything from cleanliness and toilets to much else, overloaded by hapless passengers in desperate need of transportation. One can only marvel at these services.
…And Things That Don’t
And yet, there are debilitating areas that seem utterly intractable, like sanitation, water, power supply and communications services for data (apart from voice).
Comparing the state of sanitation or power with the railways, one might say the latter had the benefit of being set up as an integrated system since the 1850s, although deprived in recent times of systematic development and investment, and so reduced to decrepitude. By contrast, sanitation has been playing catch-up on our old, established society, behind the curve for hundreds of years, never having had the advantage of installation as ab initio systems. Open drains are an Indian feature, even in Delhi. A similar situation obtains in power supply, where the contradictions and inequities of piecemeal, encapsulated interventions that tried to address power generation first were followed by sporadic efforts to address transmission and distribution, with realpolitik all the while playing to the users’ self-indulgence of having it all without paying for it. This sense of entitlement without accountability has resulted in the vicious circle of “free power” that leads to no power, annihilating possibilities for improvement.
In communications services for data (broadband), we have a different kind of problem. For one, governments, citizens and activists don’t seem to get it that these services are as essential to infrastructure as energy and transportation. There is no logic to their exclusion, but it has taken the National Telecom Policy of 2012 (NTP-2012) to announce the objective that telecom is part of infrastructure, although the associated benefits, such as lower interest rates, are yet to follow.
User-Centric Systems
The malady with sectors such as power, communications and transport is that solutions seem to be designed without an integrated, end-to-end, goal-oriented perspective favouring users. For instance, otherwise successful initiatives like the Delhi Metro provide services from an islanded “product perspective” that is simply not user-centric in its orientation. This results in insufficient feeder buses, inadequate parking at the Metro stations, a gaggle of disorganised cycle-rickshaws at stations like Mayur Vihar, and so on. Instead of being an unadulterated blessing, a Metro station in the neighbourhood becomes a curse, because user needs are not treated as being central to the delivery of the service. Passengers are left floundering while people in the environs (like the denizens of Mayur Vihar) are left to fend for themselves. There is also the question of capacity and demand. Again, the “product perspective” results in overcrowding and other inconveniences. On the flip side, well-meaning though misguided critics attack attempts to build capacity in anticipation of demand, as was the Metro by proponents of a Bus Rapid Transit system pushing for the latter as a silver bullet instead of as an adjunct.
What Could Have Been, But Isn’t Yet
The Unique Identification Authority of India’s Aadhaar augured a potentially revolutionary electronic enabler. In practice, however, its design has been baffling. A brilliant concept – abstracting a smart identification number from a smart card – has been reduced to an identifier for cash transfers to bank accounts. The question is, why to bank accounts and not to transactions, whether for retail or for services, activated by a mobile phone? Kenya’s M-Pesa was the pioneer for mobile money transfer, subsequently enhanced to include interest earned on virtual accounts.[*] Introduced in India by ICICI Bank with Vodafone in November 2012 and State Bank of India in January 2013, not only would this be much more practicable as the majority of our population doesn’t have bank accounts, it would cost far less, while being much more convenient for users. It would obviate setting up millions of physical micro-accounts at relatively high cost at banks, as well as giving users proximate access to products and services.
Another puzzling aspect is the contradictory, sometimes changing signals about Aadhaar. It is supposedly voluntary, yet reportedly mandatory now for marriage registrations, yet not accepted by banks for account opening, nor by some mobile phone operators, nor for passport applications, nor for driver’s licences. And inexplicably, except as a ruse to garner votes from non-citizens, it is for all residents (who choose to apply?), and although it could include citizenship information, it doesn’t.
It is best to start out right, recognising that we need user-centric, end-to-end systems design and execution, and apply this approach across the board going forward.
Inflation Control Through Structural Reforms
Shyam Ponappa's column was published in Organizing India Blogspot on December 11, 2012. Also read the version published by the Business Standard on December 11, 2012.
It’s ironic that when our economy finally developed a head of steam after many false starts, the sky fell in, as crony deals like the spectrum and land allocation scandals unravelled. A sizeable transformation of upwardly mobile consumption powered the transition from a laggard to global front runner, despite misgovernance. Now, the legacy of poor infrastructure, scams and an “Indian spring” – with many valid anti-corruption demands but impractical solutions – threatens to derail stability, severely damping productive activity. This jeopardises the very basis of our economic momentum: a burgeoning market. Assorted blunders add to the chaos, eg, judicial rulings that contravene the sanctity of contracts, and misguided institutional action, like the Reserve Bank of India ( RBI) trying to force the government towards fiscal responsibility instead of concentrating on providing stability and support for growth. This is aggravated by a government that does not seem to act in the public interest, and a frustrated Opposition that stalls governance and parliamentary proceedings.
The result is a marked inability, or unwillingness, or both, to act rationally and comprehensively on forward-looking, achievement-oriented plans — except to tide over crises, stay in power somehow, and capture the treasury for opportunistic ends. The Empowered Group of Minister’s ( EGoM’s) decision last week to merely reduce the 1800 MHz spectrum reserve price by 30 per cent where there were no bids is a good example. To see why, compare the end results that would best serve our common interests with the consequences of the government’s approach and actions.
What is the effect on inflation of butterfly wings or a hurricane in telecom? To decipher this, consider the drivers of inflation in India, and how such decisions affect them.
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Supply constraints need structural changes in capacity and productivity
Our inflation is driven by increasing fuel and high-technology imports, with rising oil and coal prices and structural constraints on capacity and productivity — aside from expanding demand as purchasing power increases. (There’s also the import of gold, of course, possibly fuelled by lacklustre financial alternatives.) This shows up in a steadily depreciating rupee after August 2011, falling 25 percent from Rs 44 per dollar to Rs 55.
Some economists and foreign exchange advisors consider this as salutary, because India’s goods and services become more competitively priced. A weak currency can be advantageous up to a point, but only if it is exploited through competitive product and service offerings to yield sustainable profit margins. If, however, there is no complementary rise in capacity and productivity to capitalise on market access through the weak rupee, we end as we are today — where the disadvantages of essential imports with a weak currency outweigh the benefits of thin margins in low-productivity labour arbitrage.
Likewise, structural supply constraints remain intractable in the absence of increases in production. Increasing supply involves improving entire process chains: extension services and inputs for agriculture, market organisation and logistics, even changes to cropping methods such as alternatives to flooding rice fields. In other words, deep and sweeping changes in areas where we have not achieved such so far. The requirements for productivity improvement, likewise, are improved infrastructure such as communications services, power supply, storage and delivery including logistics and transportation — again, areas of weakness and inability to deliver that are mired in a policy stalemate, such as in power supply and telecom.
In short, inflation is likely to continue unless supply increases through improvements in production capacity and productivity. Therefore, waiting for inflation to fall before cutting interest rates to stimulate growth is futile. While rate cuts alone are inadequate, as there need to be structural solutions in parallel to build capacity and productivity, it is equally true that without integrated, synchronised initiatives in all these aspects, supply constraints will drive inflation.
Over the last two years, the RBI has shown the inefficacy of raising interest rates to combat inflation. It has only succeeded in slowing growth to a painful rate of under 5.5 per cent, contributing to our social pressures and turmoil. Instead of playing chicken and trying to stare each other down, the government and the RBI need to address growth in tandem, the former by eschewing fiscal irresponsibility and taking bold steps in the public interest, the latter by cutting rates, while introducing real-time systems for selective credit management to minimise misallocation and asset bubbles.
Decisions on spectrum as an example of structural reforms
The EGoM’s decisions on spectrum policy have major implications for productivity and user services for everyone, apart from the operators. Communications services are a basic enabler for effectiveness and efficiency. Increases in supply are facilitated once the infrastructure is in place. For this, we need supportive policies and incentives. Our spectrum allocation approach does not serve these purposes, because the growth in the sector has been largely of voice services and the delivery has been skewed in favour of remunerative urban areas while rural areas have insufficient coverage. This is partly the consequence of allocating narrow bands of spectrum that suffice for voice services but are inadequate for data delivery, and partly because of costs.
Auctions are inappropriate for developing economies like India because (a) they add to infrastructure costs in place of investment in service delivery; and (b) they lead to the fragmentation of spectrum for exclusive use that is contrary to what’s needed for data delivery. Our operators have an average spectrum holding of about 10 MHz, whereas they need at least 2x20 MHz.
Our policy makers seem unaware that new technologies for broadband need much more spectrum. Advanced data services are not possible otherwise, and rural users in nearly two-thirds of India will continue to be deprived of high-speed data access. A radical change in approach by sharing available spectrum will make broadband access much more feasible as well as cost-effective. This is the way to build productivity gains and distributed capacity for supply. The EGoM’s decision has to unleash this sector, instead of merely loosening a revenue-focused stranglehold.
Folly of Mandating Spectrum Auctions
This article by Jayna Kothari was published in the Business Line print edition dated November 24, 2012.
It was reported that as against the expectation of Rs 40,000 crore, the Government received bids for just Rs 9,224 crore. The turnout was so weak that only 18 of the 22 telecom circles received a bid.
The auctions were conducted in fulfilment of the mandate given by the Supreme Court — that for spectrum, auctions were the only equitable manner for allocation.
This was first held by the Supreme Court in its judgment in CPIL and Others vs Union of India and Others (“the 2G case”), where the Court set aside the 122 spectrum licences that were allotted on a first-come-first-served basis, and went so far as to declare that for spectrum and all natural resources, auctions would be the only method for allocation that would fulfil the constitutional requirements of fairness, equality and transparency guaranteed in Article 14.
Contrary Positions
This was a highly problematic declaration — to mandate allocation of spectrum and all natural resources through auction. This observation was taken to Supreme Court once again in a Presidential Reference by the Government. In its September 2012 order on the Presidential Reference, the Supreme Court held that for all other natural resources auction cannot be mandated as the only method, but oddly carved out an exception for spectrum.
It reiterated that for spectrum, auctions shall continue to be the only method for allocation. The judgment held that the observations in the 2G case, “….could not apply beyond the specific case of spectrum, which according to the law declared in the 2G case is to be alienated only by auction and no other method.”
On the other hand, in the Presidential Reference it was held repeatedly by the Court that “…it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-à-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate.” When this was the opinion of the Court, it is hard to understand why auctions were mandated for spectrum.
Justice Kehar’s separate opinion perhaps provides support for an interpretation that auctions were never meant to be the only mandate for all distribution of resources, even for spectrum.
In the Presidential Reference, the Supreme Court did perhaps not want to appear to interfere in its earlier judgment where the 122 licences were set aside. The government also, in an attempt to not have the entire Reference rejected, conceded that it was not seeking an opinion of the court on spectrum allocation and accepted auctions as the only method for allocation, although several core questions in the Reference were concentrated on spectrum.
An Intervention Brief was filed on behalf of the Centre for Internet and Society urging the Court to reconsider its mandate specifically for spectrum, citing examples of spectrum auction failures around the world.
These arguments were not accepted because both the Court and the Government did not want to touch spectrum allocation — it was a delicate issue, and they tiptoed around it. The mandate of the court on auctions, as being the only method for spectrum allocation, stood firmly reinforced.
Alternatives to Auctions
Are auctions, with all their promises of maximisation of revenue, the only mode in the common public interest for allocation of spectrum? Clearly not, going by the recent auction failure which failed due to underbidding, where none of the promised revenue was recovered.
The Constitution in Article 39b mandates that the State shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. Thus, it is clear that the State’s object cannot be merely to maximise revenue but the policy of allocation and distribution of spectrum chosen must be towards securing the common good and keeping the public interest in mind.
There have been several instances worldwide where spectrum auctions have failed. A 2006 Report by Gregory F. Rose and Mark Lloyd, analyses spectrum auctions in the US from 1993 onwards and found that along with problems of overbidding, auctions had also failed due to underbidding in the US. Collectively, these trends of overbidding, pre-emptive bidding and underbidding characteristic only to auctions, sometimes result in disastrous consequences. Thus the argument that auctions maximise revenue, fails in the face of the recent failure of the 2G auctions. This affects the quality of services rolled out to consumers.
The present fiasco shows the danger of mandating any one method, such as auctions, for spectrum allocation. With the Government’s hands tied by the Supreme Court mandate, other possible options for spectrum such as the revenue sharing model, spectrum sharing and the creation of a spectrum commons are now not available. Perhaps these and many other modes of allocation would be in the fulfilment of the common good at a time when auction may not be right.
Courts and Policy
So, where do we go from here? Do we look for an interpretation in these judgments that would give a way out for the government to implement different modes of allocation for spectrum? Or would this give ground to a fresh case for review? These are all possibilities that need to be explored.
It is time we re-look at the role of the courts in policy matters. As far back as in 1995, the Supreme Court, when dealing with airwaves in Secretary, Ministry of Information and Broadcasting and others vs Cricket Association of Bengal and others, held, that, matters of policy are for Parliament to consider and not for courts.
Let us take this principle seriously and learn lessons from this auction failure. Mandating any one mode of allocation as a constitutional mandate can never be in the interest of the larger common good.
The Supreme Court should not have been rigid about allocating spectrum only through auction, given its mixed record the world over.
Super WiFi & Shared Spectrum: A Time to Start Sharing
Shyam Ponappa's article was published in Organizing India Blogspot on November 3, 2012 and earlier in the Business Standard on November 1, 2012.
Amidst our preoccupation with internal problems of misgovernance, we’re losing track of long-term technical developments elsewhere. For instance, there’s a buzz about “Super Wi-Fi” technology in other countries that's missing in India. Yet this could make spectrum abundant, while avoiding the problems of private allocation. Here’s why India with its floundering, beleaguered telecommunications sector should stay abreast.
Super Wi-Fi using TVWS
The technology for unused TV spectrum bands, or TV White Spaces (TVWS), is referred to as “Super Wi-Fi”, although it doesn’t conform to earlier Wi-Fi standards, nor does it use the 2.4 GHz or 5 GHz licence-exempt spectrum. Super Wi-Fi has its own standards (IEEE 802.22 and 802.11 af) using 470-810 MHz, the “digital dividend” after conversion from analogue broadcast TV. It can be used for long-range rural broadband, and to improve short-range coverage. In the US, where it was pioneered, access is available without a licence to devices registered with a proximate geolocational database. Like regular Wi-Fi, Super Wi-Fi expands the use of available spectrum by sharing access.
The US is also permitting exploration of shared use in defence and security bands from 1755-1850 MHz, extending the potential for sharing spectrum.[1]
TVWS trials
Earlier this month, Singapore’s Infocomm Development Authority organised a workshop on TVWS with government and private entities. Organisers included the Institute for Infocomm Research (IR) and other local participants, with presentations from companies from the US, Europe, Asia, and Africa, including Microsoft, Google, Spectrum Bridge, Adaptrum, Ericsson subsidiary Telcordia, Neul, Japan’s NCIT, and so on.[2] Completed or ongoing trials are shown in the diagram below.
Super WiFi Trials
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Source: http://www.microsoft.com/en-us/download/details.aspx?id=29678 |
TVWS and shared spectrum vs refarming
These developments should be of vital interest in India to policy makers, operators and users — not only for TVWS as a shared resource, but as an approach that could be extended to other bands, so that limited spectrum availability doesn’t constrain reasonably priced, high-speed data services. This is a serious limitation in India, unlike in other countries where a few operators have sufficient spectrum; in this sense, the need to share spectrum is much greater in India. For example, sharing could provide a better alternative to refarming of the 900 MHz band, allowing for both 4G and legacy uses.
One difficulty is that dominant operators may oppose sharing because their spectrum holdings provide a competitive advantage: possibly Bharti, Reliance, or an aspirant like Vodafone with access to inexpensive offshore funding. Our collective interests here, however, are likely to be best served not by constraining access through limited, exclusive spectrum, but by making spectrum abundant through sharing, allowing for wide bands (2x20 MHz or 2x40 MHz) that can be aggregated for much higher throughput for data, not just for voice.
For this to happen, (a) the government has to explore spectrum sharing in TVWS as well as in other bands, and (b) stakeholders must be receptive, to co-operate effectively on a workable plan on the lines of revenue sharing after NTP-99, extending to broadband delivery. Everyone will gain: users will get better access, operators can thrive, and the government will collect much more revenue over time. However, dominant operators will need to give up their spectrum for the greater common interest including their own, and for this, they will need compensation — as in production-sharing agreements in the oil sector.
The advantages of spectrum sharing
There are a number of advantages of sharing spectrum. First, and important, it can be non-discriminatory. Second, it avoids private allocation; shared spectrum can be accessed without allocation to private parties. Then there is the fact that capital cost is reduced. There is no deadweight loss from capital tied up in auctions, freeing it all for network development and service delivery. Finally, there’s the general misinformation about auctions, which become academic if spectrum is shared. If spectrum is instead auctioned, the public interest – of users, operators and producers – will be adversely affected. (On producers, while local manufacturing is currently insignificant, there is considerable scope if it is set up right, as telecommunications equipment imports are expected to exceed energy imports in a few years).
The Supreme Court was misinformed about auction fees exceeding revenue-sharing collections, and not informed of its detriments. As evidenced after NTP-99, networks and services proliferated, resulting in much higher collections than auction fees foregone. The Supreme Court’s opinion on the Presidential Reference clarified that auctions were not mandatory for other resources, but not for spectrum, although the reasoning is the same. This needs rectification if spectrum is not shared, because revenue-share collections and tax revenues on profits from more extensive networks and services are likely to far exceed the estimated auction fees of Rs 40,000 crore over three years, quite apart from the major public benefits of access.
Space for constructive decisions
Another requirement for constructive resolution is that policy makers be given the requisite space to frame solutions that are genuinely in the public interest. These solutions can be premised on abundance if it is possible, rather than artificial scarcity and rationing. At present, the Telecom Regulatory Authority of India, the Department of Telecommunications, and other authorities including the Empowered Group of Ministers are under immense pressure to favour aggressive government collections, instead of what might be genuinely beneficial. This is an odd consequence of the government’s increasing loss of credibility, resulting in the rise of populists, “profit haters”, and ignorant-yet-opinionated sceptics. Uninformed attacks on constructive approaches and alternatives need to be presented and seen in a more balanced way by an informed media, press and public, instead of being fuelled by indiscriminate hype.
Also, we have to learn to distinguish between problems of ideological conviction – those that can be solved through political accommodation – and engineering problems, like network design and service delivery at least cost. Resorting to political accommodation for engineering requirements results in malfunction and/or collapse.
A good way to proceed is to ensure sharing solutions are worked out without incurring exorbitant cost — not only for TVWS but also for legacy operations, such as in the 900 MHz band. These can induce new network build-outs for data services in urban as well as underserved rural areas, and broadband service delivery across the country.
[1]. Other bands being considered for sharing in the US are:
1695-1710 MHz & 3550-3650 MHz; Unlicensed: 5350-5470 MHz & 5850-5925 MHz. For details, see: http://news.cnet.com/8301-1035_3-57529959-94/defense-department-pushes-spectrum-sharing-as-solution-to-wireless-crunch/
[2]. http://whitespace.i2r.a-star.edu.sg/TVWS_Workshop/Programme.html
Details on the UK (Cambridge) trials at: http://www.cambridgewireless.co.uk/docs/Cambridge White Spaces Trial - technical findings-with higher res pics.pdf
The Supreme Court Delivers
Published in Organizing India Blogspot on October 11, 2012 and in Business Standard on October 4, 2012.
The Supreme Court’s opinion on the Presidential reference[*]dismissed two preposterous claims. One is that it is beyond the ambit of Parliament and the government to formulate economic policies. The second is that the government must allocate resources only through auctions. It’s like the end of a self-destructive nightmare. True, our heedless kleptocracy as a society of rogue politicians, bureaucrats, defence personnel, and complicit citizens, led to this pass. Even so, the anarchic “destructionism” of these claims is as reprehensible as the kleptocracy they seek to tear down. Fortunately, the Supreme Court opinion rose above the populist clamour.
There’s still a mess to clear. The big picture is that the Supreme Court left its decision on spectrum auctions unaddressed. In matters of detail, some points need resolution based on facts. These are discussed below to dispel prevalent myths.
Myth 1: Auctions maximise govt revenues
"Auctions may be the best way of maximising revenue…": paragraph 116 of the opinion. This contravenes the evidence after the National Telecom Policy -99, that revenue-sharing maximises government revenues as well as public benefits. It also ignores the many auction failures.
Consider the evidence: auction revenues foregone were estimated at under Rs 20,000 crore for 1999-2007, because the sector was mired in losses and was unable to provide services effectively or pay those dues. By comparison, actual collections from revenue-sharing by March 2007 were more than double, at Rs 40,000 crore. Collections by March 2010 were Rs 80,000 crore. Current annual contributions to government revenues may be about Rs 18,000 crore on Adjusted Gross Revenues estimated at Rs 1,40,000 crore, plus taxes, amounting to perhaps Rs 36,000 crore.
Re public benefits, access to telephony grew from a few million users in 1999 to about 700 million today (excluding around 250 million shadow subscriptions).
An ameliorating caveat in paragraph 12 states: "…if the State arrives at the conclusion … that maximum revenue would be earned by auction of the natural resource in question, then that alone would be the process", and this is expanded in paragraph 119:
"Where revenue maximisation is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations."
This has not prevented erroneous conclusions in the press that auctions are the only valid process, notwithstanding that the conditions stipulated in the order, eg, that government’s actions be “fair, reasonable, non-discriminatory”, were always operative, if not adhered to in instances of abuse, as in the 2G scam.
Myth 2: Maximum govt collections are in the public interest
Government collections as the public interest criterion may work for colonial powers extorting revenues from subject states, or possibly for utopias whose political economy is so balanced that such cross-subsidisation works. Developing economies like India presumably can and should seek the welfare of their people. The same populists crusading for maximum government collections accuse governments of corruption and waste. This doesn’t provide a coherent approach to infrastructure, where each capital-intensive sector is configured to deliver a specific service. For instance, the energy sector has to deliver power, while telecommunications must deliver communications services. Neither can be expected to deliver toilets or water. Yet, many well-intentioned people seem to nurture such irrational expectations.
The spectrum and broadband link
The first prerequisite for broadband is high-speed connectivity. The second is reasonably priced services. Our objectives are, therefore: (a) a broadband network, (b) available anywhere (c) at reasonable prices. Our networks are deficient, however, particularly in rural and semi-urban areas. A host of factors are responsible, ranging from limited public sector network rollout, combined with a private sector focus on the most lucrative urban centres, with incentives skewed to voice telephony. Applications need connectivity based on networks that require spectrum.
Problems and solutions
Consider an application like distance education. The need is for networks and services of high quality (followed by the additional requirement of content). What is apparent is that such applications cannot be effective without the connectivity. So we’re back to the need for networks, of fibre where feasible, and wireless elsewhere. This brings us back to the need for spectrum.
Reviewing facts
As regards the facts relating to the 2G judgment deserving review:
The solution the Supreme Court has not considered is that operators need only to use spectrum, for which they can be charged a fee. The evidence of widely available Wi-fi shows that innovation and usage thrive if spectrum is available. The Supreme Court, the government, and the public need to recognise that allocating spectrum to operators is only one way to use spectrum.
There need be no alienation of spectrum at all, if policies allow open access and charge fees. Then, spectrum could be used like any infrastructure network, eg, airports, highways, or rail, on payment of usage charges. The sharing could be in at least two ways. Operators could pool spectrum for collective use. For this, (i) regulations must allow pooling/active facilities sharing, and (ii) operators must agree on terms and procedures. Another way is for mandatory spectrum sharing using the database-driven systems being implemented in the US by Spectrum Bridge and Telcordia. Similar deployments are planned in the UK, the European Union, and in Singapore. The TV white space is shared because this range is available for sharing, and not because other bands cannot be shared.
There are immense societal costs of duplication in capital investments in multiple networks, including the last-mile spectrum access, of operators using dedicated networks with limited passive facilities sharing (such as towers), compared with the benefits of open-access to common networks, if policies changed. These would employ active facilities sharing (equipment, and not just construction) to reduce capital equipment, construction costs, energy for towers, carbon emissions from a more limited physical network, possibly reduced radiation from a rationalised network with small cells with lower-powered equipment, and the multiplier effect on the finite available spectrum.
Enormous productivity benefits could accrue through ICT applications in infrastructure such as smart grids for energy, transportation, education, healthcare, and government services, as well as many commercial applications.
The Supreme Court could also uphold contractual obligations, by discriminating against actual transgressors in the 2G spectrum allocation, while rehabilitating those who operated within the law.
[*].http://supremecourtofindia.nic.in/outtoday/op27092012.pdf
Changing Our Game
Shyam Ponappa's column was originally published in the Business Standard on September 5, 2012 and also posted in Organizing India blogspot.
Consider the handling of irregularities in spectrum allocation and in coal mining rights. Instead of swiftly ring-fencing problem areas where there are allegations of culpability supported by prima facie evidence, then striving for good policies going forward, the ruling coalition and the Opposition are in a war of attrition. What began with the United Progressive Alliance’s turning a blind eye to the spectrum awards has turned into the Bharatiya Janata Party’s heedless flailing to tear down their opponents. Meanwhile, the confusion created by the pronouncements of the Comptroller and Auditor General and previously of the Telecom Regulatory Authority of India has vitiated conditions for constructive reform. Any solution that fails a populist screen is likely to be guillotined in the streets.
Contention versus co-operation
There seems to be quite a contrast between our manifest contentiousness and our apparent friendliness. From our chaotic ways in traffic to dealing with each other and with our surroundings more generally, often, self-centred, short-term opportunism appears to override our better nature. As evidenced in the coalgate stand-off in Parliament, or our inability to establish adequate infrastructure, this cuts across all levels of individuals and groups. The irony is that no one gains, except the perpetrators and supporters of rip-offs and stand-offs. They, too, gain only in the short run, unless they’re not caught out. In the long run, everyone is worse off except the rogues who get away.
How did we get to this self-destructive state, and how might we get out? Insights from game theory could provide some perspective. One stark fact is that our interactions are predominately driven by self-interest that leads to contention, on the lines of a Prisoner’s Dilemma, [1] instead of a co-operative group- or common-interest model like the Stag Hunt.[2]
The two models are described briefly below. For those who want to skip the description, read on after the next two paragraphs.
Prisoner’s Dilemma
Two men attempting a burglary with a weapon, A and B, are caught, with insufficient incriminating evidence for the burglary. They are questioned separately and not allowed to communicate. If both deny the burglary, they escape a 10-year sentence and will be imprisoned for two years for possession of a weapon. A is told separately that if B pleads guilty and A does not, B will get a reduced sentence of four years, while A will get 10. So A has an incentive to confess and get four years, too. A is also told that if he confesses, he can go free, while B gets 10 years. Therefore, the logical choice for A is to confess. The same logic applies to B. So, both confess and get four years, instead of both denying and getting only two years. The logical trap is that acting in one’s self-interest without communication and co-operation leads to a worse position.
Stag Hunt
A group of hunters agree to wait for a stag in their assigned positions. If one sees a hare and shoots at it, the stag takes flight and the group loses out. The group and individuals gain most if individuals stick with their commitment and get the big prize. However, individuals may be tempted to defect by a less risky, smaller pay-off like a hare.
Logical trap: Self-interest leads to contention and lowest equilibrium
In zero-sum games like cricket, tennis or football, where the total pay-off is the same no matter who wins, one participant gains at the expense of another. In most real-world encounters, however, players can improve their outcomes by co-operation and co-ordination. In other words, many everyday situations can be likened to non-zero-sum games, where one party’s win is not necessarily another’s loss. If individuals (or teams/groups) pursue their self-interest without co-operating and co-ordinating with other players, the pattern is like the Prisoner’s Dilemma, and a logical trap leads to a position of lowest equilibrium (the Nash Equilibrium). This position results from each player/group making the best decision that he/she/they can while taking into account the decisions of the others, and no one can act independently without worsening their position.
Co-ordinating better outcomes
By contrast, if players can (a) co-operate and (b) decide through effective co-ordination, everyone gains. Examples are centrally sponsored projects executed in Opposition-run states – for highways or power, for example – or the backing of political parties for India’s 123 Agreement with America on nuclear co-operation.
Can we escape a logical trap and contention by adopting models that elicit co-operation and co-ordination? Game theory suggests that models based on trust and co-ordination like the Stag Hunt work for a big prize (the stag). The question is whether it is possible to move to a co-ordination model and, if so, how to do it. While there are no simple fixes, the University of Vienna’s evolutionary game theory models hold out some promise through providing insights into how patterns of co-operation can spread in populations.[3]
There’s also the long, slow haul of structured education and training in collaborative problem solving. The techniques that need incorporation in our curricula from junior school through higher education, vocational training, and at work, are co-operative problem solving as an approach, and project management as a method. The latter starts with a clear definition of goals and objectives, followed by standard operating procedures covering the gamut of the logic of process flow for tasks, setting milestones/sub-objectives, critical paths, and individual and group responsibilities on timelines.
A second aspect where governments have to step in is institutional design — boldly initiating systems and processes after eliciting convergence in each sector from all stakeholders on sound plans in the public interest. Driven by goal-directed project management, this requires systematic action braving populist pressure and distractions.
These initiatives would significantly improve India’s ability to act in the public interest.
[1].http://bit.ly/Q6IeVp
[2].“The Stag Hunt and the Evolution of Social Structure”, Brian Skyrms, http://bit.ly/TlNJnC
[3].VirtualLabs, Christoph Hauert: http://bit.ly/90W392
Decision Analysis for Interest Rates - II
Shyam Ponappa's column was published in the Business Standard on August 2, 2012
A UN report last June stated: “…the increasing independence of central banks, tighter monetary policy, and inflation-targeting regimes, unnecessarily high — and sometimes, pro-cyclical --policy interest rates were probably one of the most important contributors to the worldwide slowdown in growth...”1 The economy is slowly grinding down as high interest takes its toll. While fear of inflation is understandable, demand-side resolve will not help our supply problems.
Surely monetarists also see growth as being dangerously low for India, with its large, explosive, not-so-well-served, -educated, nor -prosperous population? Focusing on anything except growth as the highest priority is a mistake we cannot afford. Everything else depends on it, whether it is feeding people, clothing them, providing livelihood, sanitation, shelter, electricity, social stability, even law and order.
My previous column (Business Standard, July 5, 2012) explained how lower interest rates could improve growth by increasing net profits. The purpose was to demonstrate the application of decision analysis through simulation, using financial process-flow logic. The question addressed was: what happens if interest rates are lowered in the present circumstances? Answer: profits would rise, reviving growth through higher income, employee compensation and taxes, with more savings and investment.
Consider what might have happened. In March 2012, net profit was 8.8 per cent of total revenues for 2,840 companies.2 This would have risen to 11 per cent by June if interest costs fell 20 per cent per the example. With some reduction in raw-material costs, net profit could have risen further.
What actually happened? The RBI held firm, and net profit stayed about the same at 9.1 per cent (+0.3) for the quarter ended June (711 companies reporting by July 30, roughly 25 per cent). This was despite revenues dropping by about 3 per cent, higher taxes (0.4 per cent), and interest costs rising from 11.1 per cent in March to 17.3 per cent, as expenses dropped by 7 per cent with big cuts in inventories.
Commentary
Some issues in responses to the earlier article are outlined below, assuming an understanding of finance and awareness of economic history.
1. Straw-man arguments: Zero rate or 100 per cent debt
Some readers asked, why not a zero rate? Answer: misallocation and lower productivity. Others asked, why not 100 per cent debt? Answer: bankruptcy risk. Still others suggested that providing support to business was not the only requirement. This is addressed above in growth being the highest priority. Reducing rates from current levels does not mean dropping to zero, nor ignoring prudential norms for debt/equity. Our goal is presumably sustained growth, not volatility with risk. Near-zero rates are known to create problems through misallocation, asset bubbles, and reduced productivity, e.g., in Japan, the USA, and the UK. However, Switzerland used low rates to tackle an overvalued currency in the late 1970s.
Low rates induce a propensity to higher debt. This is because of a tendency to misconstrue the Modigliani Miller theorem, viz., that a firm is valued by the earning power of its assets and their risk unrelated to capital structure, to mean that high leverage has no adverse consequences. The lower the rates, the more the temptation to leverage, and the greater the risks.
2. The “correct” interest rate
If rates were cut, what figure would be “correct”? Instead of a search for the perfect mathematical step, it is much more important to act in the right direction. Simulation helps to establish an appropriate range. Within that range, the rate is less important than that it’s a significant cut in these circumstances (1 per cent?), while not being too drastic. This is not a theoretical search for a perfect rate, but a pragmatic step to induce growth, for India to regain its investment destination status.
The idea of a closed-form point estimate that is “correct” is misplaced, because correctness depends on circumstances, timing, and cultural/emotional/political responses, i.e., animal spirits. Simulation helps in exploring the range of probable outcomes for causal factors. Each factor has its own probability distribution, sometimes contingent on others (a Markov chain), yielding a range of probable outcomes, and not a point estimate.
3. The RBI intended to slow growth
One view is that the RBI slowed growth in the hope of containing inflation. Therefore, criticising it for achieving the intended result serves no purpose. Surely the intention was not to slow to this extent?
Other critical issues: Processes for growth
Apart from lower interest rates, certain fundamental processes also need to be addressed with undiluted focus. These are goal setting, prioritisation, and coordination.
a) Goal setting: Capital requirements
India needs capital to grow, from both domestic and foreign investors. Paradoxically, growth is a critical prerequisite. If this is seen as greed or sophistry, let’s devise a better plan.
b) Prioritisation: Growth is the first requirement, as everything else depends on it.
c) Coordination: Effective coordination is the key to achieving growth. This is exemplified by the current state of electricity distribution, despite the addition of 20,000 Mw of capacity last financial year, mostly stranded, with the supply of coal supposedly being addressed, but without positive results.
Real interest rates (and growth)
In addressing these processes, one problem is conflicting information, for example on real interest rates. Does India have negative rates as some claim? The chart above shows World Bank data until 2011, with India’s generally higher rates.
Food inflation (and growth)
Food inflation is constraining interest rate cuts. The RBI’s statements and some commentators’ remarks lamenting that food inflation prevents rate cuts epitomise a misapprehension about supply and demand that sorely needs resolution. A recent study covering four states (Bihar, Punjab, Uttar Pradesh, West Bengal) suggests that rainfall drives agricultural output in Uttar Pradesh and West Bengal.[3]
The report concludes that supply side problems primarily affect food prices, not fluctuations in demand. Add supply constraints from inadequate infrastructure and distribution processes, and it is clear that high interest rates cannot possibly solve the problem of food inflation.
[1].“The Scorecard on Development, 1960-2010: Closing the Gap?”, Mark Weisbrot and Rebecca Ray, June 2011: http://bit.ly/kkP83I
[2].http://bit.ly/JytL69
[3]. “The Curious Case of Indian Agriculture”, Nilanjan Banik and Basudeb Biswas, April 28, 2012: http://bit.ly/PZLztp
Use of DPI Technology by ISPs — Response by the Department of Telecommunications
We raised the following questions with the Department of Telecommunications (DoT) and the Telecom Regulatory Authority of India (TRAI):
- Do ISP's in India (public and private) use DPI technology? Please provide details of all ISPs known to use this technology.
- Please provide copies of documents relating to rules and regulations and license agreements for use of DPI (infrastructure and processes) by ISPs in India.
- What are the purposes for which this technology is used in India?
- Please provide details and copies of documents relating to regulation of network traffic management by ISPs in India.
DoT has responded to this application, while the response from the TRAI is awaited.
According to the DoT response to the RTI "as per the present License for provision of Internet Services, based on Internet Guidelines dated 24/08/2007, there is no direction/reference for DPI as mentioned in your RTI application."
The following questions were asked of BSNL/ MTNL:
- As a national Internet service Provider, does BSNL deploy DPI on any Internet network in India? If so, please provide details of equipment used, including, but not limited to
- Hardware and software
- Details of purchase (manufacturer, date, price)
- Technical specifications
- Please provide details of the nature of information obtained through DPI of Internet networks and clear details of what purpose such information is used for.
- Please provide details and copy of documents pertaining to traffic management and traffic shaping policies followed by BSNL.
MTNL has responded to the application, while the response from BSNL is awaited. In response to the above questions, MTNL sent the following reply:
- MTNL does not do any DPI.
a. 1(1), 1(2), 1(3): not applicable in view of reply 1 above - Not applicable in view of reply 1 above.
- Not applicable in view of reply 1 above.
While MTNL has denied the deployment of DPI technology in their networks, it is interesting to note that they have avoided providing details of their traffic management policies.
For a scanned version of the response we got from the Department of Telecommunications, click here.
Decision Analysis for Interest Rates
Shyam Ponappa's article was published in the Business Standard on July 5, 2012.
Several analysts applauded the Reserve Bank of India’s (RBI’s) resisting cutting interest rates despite declining growth. Some quoted monetary theory to justify this; others praised the regulator’s standing-up-to-government stance. Meanwhile, the nation groaned, waiting for relief. Is this just the vaunted animal spirits in reverse, that perceive a half-full glass as half-empty? Or is there substance to the frustration of those who function in the real-world marketplace, who deliver products or services and expect rational solutions?
Simulation using financial logic
There is a systematic approach to evaluating alternatives for the cost of money and possible outcomes, using decision analysis and the process-flow logic of finance. Figure 1 shows the quarterly results for 2,840 companies from their income statements on March 31, 2012. The first column shows the amount for
each item in crores; the second shows each item as a percentage of total revenues including other income. Consider the expense in the interest and net profit columns, shown in the second column as 11.1 per cent and 8.8 per cent of total revenues.
Total revenues for these companies grew about nine per cent from December 2011 to March 2012. Assume conditions remained the same for the next quarter to June 2012, except for one item: the RBI cuts the repo rate by 20 per cent, so interest expense amounts to 8.9 per cent. Revenues grow as in the previous quarter – because conditions are turbid, to say the least – by nine per cent, and the only change in costs is the drop in interest expense to 8.9 per cent.
The results would look as in Figure 2 for June 2012 (ignoring the change in tax
Figure 2
for simplicity). Note net profit, which was at 8.8 per cent in March 2012, increases to 11 per cent in June 2012. If nothing else changes for the year, no costs, no animal spirits, net profit in succeeding quarters will be 11 per cent instead of 8.8 per cent of revenues.
Now consider the further effects of the ongoing drop in raw material prices. If raw material costs were to reduce so that expenses fell by, say, five per cent, total expenses would fall from 75.2 per cent to 71.5 per cent of revenues, and net profit would grow from 11 per cent to 14.8 per cent of revenues. In other words, in one quarter, this reduction in interest cost could take net profit from 8.8 per cent to 11 per cent — and, if it were possible to capture the drop in input prices, even to 14.8 per cent of revenues. Figure 3 shows what June 2012 would then look like.
Figure 3
This example involves no hypotheses or theories; just arithmetic. The reality is likely to be different, because there will be changes like the extent of pass-through of a cut in RBI rates, inflation, the extent of labour troubles, seasonal effects on sectors that affect buying, production and so on. The purpose of this example is to show that a reduction in borrowing costs would yield higher profits. These profits could enable companies to muster cash and borrowings to capitalise on falling raw material prices, as they have in the past. To the extent that they can do this, net profits would increase, resulting in increased GDP because of increases in corporate and proprietary income, employee compensation, as well as higher tax collections and increased investment.
Global factors
Another level of complexity arises from global responses to these developments in India, assuming for the moment there are no major negative global events. How are investors likely to respond to higher growth in India in the context of problems with stranded power generation, choked logistics, resurgent populist activism with a weak Centre and assertive states, and uncertain telecommunications reforms? Will a reduction in oil prices translate to lower or higher inflows from foreign institutional investors? And so on. The denouement of developments in Greece, Spain and Italy may affect India significantly. Likewise, developments in America will also have significant effects. The point to consider, quite simply, is this: if profits increase, investment is also likely to increase. Would we rather be dealing with these circumstances from a position of relative strength, or of comparative weakness?
Financial logic: Models
It is not clear whether analysts and practitioners, including the RBI, used planning models based on the process flow of financial logic to test their assertions. For instance, for realistic scenarios based on recent circumstances, what are the likely outcomes of increasing interest rates, holding them steady, or, as in the example above, reducing them? Or are such models considered too simplistic? The logic can be evaluated in the process flow, and the possibilities laid out in a decision tree with likely outcomes. Probabilistic forecasts can be input as distributions linked to probabilities to analyse probability-weighted outcomes instead of simplistic point estimates, before deciding on the appropriate action.
This process of decision analysis can be usefully applied not only for interest rates, but also for resolving problematic issues in electricity supply, or telecommunications, spectrum and broadband policies. A second element that is useful for result-oriented decision making in intractable areas like power supply and telecommunications is participative problem solving, as in the process that led to the successful breakthrough of the New Telecom Policy, 1999. If the government and stakeholders adopt this approach, prospects of a higher growth trend may indeed be realised, despite the doubts being expressed about higher sustainable levels.
Growth, India's Highest Priority
“…people are starting to question the long-term Indian story… For the time being, people are just giving up on it” — a Moody’s analyst.
With growth in the fourth quarter of 2011-12 at 5.3 per cent, India’s economy is on the brink. If higher growth is not addressed as a priority, we will all lose enormous upside potential. We cannot afford disunity on this issue — neither the government’s arbitrary action nor inaction, nor stalling by the United Progressive Alliance allies, nor the irresponsibility of the Opposition. Continuing discord carries the risk of precipitating our own Greek tragedy.
We need to agree on what the biggest problems are, and how to remedy them. Here is the case for focusing on growth above all, and acting to enable it.
Symptom: Rupee Depreciation
The depreciation of the rupee is the acute symptom. Why has the rupee fallen so precipitously, and why might it get worse? Because of foreign currency outflows. Why the outflows? Declining corporate profits, as explained below.
The drop of over 27 per cent against the dollar since August 2011 is crushing for companies with foreign currency convertible bonds (FCCBs) and external commercial borrowings (ECBs). Estimates of redemptions this year range from $5.5 billion to $7 billion. With growing euro problems and global risk aversion, renewing external debt is possible only for the strongest companies. This problem has to be dealt with, despite the temptation to say, “Let them stew”. That works only if we are not all cooking in the same pot — which we are.
Some counter that an overvalued rupee needed depreciation to help exports. In depressed markets, growing market share is less likely. Some object to actions that protect companies with ECBs as “socialising losses”. While policies can have multiple effects, it is net benefits that matter most: whether losses in energy imports outweigh the export advantage in a global downturn, or companies that escaped high domestic interest rates will create more turmoil if they fail compared with bailing them out. These judgement calls need the objective use (to the extent possible) of financial models, balancing the resistance to creating moral hazard.
Declining Profits
We now face a problem of shrinking profits. With weakening global cues, a slowing economy, and lower capital flows, everyone – policy makers, enterprises and citizens – must seek to alleviate what will otherwise be a slow, difficult recovery. Collectively, concerted efforts are needed to improve profits.
High Interest Costs
Lower revenue growth in 2011-12 with higher raw material costs resulted in lower profit margins. In the fourth quarter, higher interest costs were 31 per cent of net profits, compared with 22 per cent for the previous quarter for 1,066 companies, excluding banks and financial entities. Interest costs for over 2,000 companies rose 38 per cent, following increases in the previous three quarters of 42-50 per cent. High interest costs and an unreconstructed budget triggered a downward spiral in profits. This was made worse by negative sentiment because of government ineffectiveness and capriciousness, epitomised by the Vodafone tax case: attempts to seize what the Supreme Court had annulled.
Foreign outflows triggered by decreasing profits were aggravated by a declining rupee — because of high imports with rising prices, particularly for oil and gold, but also for coal imports, because of local supply shortfalls. The consequent fall in stock prices and unstable tax policies combined to reinforce outflows, increasing downward pressure on the rupee.
There were, of course, other reasons:
- Mismatches between growing demand and constrained supply, leading to persistent inflation. The Reserve Bank of India’s (RBI’s) raising interest rates to tackle this has only compounded the problem of reduced profits and investments, made worse by central and state government failures to augment supply.
- Capriciousness in policies which, like Brazil’s missteps of the ’70s, began with distributing entitlements before assuring growth. Capriciousness now manifests in decisions like the Vodafone tax case.
- Paralysis/incapacity, typified by the failure in the coal supply chain to power plants, unviable electricity distribution agreements and tariffs, new power plants running far below capacity, the unwillingness to take constructive decisions on spectrum and telecom policies fearing populist reactions, or the rollback of foreign direct investment in retail. This is compounded by the rise of populists, many of whom act as if good intentions obviate the need for domain knowledge, competence, organisation, or even simple arithmetic.
Solutions
Two salutary steps are possible immediately.
- First, cut interest rates, although economists are divided on the merits. What should the RBI do? A big rate cut – 150-200 basis points – can improve profits, capitalising on softening input costs, as well as boost sentiments. Interest as a percentage of profits must be reduced, and sentiment improved to enable increasing investment. Interest rate increases as some suggest, on the other hand, will deplete profits further, accentuating lower growth and exacerbating the decline.
- Second, the government should signal an immediate end to arbitrary tax moves.
Thereafter, systematic steps are needed to address difficult issues like telecom policy, fuel supplies and land acquisition. Telecom and spectrum reforms are overdue, as are energy reforms addressing the fuel supply-power generation and distribution-sustainable tariffs chain. Then there are all the structural elements affecting productivity – a big mouthful – that can only be addressed in phases.
In terms of sequence, the next significant effort could focus on the poster boy in trouble, the telecom sector. The empowered group of ministers (EGoM) can decisively abandon short-term government revenues in favour of user benefits, leading in time to even more government revenues. A persuasive case needs to be made, for example, to those who favour goals other than functional objectives — like government collections for purposes extraneous to the sector, such as for sanitation or for food. Such confusion in objectives arises from misinformation or incorrect reasoning, because (a) the primary objectives of a sector are its functional purposes; and (b) government collections increase with the prosperity of enterprises paying reasonable taxes. For this iconic sector, including its spectrum and broadband issues, the EGoM should be made aware of the recent report to the US President’s Council of Advisors on Science and Technology on sharing spectrum.*
"Presidential Panel Urges More Flexible Use of Spectrum", John Markoff, May 25, 2012, The New York Times: http://tinyurl.com/6m8hx72
Read the original here
National Telecom Policy 2012 — Issues and Concerns
The National Telecom Policy, 2012 (NTP’ 12) was approved by the Cabinet on May 31, 2012.[1] The primary objective of the Policy is to provide reliable and affordable converged telecommunication services, across the whole nation. It aims at transforming mobile devices into instruments of social empowerment by implementing e-governance and m-governance, and has emphasized on security of networks and secure services to consumers.
The Positives
- The Policy has exempted additional frequency bands from licensing for public use. It aims to provide small chunks of frequency bands for the purpose of research and development of indigenous technologies and products. NTP’12 further seeks to promote use of white spaces with low power devices, without causing harmful interference to the licensed applications in specific frequency bands by deployment of software defined radios, cognitive radios, etc.
- On the issue of transforming mobile devices into instruments of social empowerment, the Policy aims to encourage development of mobile phones based on open platform standards.
- The Policy also wishes to implement measures to include disputes between consumers and telecom service providers within the jurisdiction of Consumer Forums.
- The NTP '12 will allow spectrum pooling, sharing and later trading of spectrum under the supervision of appropriate regulatory authority. The Policy also dictates regular spectrum audit to ensure efficient and optimum use of spectrum.
Despite the above mentioned positives, the NTP’ 12 has certain issues.
Access to Telecom Services including Broadband
The Policy has ambitious goals with respect to telecommunication coverage throughout India. It aims to increase the teledensity in rural and remote areas from 39 to 70 in the next five years and 100 by the year 2020. In case of broadband, it wishes to provide affordable and reliable broadband-on-demand by 2015 and 175 million broadband connections in the next two years at a minimum speed of 2 Mbps and 600 million by 2020. However, the policy fails to mention any framework for implementation of such policy mandate. Formerly, the National Broadband Plan, 2004 [2] aimed at providing broadband (minimum speed of 256 Kbps) to 20 million households by 2010 but only 13 million households have broadband connectivity as on May, 2012. The target which the policy wishes to achieve is commendable. But the previous experience with such policy implementation could have been taken into consideration before setting such targets.
Research and Development (R&D), Manufacture and Standards
The World Trade Organization (WTO) mandates national treatment wherein a member country cannot discriminate between domestic and foreign products.[3] The Draft Policy ran into conflicts with this particular WTO obligation with regards to giving preference to domestically manufactured telecom products and equipments. However, this has been revised and now the policy only seeks to prefer indigenous telecom equipment in case of government and place where national security is involved. This is a good move as it provides better security in case of confidential government communication. However, it fails to give any directive as to production of such secure telecom equipment as well as security standards of such equipment. Moreover, we don’t have any uniform security standards in place.[4]
The NTP’12 aims at transforming India into a ‘global manufacturing hub’. However, it neither mentions deadlines for achieving such goals nor it lays down any framework to achieve such goals.
Unified Licensing Regime
The NTP’12 aims at moving towards unified licensing regime. Under unified licence, the licensee has the right to provide converged services. But if a service provider wishes to render any specific service only (for example internet service providers), then such service provider does not have any option but to procure licence for converged services i.e. a unified licence. In order to implement such unified licensing regime, the Policy needs to further clarify the terms and conditions of such licence.[5] A better approach would be to provide unified licence as well as licence for specific independent services, so that a service provider has the option to provide converged services or selected services
Concerns regarding Security and Privacy of the Consumers
Implementation of voice over protocol (VoIP) is one of the policy directives of NTP ’12. VoIP can be used for anonymous communication which poses a threat to security of the State. The Policy has been criticised by the Home Ministry on this ground and the Ministry asked the Department of Telecom to consult with them before implementing such policy.
The Policy wants to mandate and enforce telecom service providers to take adequate measures to ensure security of the communication sent or received through the networks. The Policy dictates that this will be achieved through ‘contemporary security standards’. The term ‘contemporary security standards’ has not been defined in the Policy. The Policy might have referred to any of the International Telecommunication Union (ITU) approved standards to define 'contemporary security standards'.
Another concern with security and privacy is that the Policy mentions that Unique Identification (UID) will become an integral part of electronic authentication framework. UID has been widely criticised on various grounds including privacy. It is important to note that UID can be easily misused, and therefore it should be avoided for authentication purposes.
Missed Opportunities
NTP’12 does not include any policy mandate for providing accessibility for person with disabilities. The Policy should mandate implementation of systems that would enable better accessibility for persons with disabilities. This could have included formulation of a Code of good practice for manufactures and service providers, conduct surveys and gather statistics on use of telecommunication services by persons with disabilities, etc.
Conclusion
The NTP’12 is an ambitious policy, it would be a daunting task for the Government of India to fulfill the objectives within the deadline prescribed by it.
Notes
[1].See New Telecom Policy, Department of Telecom, Ministry of Communications & IT available at http://tinyurl.com/cwqf3br, last accessed on June 30, 2012.
[2].See the Broadband Policy, 2004, Ministry of Communications & IT, Department of Telecommunications http://tinyurl.com/7e52tbq, last accessed on June 29, 2012.
[3]See generally, National Treatment available at http://tinyurl.com/yg2kkc5
[4].See Elonnai Hickok, Encryption Standards and Practices at http://tinyurl.com/6prhl4q, last accessed on June 30, 2012.
[5].Shalini Singh, Policy promises broadband for all with minimum download speed of 2 megabits, The Hindu, June 1, 2012 available at http://tinyurl.com/bqc6sgr, last accessed on June 30, 2012.
Unlicensed Spectrum Policy Brief for Government of India
Executive Summary
The aim of this policy brief is to recommend unlicensed spectrum policy to the Indian Government based on recent developments in wireless technology, community needs and international best practices. We seek to demonstrate the need for and importance of unlicensed spectrum as a medium for inexpensive connectivity in rural/remote areas and source of innovation by serving as a barrier-free and cost-effective platform for testing and implementing of new technologies.
The specific frequency bands that we request for unlicensing are: 433-434 MHz, 902-928 MHz, 1880-1900 MHz, 2483-2500 MHz, 5150-5350 MHz, and 5725-5775 MHz. These demands reflect the widespread market adoption in countries where these bands have already become unlicensed.
Interference concerns to licensed users, which are the predominant reason for the limited allocation of unlicensed spectrum, are greatly diminished. Interference-free spectrum use by multiple operators is enabled by the short-range, low-power nature of most of the technologies operating in these spectrum bands, as well as innovative techniques that facilitate spectrum sharing.
Technological advancements such as Wireless Local Area Network (WLAN), Ultra Wide Band (UWB), Radio Frequency Identification (RFID), Near -Field Communication (NFC) systems, and others have demonstrated that when an opportunity for cost-efficient and flexible spectrum usage is presented in the form of unlicensed spectrum, the market is likely to respond through innovation and expansion.
The value of unlicensed spectrum in bridging the digital divide has been demonstrated through community wireless networking projects as well as inexpensive ITES (IT enabled services) operating on unlicensed spectrum that have been created to spread connectivity to digitally-marginalized areas. As demonstrated by numerous case studies, such networks administer e-learning, e-commerce, telemedicine, e-agriculture, and many other initiatives that lead to equitable social and economic growth, making unlicensed spectrum a “public good”.
The International Telecommunication Union (ITU), European Union telecom regulatory bodies, as well as leading state telecom policy makers and regulators such as the FCC (U.S. Federal Communications Commission) and OFCOM (UK Office of Communications) have recognized that the optimal use of radio spectrum is dependent on flexible spectrum management policies and the multi-time sharing of this precious resource. Of late, the relevance of unlicensed spectrum is being recognized by policy makers in India as well. This is evident from the National Telecom Policy 2012, as well as recent remarks on the subject made by senior government officials.
Download the Unlicensed Spectrum Policy brief for Government of India below:
- PDF Document [519 Kb]
- Word File [124 Kb]
Report on the 3rd IJLT-CIS Lecture Series on Telecom Laws and Regulation
Lecture by Rohan Samarajiva[1]
Mr. Samarajiva’s lecture was divided into two sessions. In the first session, he introduced the ICT policy and regulation think tank, LIRNEasia, which was founded by him and also described the various capacity-building measures that it regularly undertakes. He went on to discuss various aspects of the policy-making process with the participants, including how they could engage with the same. He also introduced the CPRSouth conference – a capacity building initiative to develop young ICT scholars in the Asia-Pacific region. With the 2013 edition of conference scheduled to take place in Mysore, Karnataka, Mr. Samarajiva invited
all present to participate and contribute towards making it a success. Towards the end of the session, Mr. Samarajiva also fielded questions from students on different aspects of engagement with the policy making process in areas of telecom, infrastructure and egovernance projects.
A short break for tea followed, during which students got the opportunity to interact with Mr.Samarajiva in a more informal setting. The range of topics discussed during the break stretched from nuclear power and its pitfalls to diverse aspects of intellectual property and environmental law.
The second session of Mr. Samarajiva’s lecture dealt with ‘Tariff Regulation in India and Abroad’. The lecture began with Mr. Samarajiva showing students some astonishing facts regarding levels of awareness about internet penetration into the lives of those living in the Asia-Pacific. The statistics showed fundamental misconceptions regarding the internet and a need for greater awareness programs to ensure knowledge-parity across different strata of society.
The discussion about ‘Tariff Regulation’ itself began with an introduction to the theory of regulation itself. Delving into his rich experience, Mr. Samarajiva spoke about the differing approaches to regulation that exists across the Asia-Pacific region. Citing examples from Sri Lanka, Myanmar, Bhutan and India, he explained how a tariff regulator’s success is typically measured and remarked that the Indian regulator’s approach of forbearance has been linked to its low tariff rates - one of the cheapest mobile call and broadband rates in the world. In this regard, he stressed on the characteristics a regulator should seek to ensure the following attributes in a market: information symmetry, lack of barriers to entry/exit, the multiplicity of buyers and sellers, the presence of substitutable products and rational market players. Explaining how concentration of market power can lead to consumer exploitation, he proceeded to address the various regulatory tools used to ensure a more equitable distribution of market power. These include: rate of return regulation, price cap regulation and benchmark regulation.
Taking India’s situation specifically, Mr. Samarajiva showed students various statistics including data from the Nokia Total Cost of Ownership Study 2011, data concerning fixed and mobile broadband prices in South East Asia and South Asia as well the Tariff Regulation scores from the 2011 Telecom Policy and Regulatory Environment Survey. Furthermore, he introduced students to the Herfindahl-Hirschman Index (HHI) – a mathematical tool that serves as an indicator of prevailing levels of competition in a particular market. Using these inputs, he showed how the extremely high levels of circle-level as well as overall competition in the Indian telecom segment coupled with a policy of regulatory forbearance had ensured India’s mobile call and broadband rates were the one of the lowest in the region as well as the world. This, he posited, was the primary reason for the policy of forbearance being such a success in India. This peculiar market structure is also the reason why a similar approach might not work in every country that is similar demographically and location-wise.
Drawing upon his personal experience as a consultant on the regulatory policy for the Maldives, which has a duopoly in the telecom market, Mr. Samarajiva outlined the relevant factors in formation of a regulatory policy in such a market. The regulator should be interested in incentivising efficiency, while also keeping tariffs at a level that allows operators to make sufficient returns. The critical factor in the computation of tariffs is the cost incurred by the telecom company in providing these services. The ease of regulation and procuring licenses and approvals often proves to be a decisive factor, and a potential entry barrier to the market. After highlighting these issues, Mr. Samarajiva explained how the optimal solution for the regulator was to take a slightly hands-off approach and provide for a band, within which service providers would fix the tariff. This form of asymmetric regulation would serve the dual purposes of regulating unfair competition as well as protecting consumer interests. The benchmark for banded forbearance would be fixed on a comparison of the tariffs and market conditions. Mr. Samarajiva discussed the different relevant factors for setting the benchmark, including selection of mobile services basket and comparison with neighbouring countries, or demographic peers. For any tariff to be fixed outside the bounds of the band, approval would have to be taken from the regulator, and in the resulting inquiry the regulator would rely upon the commonly used economic indicators and justifications to determine if the same should be permitted.
With the vote of thanks, the inaugural lecture of the 3rd IJLT-CIS Lecture Series 2012 on Telecom Law and Regulation in India drew to a close. The slide set used during the presentation may be accessed here.
[1].Rohan Samarajiva is founding Chair and CEO of LIRNEasia, an ICT policy and regulation think tank active across 12 emerging Asian economies. He has served in numerous roles including as the Director General of Telecommunications in Sri Lanka (1998-99), a founder director of the ICT Agency of Sri Lanka (2003-05), Honorary Professor at the University of Moratuwa in Sri Lanka (2003-04), Visiting Professor of Economics of Infrastructures at the Delft University of Technology in the Netherlands (2000-03) and Associate Professor of Communication and Public Policy at the Ohio State University in the US (1987-2000). Samarajiva was Policy Advisor to the Ministry of Post and Telecom in Bangladesh (2007-09).
The Coming Telecom Monopoly
Shyam Ponappa's column was published in the Business Standard on May 3, 2012
The Telecom Regulatory Authority of India, or Trai, has delivered a stunning blow to the telecom sector in the form of its spectrum pricing and refarming recommendations. The sector was already reeling from scandals and misgovernance, and staggered by a confused Supreme Court judgment based on inappropriate assumptions (for details, see “Time for a review”, March 1, 2012, and “Open access is the future,” March 4, 2012). This will cripple an erstwhile sunrise sector that drove (and still can) India’s prosperity through productivity, enabling many factors to converge positively — such as its economic momentum, enterprise, resilience and, most important, a demographic bulge that could become a blessing or a curse. This convergence was (and is) possible because of the enabling ability of telecom and broadband to provide access to education, vocational training and continuing education; health care and other public services; and commerce, including the delivery of individual output, within easy reach. All this is stalled, as we deliberately disembowel ourselves, as it were.
If Trai’s recommendations are implemented, they will ensure that a lone survivor dominates the sector, annihilating all significant competitors – Bharti, Vodafone, Idea, Tata, and newcomers like Telenor and Sistema – through their having to pay exorbitant fees just to keep their current business going, even without expansion. That is, provided the lawsuits that are likely to follow don’t obliterate everything for the next 10 years.
Are these setbacks happenstance, heaven-sent, or acts of man? Analysing the components shows that much is attributable to the machinations of men, although rendered by different individuals or groups under varying compulsions. The afflictions that began with cronyism and misgovernance have been aggravated by a judgment based on misapprehensions regarding: (a) spectrum technology; (b) the economics of auctions and; (c) competition in network economies.
In trying to get at the corrupt nexus of corporations, politicians, bureaucrats, and just plain crooked people, indiscriminate zealotry is destroying legitimate enterprise. The judgment lumps the guilty with the circumstantially proximate. Coupled with defining auctions as best for the public interest, this set the stage for what has followed. The furore over corruption and the Anna Hazare movement ensure that any objective recommendation would come under fire, with a mobocracy baying for revenge.
Is being deprived of ubiquitous, reasonably-priced broadband so devastating? Yes, because of broadband’s great potential in India’s vastness for enabling people at relatively low cost, compared with, say, fixing energy supply, or sanitation and water, or roads, or growing food. All these are necessary; but broadband is much easier to achieve, at lower cost, and would bring it all more easily within our grasp, especially in rural areas.
Performance
Some question the beneficial effect of revenue sharing from the National Telecom Policy, 1999, (NTP-99) suggesting the sector might have done as well or better without the change. Pakistan is cited as an example for growth with auctions. Consider the performance of the sector in both countries.
Chart 1 - Mobile Subscriptions (Millions) 2003-2010
(The third line shows India’s numbers reduced to 70 per cent, reflecting an estimate of live subscriptions.)
Chart 2 shows the percentage of population served. Pakistan’s coverage grew
Chart 2: Percent Population Covered
Sources: India – TRAI; PIB; http://en.wikipedia.org/wiki/Telecommunications_Statistics_in_India
Pakistan - http://www.pta.gov.pk/index.php
rapidly until about 60 per cent, then tapered off. India started more gradually before accelerating to 60 per cent a couple of years later, and kept going. In March 2011, both were around 70 per cent. At the end of December 2011, India was at 76.86 per cent.
However, there are two major differences. One is the scale of India’s operations. Sheer magnitude makes for much greater complexity, and the achievement is therefore remarkable. The second is the significantly higher government levies in India. India’s telecom sector is perhaps the world’s most heavily burdened, with government collections higher than in Pakistan by 15 to 24 per cent of revenues.* (Compared with China,where government charges are only 3.5 per cent, India’s levies are even more grossly out of line.) Had Indian enterprises not had this burden, it’s conceivable they might have had the capacity and stomach to effectively address rural coverage, especially with the right incentives.
Achieving Ubiquitous Broadband
Now consider what needs doing for countrywide access to broadband, and what odds have to be overcome. First, there’s the addition necessary to rural and semi-urban networks, where almost three times the existing coverage is needed. Much of this needs wireless access. This is why spectrum pricing critically affects outcomes. Many people in India harp on a litany of sunk-costs-not-affecting-tariffs, oblivious to the vast deficiency in network coverage, ie, areas and people without access. It’s like arguing over pricing without any production plant or products. Without capital investments in network coverage, there can be no services, nor any tariffs, high or low. There is little doubt of the effects of high spectrum and licence fees: these needs remain unmet. Hence the low rural teledensity of under 39 per cent at the end of February 2012, with urban coverage at nearly 170 per cent, and overall teledensity at 78 per cent. Separately, there’s the issue of inadequate incentives for broadband delivery.
Statements from Trai and the Department of Telecommunications about the spectrum pricing recommendations being reasonable because of the revenue potential simply don’t add up. Their projections are based on a fantasy of booming growth (like the Budget projection of 7.6 per cent GDP growth, but even more exaggerated). Whereas the combined effect of the scam and its fallout, sentiment, momentum, and misguided efforts at tax-gouging will ensure that telecom revenue growth is no more than a stunted five to seven per cent, at best. No bank will lend seven-year funds in such uncertain circumstances to what was once a sunrise sector — but is now like heavy infrastructure, with a need for 20-year financing. Add the costs and difficulty of refarming the 900 MHz spectrum, and one has to wonder: who is going to bid, and why? It makes sense only for one survivor. All this is aside from the extension of subsidised non-performance at the PSUs, instead of transforming them into anchors of an open-access national network.
China 3: Build Comprehensive Ecosystems
India’s inability to address infrastructure is legendary, barring historical exceptions. It shows in electricity shortages, inadequate sanitation, broadband, railway services, airlines and roads. This explores the common strands of such failures, and a possible alternative drawing on China’s approach to development.
Electricity shortages are attributed to a tangle of factors: difficulties with fuel supply – for instance, for coal, there are problems in mining, and unrelated problems in transport, including the limitations of the railways – or the difficulties with nuclear and hydroelectric power development faced with overzealous activism, aggravated by the government’s poor record of compensation to affected people; unsustainable populist pricing; a lack of integrated planning (for example, generation capacity without linkages to fuel); and poor execution.
In transportation, there’s another tangle in the railways, with populism and deteriorating finances, yet making plans for super-fast trains. Airlines are treated as either a milch cow for government revenues or a sacred cow when it comes to providing endless, unviable subsidies.
Consider, also, spectrum and broadband. After mobile telephony’s meteoric rise, prospects of growth with pervasive broadband are receding, with little indication of supportive policies from the erstwhile New Telecom Policy, or NTP-2011, now NTP-2012-if-we’re-lucky. The episodic pronouncements and actions have been retrograde, such as the “tax attack” on Vodafone after the Supreme Court dismissed earlier tax claims, or the withholding of Qualcomm’s spectrum until recently. Worse, there’s an apparent pincer movement undercutting 3G by prohibiting roaming, while announcing spectrum auctions with hardly any spectrum available. Defence spectrum release has stalled, as Bharat Sanchar Nigam Limited has not built the alternative fibre optic network. Consequently, the department of telecommunications has only 150 megahertz of spectrum for commercial use, of which only 5 MHz remain for 3G. Combined with the prohibition on roaming, this effectively stymies 3G.
There’s more pressure on GSM operators coming up to “refarm” the 900 MHz spectrum when licences are renewed from 2014 to 2016. The best solution for incumbents as well as others without bandwidth below 1 gigahertz is to share networks. This would seem an obvious solution for 3G as well, and might even trigger or revive other technologies because spectrum is available, just as the dearth of spectrum may contribute to the untimely exit of WiMAX (802.16) or iBurst (802.20).
However, restrictions on roaming and insistence on spectrum auctions will ensure that spectrum sharing is either impractical or legally infeasible. This means India will deny itself the benefits of developments in spectrum sharing in TV white spaces in the US and in the UK, including its possible extension to other bands.
Comprehensive Ecosystems
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Convergence India 2012
Yelena Gyulkhandanyan from the Centre for Internet and Society attended the event organised by Exhibitions India Group and shares her experiences through this post.
India Goes Digital
The opening panel discussion, “India Goes Digital”, initiated the three-day-long exchange of knowledge and experience centring around telecom, information security, mobility, cloud computing, cable, satellite, broadcast, media, and social services offered through ICT’s. A principle theme throughout the conversation was the significance of mobile penetration in India.
Stressing the tremendous opportunity for equitable service distribution presented by mobile service delivery, Rajiv Bawa, the Chief Representative Officer (Head-Telenor India), pointed to a study which found that mobile devices are more accessible in India than television sets and are proving to be the main mode of reaching people. Dr. J.S. Sarma, Chairman Telecom Regulatory Authority of India, who headed the panel, emphasized the importance of data and application services for the expansion of digitization in India. The application industry needs to be mobilized in the field of education, agriculture, banking, finance, and others. A. K. Bhatnagar, Doordarshan Engineer-in-Chief highlighted the advantages of digitization, those being superior quality, flexibility, high reliability, spectrum and power efficiency, as well as multimedia and Value Added Service (VAS) delivery. The growth of digitization has been enabled by techniques such as coding, modulation, and multiplexing.
While all speakers maintained that digitization will contribute to an inclusive and equitable growth in the country, no one denied the challenges lying in the road ahead. Out of the 900 million mobile subscribers accounted for in India, only 500-600 million are active users, remarked Pankaj Mohindroo, Managing Director, South Asia, NICE Systems. Many people are still left out of the telecommunications network. Extending mobile services to rural and remote areas and making hardware more affordable is a priority. As a step towards meeting some of these objectives, Mr. Mohindroo praised the National Optical Fibre Network (NOFN) initiative to provide broadband connectivity to all Panchayats. As well, the WiFi model needs to be leveraged to further extend coverage. | ![]() |
Long Term Evolution
Long Term Evolution (LTE) is a wireless broadband technology that enables roaming Internet access through cell phones and handheld devices. It seeks to provide excellent quality IP-based services such as VoIP and web site browsing. Compared to 2G and 3G technology, LTE has much faster download rates. Panel participants discussed the development of revenue generating business models for LTE deployment and some challenges for operators in India.
![]() Skyware Global: ODU system provider |
By 2014 the Asia-Pacific region is expected to be the biggest market for LTE, acquiring 40 per cent of the world market by 2016. Thirty-five countries have already launches LTE services; panel participant S. P. Jeyrath, Advisor, Tulip Telecom, is sure that India will add to this number, becoming a story of great growth. Nevertheless, to for LTE to succeed, some core challenges need to be met. Some of these include: high prices of smart handsets; limitation of spectrum and coverage area of existing operators; and the challenge of using current infrastructure to deploy mobile broadband. According to Jaswant Boyat, Technical Director-SP India & SAARC, Cisco, content management and the development of regional and national data centres is a priority when introducing LTE services in India. Other strategies involve decreasing tariffs to make the services more affordable and creating a solid marketing strategy. |
Greet ICT’s
With the increasing spread ICT’s worldwide, green ICT’s are becoming integral for sustainable development. Green telecom networks and solutions for telecom in India were the topics of the next day’s conversation. Naresh Ajwani, Chief Regulatory and Corporate Affairs, Viom Networks Limited, pointed out that the matter of employing green technology concerns the telecom industry because India has a 33% electricity penetration, while the telecom penetration is beyond 65 per cent. It was also recognized that India’s carbon footprint is minimal, but that should not stop the implementation of environmentally-friendly solutions where it is feasible to do so.
The speakers highlighted a number of attainable solutions for greening the telecom industry in India. According to Jacob Mathews, VP – Network Services, Aditya Birla Group, regulators should set energy targets and embark on a strict monitoring program to ensure compliance. Sharat Chandra, Managing Director, TelEnergy Technologies Pvt. Ltd., stressed that Renewable Energy Service Companies (RESCO’s), the Ministry of New and Renewable Energy (MNRE), and telecom operators need to work together to achieve the set targets. Specialists in renewable energy solutions need to be given participatory space and be treated as partners in the process of innovation. Other key factors in reducing energy consumption are infrastructure and spectrum sharing, as well as optimizing solar and biomass technologies that are already available.
Mobile Service Delivery
Mobile Financial Services
With mobile penetration on a phenomenal rise, a cell phone holds the promise of reaching the most marginalized members of the population; facilitating an accessible and equitable service distribution; and ushering in a new era where a simple hand held device that fits in our pocket will be the bridge that extends through the vast digital divide. Panel members discussed and debated the potential of mobile-enabled services, in particular, mobile financial services, m-education, m-governance, m-health, and m-entertainment.
President and Country Head, Yes Bank Limited, Tushar Pandey, listed the three factors of financial inclusion: savings, insurance, and credit. However, the challenge in distributing these factors to all members of the population is that many citizens still do not have a bank account. Fortunately mobile phones have succeeded in reaching many of those that are left out of the banking system. This reality makes mobile financial services, such as money transfers, wallets, and banking a viable alternative. The mobile payments platform is for the bottom of the pyramid consumers, explained Dr. Sam Pitroda, Advisor to PM, because it gets rid of the middleman and hence reduces opportunities and incidences of corruption and money swindling. Through mobile money transfers, people can get government monetary assistance, such as subsidies, directly through their phone. All that is needed for mobile transactions are payee’s mobile number and the Mobile Money Identifier (MMID) which is a seven digit account number assigned by the bank.
Presently, it is possible to send up to Rs. 5000 over a text message. Nevertheless cash transactions are still predominant in India. Anand Bajaj, CIO, Yes Bank Ltd., compared India’s cash economy, which is approximately 50-60 per cent to Sweden’s, where it is around 4 per cent. According to Sonny Sannon, CEO, Transnet India, for mobile financial services to really take off, there needs to be a unifying brand much like ISIS in US, which is a joint venture between AT&T, T-Mobile and Verizon Wireless specializing in mobile payments. A significant investment in marketing, advertisement, and customer literacy is also required.
Mobile Service Delivery in India
As stated by Vinod Melarkode, Director – Qpass, Amdocs, the service industry contributes to 55 per cent of India’s GDP. Mobile services can further increase this percentage. Melarkode proceeded to outline the advantages of m-services: m-governance will contribute to a decrease in costs associated with service distribution as well as enhance social inclusion; m-learning will extend basic education, as well as enable the sharing of exam tips and result alerts; m-information will extend access to knowledge and entertainment; m-health will allow medical examinations and diagnosis to be done remotely. Several factors need to be in place for the success of the m-service model: cloud based solutions need to be implemented; the model needs to be easily assimilated with exiting mobile network operator systems; as well, the model should be scalable, secure, and high performing. Android phones are secure and affordable, and can further enable the proliferation of m-services.
Describing m-service initiatives that are already being implemented throughout the country, the speakers reflected on present challenges and solutions for the future. Sanjay Vijaykumar, Co Founder & CEO, MobMe, reflected on his observations on an initiative involving fishermen receiving information on their mobile phones about the whereabouts of fish obtained through satellite monitoring. According to Vijaykumar, for the past three years the only message that the fisherman receive is “cloudy, no service”. This case study was used to illustrate that m-initiatives often look good on paper, but do not work in reality. Hence constant monitoring and evaluation is necessary to maintain the service.
Anupam Varghese, VP – R&D, Eko India Financial Services Private Limited, spoke about a project in Bihar where ASHA (Accredited Social Health Activist) workers receive their pay through their mobile phones.Varghese pointed out that this is a successful case study, but such models need to be replicated on a large scale. Reflecting on the e-governance scheme, he was of the opinion that e-governance currently does not function as widely and efficiently as it could, because it is not mandated by law and hence is not implemented as extensively as it should. The Electronic Delivery of Services Bill, which mandates the electronic delivery of all government services, is a step towards overcoming this challenge. Referring to the concern that even if electronic service delivery systems are established, people will not have the necessary skills and awareness to use them, he asserted that we need to begin with creating infrastructure and systems for service delivery, and given time, we can be sure that people will learn to use them.
The Exhibition
An expanse of exhibits displaying some of the latest technologies and innovative service models stretched outside the conference hall. The exhibition proved to be a prolific ground for networking opportunities and knowledge dissemination.
An Interview with PK Garg
P. K. Garg: In 1991, the teledensity of India was less than 2
per cent. The then government, as part of the economic liberalization
policy wanted the teledensity to grow fast. At that point of time the
government was supporting the telecom sector for the growth of
teledensity to the tune of about four to five billion dollars per year
through the annual budget. During the same time frame it was felt that
the government would further need to support the telecom sector to
almost double the level if teledensity was to reach five per cent and
also if every village was to have a telecom connection to make
telecommunications accessible to each and every citizen. At that time
the thrust was more on accessibility rather than having an individual
connection for every home or every citizen.
Yelena: So if a telecom connection is accessible to the whole village then all villagers can share one line instead of having an individual connection?
P. K. Garg: Yes, until that time telecom facilities were not accessible to many people. So with the accessibility at least if there is one telephone in the village, whether it is a PCO, whether it is a phone in the Panchayat, all can use it. So the thrust of the government at that time was that the telecom facilities should be made accessible to all citizens. And even for taking the teledensity to five per cent it was estimated that it would require about 25 to 30 billion dollars over a period of five years. The government made provision for almost three-fourth of this money in the Indian budgets and the planning processes. So the fiscal imbalances, etc, that is an overall economic aspect, not only related to telecom. I think you have plenty of material from other sources on what measures the government took to deal with the issue – one of which was the liberalization: entry of the private sector was decided upon and it was also decided that the government telecom department would concentrate on increasing the accessibility through line telephones. The entry of wireless was to be left to the private operators, because the government money that was available for this was limited.
Yelena: And this was prior to 1994?
P. K. Garg: This was around 1991-1992 time frame. The government decided that the wireless telephony (mobile telephony) should be left to the private sector because it would require quite a significant investment and if the government funds were diverted to the mobile wireless service provision then it would have to reduce the investments available for line telephony and increase of teledensity. Another factor at that point of time was that nobody felt that mobile telephony will grow to that extent. They were feeling that one might get a few million connections, maximum four to five millions, because it was considered to be a service for rich and elite people, business people, top bureaucrats, but not so much for the common masses.
Yelena: So where did that shift come where the government realized that mobile connections are important for all citizens?
P. K. Garg: I would say it was a combination of many factors. To understand this one has to go through the history of our wireless mobile telephony a little bit. In 1994, licenses for mobile telephony in India were granted for the four metro service areas – Delhi, Mumbai, Chennai and Calcutta. Two operators in each of these areas were selected. At that time it was not pure bidding; it was sort of a beauty contest where certain pre-conditions were made and only those who technically qualified for those conditions could bid for that. At that point of time the government had indicated a certain ceiling for the tariffs and at that point of time outgoing calls as well as incoming calls – both were charged. Then around 1995-96 the mobile telephony licenses for other areas of the country were auctioned. It was slightly different from the 1994 bids which were more on the pattern of a beauty contest. And not only the mobile telephony licenses were auctioned; it was considered then that one more operator in each area should come in the line telephony sector also as a competitor to the government operator – first, to provide competition, secondly, to add to the government efforts to increase the teledensity.
Yelena: So the government operator was BSNL right?
P. K. Garg: At that time it was not BSNL, it was called the Department of Telecom and only in Delhi-Mumbai it was MTNL. MTNL was formed in 1986, and it was managing the Delhi and Mumbai areas. The rest of the country was still under the Department of Telecom. Later on they converted into the Department of Telecom Services. And in 1996-97, one private licensee or one operator for line telephony areas was also selected through auctions. The private operators began functioning in 1995, starting their services slowly with first mobile telephony networks in the metro areas. Mobile telephony networks in the other areas started functioning around 1996-97 and the private operators for line telephony were allowed to use wireless in the last mile, the WLL wireless in local loop. So they also started rolling out their networks in 1997.
However, around the beginning of 1998 most of the operators, especially the mobile telephony operators, felt that their business case which was the basis of their bids was not right. And 1) the growth was not as expected; 2) the ARPU (average revenue per unit/ subscriber) was far below their expectations which they had assumed for their business case. So the net result was that they approached the government saying sorry, we made a mistake in our business calculations and the government has to bail us out, otherwise we will not be able to service the existing customers also. And as you can appreciate most of these funds were lent by banks and financial institutions. That was not necessarily the money of the promoters. So then the lending banks and financial institutions also supported the cause of the operators with the government. Because many of our banks who had given money to the operators were nationalized banks, some of them were private also, but most of them were nationalized banks, and if the national banks were not able to recover their loans, it means the public money is gone. So the government had set up a high level group, ministerial level group, in the last quarter of 1998 to examine this issue and the group had detailed discussions with the operators, the banks, the user groups, the economists in the country and many others. They also consulted international experts. Then finally government agreed that, yes, some relief needs to be given to these companies/ operators. And that is how the new telecom policy of 1999 came into play.
The most salient aspect of that policy was revenue share. The license fee was earlier based on their bids, and in India it was not a total payment of auction amount upfront, it was staggered. The bid itself was payable over 10 years and the operator had the choice to indicate at the time of bidding how he would like to pay – whether he would like to pay uniformly or whether he would like to pay less in the beginning, more in the end, or he would like to pay more in the beginning, less in the end – he had the choice. And as per the normal economic rules the government then calculates the net present value of that bid amount for the purpose of comparison. So the result was that instead of the fixed license fee, the government said OK, now you will not pay any prefixed amount but you will pay a percentage of the revenues which you will earn. That was a big relief because then the operator was not required to pay any fixed amount which was quite large, and he was to pay a percentage of the revenue towards the license fee.
Yelena: So it depends on how much money they make…
P. K. Garg: So if the subscriber growth is there, they get revenues, they pay that much, and if they don’t get adequate revenues, they will pay less, if they get more revenues they will pay more. And then the spectrum charges also, which were earlier based on a formula, were also changed over to the revenue share or percentage of their revenues.
Yelena: What was the formula?
P. K. Garg: Earlier the formula was that for each city, say 1MHz of paired spectrum was charged at about $10 000 per year, per city and in addition there was a fee of Rs.100 (appox $ 2) per subscriber, per year that is the wireless license charge. So instead of separate spectrum royalty and the license fee, both were combined and it was taken as the revenue share. So the burden of a fixed fee was taken away and the operators were to pay a percentage of their earnings; whatever the revenues they get, they pay a part of that. So that was the biggest consequence of the New Telecom Policy 1999. This allowed the operators to reduce their tariffs because anybody can appreciate the two barriers for the growth of mobile telephony: cost of the handset which is entry level cost and the tariff costs. During 1999-2000 onwards the cost of the handsets was already coming down. Plus the revenue share allowed the operators to reduce the tariffs, because earlier if they were charging half a dollar per minute then they were paying a fixed amount of license fee and spectrum charges out of that, but now if they were to reduce their tariff from half a dollar to 10 cents, they would be paying only the license fee and the spectrum charge as a percentage of the revenue out of the 10 cents only. So they didn’t have much of a fear to reduce their tariffs, because the payment to the government will also be less. These factors encouraged them to reduce their tariffs – one was competition and the second was that they could get more customers.
Then the next point which encouraged the fast growth was the decision of our regulator in 2003 that only the calling party will pay; the receiving party will not pay. Earlier even the receiving party on the mobile had to pay.
Yelena: In Canada, if you don’t have a good plan, you still have to pay to receive a call.
P. K. Garg: In US also. It is there still. Even if I receive a call I will have to pay. So the charges for receiving a call were a hindrance, especially with the lower strata of society, because they were hesitant to receive the call if they had to pay. But once the liability was removed from the receiving party, many people started using the phone for receiving only. For example, the self employed artisans, electricians, painters, carpenters, anybody else could give their mobile telephone numbers to the prospective customers or clients and when they need their services they could call them without any financial penalty to the receiving party. One doesn’t have to pay anything except for the normal monthly or rental charges if one uses the phone for call receiving purposes only. That gave a tremendous boost to our telecom sector growth. For example, in early 2003, until this regulation was enforced, the total number of mobile customers in India was in the region of 10 million. These 10 million subscribers came, you can say, spread over at least 4-5 years starting from 1995. But from there onwards, the growth started picking up to almost more than 1 million subscribers per month. Another factor as I mentioned is that by that time the cost of the handset had come down to about $50-$60.
Yelena: How much was it before?
P. K. Garg: Initially in the 1995 time frame it was very much in the range of about $600. And from $600 it came to $60 (one-tenth). So these factors – the entry level cost of the handsets coming down, the tariffs also becoming low and the receiving calls becoming free – they were the factors which put mobile telephony on a very fast growth. Thereafter it’s well known to everybody because we crossed 100 million mobile subscribers in the middle of 2006 and from there onward it has been picking up and the country has seen almost 15 million per month new connections. Now also it is about 10 million new connections per month but it had even crossed 15 million during some time frame around 2007-08. So that is how the growth took place.
Yelena: The unified access services license: I think it was introduced in 2003. Could you speak about some of the reasons it was introduced?
P. K. Garg: Basically it is not my area of specialization, because mine was spectrum related, but I will give you some general aspects which I know. As part of the telecom policies most of these concessions were given to the operators. Then the government got from them some concessions or levied upon them certain conditions. For the mobile operators, government said that it will bring in a third operator which was the government operator. Moreover, the government also said that because we are giving you a concession with the license fee, etc, the government will have the right to introduce more operators as and when it feels the necessity for it in the public interest. Similarly for the line telephony also, since line telephony operators were also allowed certain concessions, in 1999 the government said that it may introduce more operators in addition to the one government and one private operator. So then in the year 2000 the government asked the government operator to enter the mobile telephony as the third operator. The name of the operator was MTNL in Delhi and Mumbai and then the remaining areas the operating wing of the telecom department was renamed as BSNL. BSNL was formed in October 2000. Then BSNL was asked to enter the mobile area for the rest of the country except Delhi-Mumbai where MTNL was there. Then in 2001, the government felt that one more private mobile operator can be introduced for which bids were called. They also said that for line telephony, because the issue of spectrum was not there, anybody who wished to come for line telephony would be allowed to do so. And then one operator came almost for all over India, that was Reliance in the line telephony. TATA also came into the play for a few areas and then couple of others were there like Shyam telecom for one or two areas as well as HFCL for one or two areas for line telephony. For mobile telephony, because it was only one license to be given, no single operator could get it for the areas all over India. Then some places Airtel got, some places went to Vodafone, and some places Idea received. So like that, all of the 22 circles went to different operators.
Yelena: And prior to this, per circle there were only two wireless operators?
P. K. Garg: Initially there were two mobile operators, third one became BSNL-MTNL, and the fourth one was introduced in 2001. And then what happened was that the fixed line operators were allowed wireless in the last mile. So they adopted CDMA; Reliance chose CDMA system to provide WLL and this CDMA technology had developed by that time to a level that could provide full roaming. Not only could it provide the wireless in local loop in the last mile but it could also provide full roaming and it was sort of alleged by many people and even the wireless mobile operators that Reliance had started providing full mobile services and not restricting to WLL which was the mandate of their license. That gave rise to many legal issues; there were legal cases by the mobile operators saying that the bid amounts offered by the fourth cellular operator in 2001 and the fixed line operators were quite different. The line operators’ bids were very low and the mobile operators’ bid amounts were very high; not as high as 1996-97 time frame, but still very high as compared to the bids of the fixed line operators. So they said that this was unfair competition and this was not allowed as per policy; why are they doing it? They went to court where they made the government also as a party, claiming that the government was allowing them to do it. At that time, in 2003, the government realized that this dispute in the telecom sector should be ended. After consultations with the Telecom Regulatory Authority the government decided to no longer issue separate licenses for basic fixed line services and cellular services, and instead introduced the Unified Access Services License (UASL). The earlier fixed line operators were given a choice that if they wanted to go for full mobility using CDMA or whatever technology, they could do so by paying the bid amount which was paid for the cellular licenses in 2001.
Yelena: And dual technology licensing came about in 2007 I believe?
P. K. Garg: Yes that was in 2007. Until that time an operator could have either mobile services in a CDMA or GSM, but not both.
Yelena: Great. Thank you for this history overview of telecommunications in India.
As part of CIS’s research interests in unlicensed spectrum policies, P. K. Garg was asked to comment on international and national level policies, as well as his perspective on the matter.
Yelena: Do ITU radio regulations reserve any bands for unlicensed use?
P. K. Garg: ITU radio regulations include the international allocations of different frequency bands. These international regulations are agreed by all the member countries of ITU at the world radio conferences. So it is agreed by all the countries, all the countries have to abide by that. In the international allocations there is no band which is unlicensed. There are certain bands which are allocated for ISM (Industrial Scientific and Medical) uses. For example, some bands are earmarked for microwave ovens because that’s an industrial use. Now of course it is for home use also but microwave ovens initially were for industrial use. Similarly certain frequency bands are for operating medical devices. And there are certain other scientific requirements for other bands. So there is a category called ISM (Industrial Scientific and Medical).
Yelena: And are these the 5GHz and 2.4 GHz bands or are there more?
P. K. Garg: Yes, they are also there, but there are many other sub-bands which are allocated for ISM services. Now many of these bands have been de-licensed for public use in many countries and as you said just now, the 2.4GHz, 5.2GHz, and 5.7GHz are the bands. There are other bands also. Many social requirements like cordless phones, let’s say individual requirements of the society, were developed in many of these unlicensed ISM type bands, because it was considered impractical both for the users, the vendor as well as the regulating authority in the country to issue licenses for each and every cordless phone. That is why they were developed in these bands. Some of these bands were de-licensed first in US and few other countries just like the 1500 or 1600 MHz sub bands. Then there was a band earlier around 150MHz, subsequently there were some parts even in the 900MHz band and the 450MHz band. That is where these cordless phones were developed. The cordless phones were one of the first de-licensed usages. Prior to that there were, you might have heard of them, walkie-talkies. They operated on 400MHz and covered a range of maybe a kilometre. That was to be used when people would go in the forest or trekking or camping, etc. So they were also developed in the ISM bands which were de-licensed in few countries.
Then as the requirements of the cordless phones came subsequently for WiFi modems, all these technologies were developed in ISM bands and even in those countries where they were not de-licensed, it was felt that it was better to de-license them, because 1) it will provide benefit to the society 2) it would be impractical to regulate their use or issue a license for everybody, because, for example, if one thinks of even regulating it or issuing licenses for WiFi modems it is practically impossible. And so the spectrum management authorities in the countries, any country, have to weigh how much is the benefit to the society by de-licensing; that is number 1. Number 2 – whether they can de-license or if there are some other users already there in that band, and how to shift them if possible, because those licensed operators/users have to be protected.
So, for example – the 2.4GHz band was de-licensed in India in 2004. For Licensed and unlicensed bands as such, there are many considerations before the spectrum management authority can decide to de-license them. The government could de-license the 5GHz band only for indoor use, because there were some existing users and it was difficult to shift them away from that band. The outdoor usage by the public cannot be allowed, because it will cause interference to those existing users as well as the public will get interference from them if they use it in the outdoors. That is why it could not be de-licensed for outdoor use. Only a small, 50 MHz portion (5825 to 5875MHz) could be de-licensed for outdoor use, but in the 2.4 GHz band the existing users were able to shift out of that band so it could be de-licensed for the outdoor use also.
There is also another important aspect which you have to keep in view while de-licensing any band: though the public requirement will be there, vendors naturally, you will agree, try to force the issue because they develop some equipment and they want to sell it. Now you would have seen that spectrum is a very valuable commodity, it’s a resource, a very valuable resource and billions of dollars have been spent by the operators to get the spectrum. On the one hand one operator is spending billions of dollars, on the other hand, another operator is using de-licensed spectrum providing the commercial services. There is a big gap as you can see. So when the government de-licenses any spectrum, the idea is that the public will use it for personal use. The intention is not to de-license it for the commercial use, because commercial usages will continue to grow, continue to increase. Today if you de-license 100 MHz, tomorrow requirements will grow and they will say that they need another 100 MHz, and after another few years they will ask for another 100 – 200 MHz. Hence the de-licensing requirements will never end. So this creates quite a difficult situation with respect to other commercial operators who have paid for this spectrum.
Yelena: That’s definitely something to keep in mind.
P. K. Garg: Yes. Even now, for example – some of these Internet service providers, they are using this 2.4 GHz band. Now this 2.4GHz de-licensed band which they are using, they are using quite extensively. As a result, the availability of this band for the public gets restricted. If members of the public want to use it they will get interference and if WiFi modems find one channel busy, they will find another channel, and if they find that channel busy too, then they will go to the third channel. Thus the number of channels which are available to the public will continue to decrease.
Yelena: So by the public you mean community projects or individuals?
P. K. Garg: Yes. For example – you and me– if we are to use a WiFi modem at home and if we find because of other commercial usages around our houses that we are not able to function, that means the benefit of that unlicensed band is lost for us.
Yelena: And there is no way to regulate so that the public gets more access?
P. K. Garg: No, because once the spectrum management authority de-licenses any band it sets certain parameters – how much power, what is the bandwidth of each channel, etc. Beyond that it will not control it. Only if somebody is using a higher power than what is allowed, it can be checked and then the person can be penalized. But whether it is for commercial use, personal use, or community use is a very grey area. It is difficult for the government to control this, requires a long litigation process and other interventions.
Yelena: That is certainly understandable. However, I’m looking into how unlicensed spectrum can be used for public good. There are projects that provide cost-effective wireless communication networks in remote areas, such as the Dharamsala wireless community network project set up by AirJaldi, or networks set up by the Digital Empowerment Foundation. So, our advocacy for de-licensed spectrum is to benefit such projects.
P. K. Garg: Basically you are right. For example – if you see now for the indoor use, almost 250MHz of spectrum in 2.4GHz and 5GHz band is available unlicensed. I would say even close to 300MHz is available. And out of this 300MHz almost 150MHz is available for outdoor use also. Now if any community wireless network or a city-wide network operating on WiFi is to be created, 150MHz is more than enough if it is used judiciously. However, supposing I am an operator and I started using the unlicensed spectrum for giving services to my customers throughout the city, and their data and the total time requirements are quite extensive, then what will happen is that it will either reduce the availability of spectrum to other users or it will become totally unavailable to them. So the basic purpose of de-licensing is defeated then.
Yelena: That makes sense. During my interviews with several other experts who are really strong advocates of unlicensed spectrum, it was stated that a solution to de-licensed spectrum being clogged is to de-license more spectrum. Considering what you mentioned, why are they still advocating for this?
P. K. Garg: Well, as I was mentioning to you, unfortunately many of these people are not fully aware of the ground realities of the situation. Now no part of spectrum is completely virgin. If somebody says today it is a question of 100GHz band to be de-licensed that is a different issue. But for the 100GHz band there are no devices available today and no usage. But if we come to the band anywhere below 10GHz, all the bands are used by somebody or the other. So before de-licensing, one has to shift those users and shifting anybody is not easy. Which band will the government shift them to?
Yelena: That is definitely something to consider.
P. K. Garg: The government will have to give them alternate bands; where will they provide them from when all the bands are in use? So the proponents of de-licensing sometime are not able to appreciate the full gravity of the situation. And another thing is that the government cannot be regulating whether it is a commercial use/private use or societal use. And many of the problems in the existing unlicensed bands have come up because they are really used more and more for commercial purposes. That is the unfortunate part of it. Otherwise 2.4GHz and 5GHz bands themselves are quite adequate to serve the societal requirements. Tomorrow, the ultra wide band systems are coming. The requirements will be there, but they will be operating in higher bands and they will be confined to very small areas; even home, even your office. So they can be tackled by indoor de-licensing.
Yelena: And this is according to the 2011 National Frequency Allocation Plan?
P. K. Garg: Well, the National Frequency Allocation Plan doesn’t talk of any additional de-licensed bands but they will consider it. However that will be for indoor, very low power applications. As I mentioned to you for indoor usage it is almost like 300 or 350MHz which is available; for outdoors it is only 150MHz which is available. So for indoor it is already 200MHz of additional frequencies which are available as unlicensed. And if all these bands are put to proper use it can very easily allow even up to 100Mbps indoor usage for every house. There shouldn’t be much of a difficulty. One is that all this indoor usages are not continuous; this 100Mbps is not 24/7 because there are short spurts usages over a few milliseconds, then there is a gap and all these WiFi modems and other devices make use of the dynamic situation, so they are able to coexist. Even if I am using it here and somebody else is using it at the other end of the room in this large hall it is possible to coexist. And certainly if it is the next house or the next building the same frequencies can be used; they will be reused. So the solution lies in the greater reuse of the same spectrum; whether you call it reuse or you call it sharing, it’s the same thing. So one has to share the spectrum; reuse the spectrum.
Yelena: Great. Thank you for your time and for sharing your expertise.
[1]. Indian Telecom Sector. (2010). Government of India Department of Telecommunications. Retrieved March 11, 2012, from www.dot.gov.in/osp/Brochure/Brochure.htm.
The 2G Supreme Court Judgment
The 2G Supreme Court Judgment - 1
Time for a review [Flawed assumptions: auctions]
The judgment cancelling 2G licences was based on demonstrably incorrect assumptions about auctions, writes Shyam Ponappa in an article published in the Business Standard on March 1, 2012. This first of two articles starts out with identifying the false premises of the judgment, particularly relating to the consequences of auctions.
The Supreme Court judgment of February 2, 2012, cancelling 122 2G licences needs a detailed review. This is because it is based on faulty premises relating to economics, finance and technology. If the Supreme Court entertains review petitions on this judgment, it is imperative that the judges be aware of these false premises, and that they be correctly informed regarding these issues. This article gives a few instances of such errors and explores the logic of auctions.
First, as an example of an error, the judgment states, “Spectrum has been internationally accepted as a … renewable natural resource which is susceptible to degradation in case of inefficient utilisation.”
The fact is that spectrum is not renewable, nor is it degraded. Spectrum is completely unaffected by use, unlike the degradation of land or water through use. However, use of a particular range of frequencies in a given space and time can block another user’s effective access to the same spectrum in that space and time — hence the need for considering efficient societal use.
Second, the judgment states that “the Government of India has already taken a decision to ... allot the same [spectrum] by auction”, quoting Telecom Minister Kapil Sibal. The fact is that the government had not announced such a policy decision before the judgment.
Third, the judgment prescribes auctions as being in the public interest. Are they?
The assumption that auctions are in the public interest warrants a detailed review. Amidst a cacophony of confused opinion based on little knowledge and less understanding, here is the evidence:
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a) Maximum public revenues: auctions or revenue share? Assume for a moment that public revenues are indeed the appropriate measure in the public interest. What does the evidence show? An estimate from the Telecom Regulatory Authority of India (TRAI) in 2005, of auction fees foregone after the transition to revenue-sharing, was Rs 19,314 crore from March 1999 to March 2007. In fact, actual revenue-share collections by March 2007 amounted to double that number, or Rs 40,000 crore. Further, the amount collected by March 2010 was Rs 80,000 crore. Sources: Auctions - TRAI, 2005: http://www.trai.gov.in/trai/upload/StudyPapers/2/ir30june.pdf Revenue Share: CAG, 2010: http://cag.gov.in/html/reports/civil/2010-11_19PA/Telecommunication%20Report.pdf |
These data demonstrate that over seven and 10 years, revenue-share collections far exceeded auction fees foregone. Over the entire life-cycle (20 years or more with extensions?), the revenue-share collections will overwhelm even the Comptroller and Auditor General’s (CAG’s) imaginary lost revenues.
b) Public interest: revenues, or access and usage?
What is really in the public interest — revenue collections or the benefits of usage? The CAG report and the clamour for auctions assume that revenue collections reflect the public interest. However, the draft National Telecom Policy 2011 (NTP-2011) states as its first objective: “Provide high quality, affordable and secure telecommunication services to all citizens.” It states that revenue generation will be secondary.
In other words, the policy objective is to provide the benefits of accessible, affordable services to users, not to maximise revenues collected. This was the first time the government unequivocally stated an objective that appeared emphatically in the public interest. The Supreme Court has thus far seen it differently, although this has nothing to do with upholding the law.
The confusion is made worse because the preponderance of literature is by “auction experts” focusing on high fees — and not at all on the services that should have followed but didn’t, because the capital went into the auctions instead of building service capability. A notable exception is a more balanced study of spectrum auctions worldwide that considers social gains as well as fees — which estimates social gains at an overwhelming 240:1 (“What really matters in spectrum allocation design”, Thomas W Hazlett and Roberto E Munoz, April 9, 2010: http://ideas.repec.org/p/reg/wpaper/372.html).
c) Are auctions in the public interest?
There was one successful auction in India in 2001 – because the market was dead – for a fourth mobile operator per circle. Other auctions in India and abroad resulted in the failure of network rollout and services, but were hailed as successes because of high auction fees. For cases of “operation successful, but patient dead”, read on.
Auction failures
US, 1994: The first US auction netted huge bids. Soon after, a number of “successful” bidders declared bankruptcy. This was repeated in the 1995-1996 “C”-Block auctions.
- India, 1994: This auction in 1994 was followed by chaos from overbidding and default. The sector recovered only after many years, when the bids were set aside in favour of revenue-sharing with NTP-99. It took almost a decade before a reduction in revenue share (lower fees) and tariffs (calling party pays) led to explosive growth in mobile telephony from mid-2003.
- UK, 2000/European Union, 2001 (3G): Considered a spectacular success, netting about $35 billion in the UK, followed by high bids in Austria, Germany and Italy that netted over $100 billion, these auctions raised about ten times the amount expected. The markets collapsed thereafter, and the bidders couldn’t service the debts incurred. Companies have taken a decade to recover, moving cautiously even now on 4G.
- India, 2010 (3G and broadband wireless access): Hailed as a success, with over Rs 1,00,000 crore bid, lacklustre performance has followed, as companies struggle with the “winner’s curse” of paying too much to corner spectrum.
Auction experts have written disparagingly of “failures” (low fees) in countries like the Netherlands, Switzerland, Sweden, and non-auction countries like South Korea, Japan and Finland (until 2009). However, these disparaged countries have the best broadband services, according to a 2010 study by Saïd Business School at Oxford (http://www.sbs.ox.ac.uk/newsandevents/releases/PublishingImages/3 - Broadband quality ranking - by economic development.jpg). That is not surprising, considering that the capital was invested in service delivery, instead of in vying for spectrum.
Read the original from the Business Standard
The 2G Supreme Court Judgment - 2
Open access is the future [Flawed assumptions re technology; way forward?]
This article addresses erroneous technological assumptions, and explores possible ways forward.
The first part of this article (‘Time for a review’, BS, March 1) dealt with erroneous assumptions, especially regarding auctions. This part covers misplaced assumptions about technology, and explores constructive alternatives going forward.
Errors in technical assumptions
An assumption underlying
the prescription of auctions is that spectrum must be assigned to
operators for their exclusive use. This was how wireless evolved during
the first half of the 20th century, when radio frequency interference
was the predominant problem in wireless communications.
With developments in technology, some advocate open spectrum predicated on the use of “cognitive radio” or “software-defined radio”, by which user equipment avoids interference by sensing unused channels automatically. In this model, open-access spectrum is a commons.
Another approach is to use a database-driven open-access model, whereby devices register with a database, and are dynamically assigned spectrum as needed. If this were possible in 1959, when Ronald Coase first recommended auctions, it would not have been necessary to parcel out spectrum. Even in America’s developed economy, the first auction was in 1994, and it failed.[1]
Now, technological developments enable spectrum sharing and dynamic assignment. America’s FCC has appointed 10 database administrators for dynamic spectrum allocation, with Spectrum Bridge being the first — in operation from January 2012.
America restricts this approach to unused spectrum in the TV bands, and a portion of the 700 MHz band, called “TV white spaces” (TVWS). The UK’s Ofcom is taking similar steps, with implementation planned for 2013. While all licensed frequencies could be pooled, sharing is restricted to TVWS because of conventions and legacies, and operators’ and governments’ preference for auctions. This judgment rules out sharing, blocking other technologies if the spectrum were available.[1]
The lure of auctions
For markets like India, there is every reason from a technology perspective to share not only TVWS and 700 MHz, but all commercially licensed spectrum. There is a technological basis for pooled spectrum, without exclusive assignment and auctions. Yet people love auctions: liberals, because business must pay its way, and governments get revenues; conservatives, because market mechanisms substitute for government controls.[2] Operators prefer exclusive assignment to the uncertainties of open access and compensation for their holdings. Governments want auction revenues. So neither governments, nor big operators, nor the uninformed public, see incentives for pursuing what is in the public interest: shared spectrum.
For Technology leaders in OECD markets, shared spectrum was not a priority, because more spectrum was available to fewer operators. For instance, in 2010, operators in many US cities had 55-90 MHz according to gigaom.com, and AT&T was using only about half its available spectrum, whereas in Delhi and Mumbai, operators had only 10 MHz.
First-come-first-served
Can the FCFS policy be abrogated on the basis of unconstitutionality? If so, the induced turmoil and far-reaching changes in procedures required for everything from tickets for railways or airlines, state-owned assets such as land, mining concessions, even government housing (including for judges?!), and all previous licences granted by FCFS procedures, defy imagination. This urgently needs review by the Supreme Court in the public interest.
Irregularities, outcomes, contracts and cancellation
The same 11 companies whose licences were cancelled qualified according to the FCFS principle, except that their sequence was changed, apparently through procedural irregularities. In other words, without malfeasance, the same companies would have got the licences, except for S Tel getting Delhi and someone else not. Malfeasance deserves penalisation. However, as changes resulting from irregularities are limited in the sense that the same candidates would have won, must all licences be cancelled? Is there a judicial option of annulling the award, and placing the issue before the executive for equitable resolution in the public interest? After all, it is against the public interest to induce turmoil in markets and development capabilities, which the present ruling is likely to do not only in telecom, but in other sectors like energy, mining, manufacturing and transportation. Also, if foreign companies acquired legitimate stakes in licence holders, can these contracts be nullified without proof of their malfeasance? Or could erring parties be penalised, while legitimate parties are enabled to reconstitute their position as required by law?
The way forward
Unfortunately, it is for our discredited
and dispirited government to pick itself up and dig us out of this hole.
Focused, goal-oriented action on the following lines would help.
First, review petitions: A first step is structured review petitions to the Supreme Court seeking relief, without grandstanding, bluster, or abdication of responsibility.
Second, an alternative to spectrum auctions exists in open access with payment. Both public revenues as well as public usage can be well served by treating access to spectrum as an open-access right-of-way. India’s policy makers need to consider the US and the UK’s shared spectrum approach. Spectrum can be paid for as it is used, as are oil pipelines, roads, or airports and ports.
Open access could create tremendous opportunities in India, including for other technologies, e.g., a revival of WiMAX, if Intel grasps the nettle.
Third, on the cancelled licences. This has different problem sets.
One set comprises parties who abused the system, punishable under due
process of law. If there are parties in a second set that did no wrong,
they should suffer no penalty.
What of a subset of the first, in
which a foreign partner invested legitimately and built out, provided
they were within the law? If these investors acted in good faith,
perhaps a legal recourse could be to place their cases before the
government for resolution and rehabilitation in the public interest
conforming with the laws, if need be by a dispensation from the court,
or even by fresh legislation. After all, good faith investors have
contractual rights. Possible solutions might be (a) to penalise the
guilty partner, while absolving the innocent, or (b) cancelling the
licences of the guilty, while allowing the innocent to reconstitute as
required by the law.
Above all, there is need for problem-solving that is systematic, transparent and participative, with expert inputs in domains and processes, to place the sector on a firm footing.
Read the original published in the Business Standard
[1].http://www.benkler.org/Open_Wireless_V_Licensed_Spectrum_Market_Adoption_current.pdf
[2].Paraphrasing Eli Noam: http://www.citi.columbia.edu/elinoam/articles/beyond_auctions.htm
[3].For details, see: http://organizing india.blogspot.com/2011/06/ntp-2011-objective-broadband.html
An Interview with Stephen Song
Yelena Gyulkhandanyan: When and how did the Mesh Potato come about?
Stephen Song: It came about after I joined the Shuttleworth foundation in 2008. I was aware of the potential of low cost wireless mesh technologies to create affordable infrastructure, but there seemed to be a challenge in getting these technologies to scale, and we had done some interesting pilot work, but nothing had really taken off. And so I convened a workshop in the middle of 2008 with some of the smartest wireless networking people I knew and so began to explore what were the key barriers.
There seemed to be at least a couple of key barriers – one was that setting up a wireless mesh network was a complex procedure that required expertise. And second was that in many areas where we were interested in providing services, people were as interested in voice services as they were in data. Simply delivering data to a particular community, at least to rural communities anyway, seemed to be only solving half of the problem. So the result of that workshop was that we came to the realization, the conclusion, that what we needed was a hybrid of technologies, something that didn’t exist yet, which was a combination of voice and data technologies together.
We were lucky enough to have a brilliant open hardware designer from Australia attending the workshop almost by coincidence, and he said, “Well, why don’t we build our own?” Up until that point I think our dominant way of looking at the world was by asking what sort of North American or European technologies could we take and repurpose in Sub-Saharan Africa to address this issue of access in a more affordable way. The notion of actually manufacturing our own technology wasn’t on the chart at all and it took a little while for the idea to sink in, because it just seemed infeasible at the time. But sink in it did, which led through my fellowship at the Shuttleworth foundation to the funding of a pilot project to see whether it was feasible to complete at least a prototype design. The created prototype design led to a partnership with the manufacturer in Shenzhen, China, and to a short run of production which led to a bigger run of production. And so one thing led to another and now we have our own device that we manufacture.
Yelena Gyulkhandanyan: And how would you describe this device to a regular consumer?
Stephen Song: Well, it is a wireless networking device that works with similar units of its kind to form an autonomous wireless network that delivers voice and data services. So you can open a box of Mesh Potatoes, plug them all in, and instantly have a voice and data network. It is a network for which you don’t require a special voice technology. All you need to do to be able to start making calls is to plug in an ordinary phone into the Mesh Potato. So it doesn’t require any sort of additional smart VOIP hand set technology or anything like that. We deliberately chose to do that because analog handsets are very cheap and lots of people have them already or they cost less than $10 to buy. So it seemed like a very affordable way of creating a voice network.
Yelena Gyulkhandanyan: And how much does a Mesh Potato cost?
Stephen Song: They are about a $100 each.
Yelena Gyulkhandanyan: And how much does it cost to set up a network and what is the largest distance that it can cover?
Stephen Song: The cost of the network is literally just the cost of the Mesh Potatoes and so once you have them and they are powered up, you have network infrastructure that is yours for as long as the technology lasts, which should be many years. So that’s really the core cost; it’s just the cost of the devices. Then if you connect your network to the Internet or to the public switched telephone network you might have to pay for the access to the Internet or for access to voice services.
Each Mesh Potato has a range of about three to four hundred meters but the way the Mesh Potatoes work is each device acts as a repeater for the next one. So as long as the next house that you can see is less than three to four hundred meters away, you can actually build quite a large network, because if you have two houses that are six or seven hundred meters away, as long as you have one house in the middle that’s got a Mesh Potato, then all three of them are connected. Mesh networking has been around for a while but just hasn’t become as mainstream as WiFi hotspots.
Yelena Gyulkhandanyan: And in what frequency range does this technology operate in?
Stephen Song: It works in the 2.4GHz range which is your standard WiFi technology, which means that for most countries you can use it without requiring a spectrum license.
Yelena Gyulkhandanyan: So in what countries, other than South Africa, has this technology been deployed in?
Stephen Song: Our biggest network is in the capital of East Timor in Dili. There is an NGO there called FONGTIL that has set up a large Village Telco network and there are a number of other smaller networks – one in Brazil, some networks in Nigeria and Cameroon, and then multiple other smaller more informal networks as opposed to formal Village Telcos.
Yelena Gyulkhandanyan: Have there been barriers in terms of deploying this technology?
Stephen Song: A barrier for us is bringing the cost of manufacture down. So one of the downsides of being a very small organization is that in terms of negotiating with manufacturers and arranging deals we have very little leverage. So we will want to bring the cost of the Mesh Potatoes down by another 50 percent, which is completely feasible, but it’s a challenge to actually build the relationships with the manufacturers to get things done quickly.
Yelena Gyulkhandanyan: So what company currently manufactures this technology?
Stephen Song: A company called Atcom.
Yelena Gyulkhandanyan: Can you provide a successful case study of this technology being deployed where it has made a difference in the village or where it helped create other social endeavors because people had access to this technology?
Stephen Song: Yeah, I think Dili in East Timor is probably the most successful example, in that the NGO that is running the network, FONGTIL, is kind of an umbrella organization for other NGOs in the region that need to connect and talk to each other on a regular basis. However mobile communication is quite expensive in Dili. So the NGOs have really valued being able to communicate easily and cheaply with their partner organizations through the Mesh Potato network.
Yelena Gyulkhandanyan: Sounds good. Thank you very much for your time.
Stephen Song: All right, bye for now.
Reversing India's Downward Trajectory
The welter of confusing pulls and pushes on India’s political economy makes finding the way forward really difficult. The government apparently cannot sustain economic reform initiatives, and does not have the finances for a stimulus package. The private sector is sitting on cash, but cannot invest because it is facing slowing growth and reducing margins. Known problem areas in infrastructure cannot absorb investment despite critical shortages in output — power generation and distribution is an example. Is there really nothing that can be done but to wait and watch while everything slowly grinds down?
The circumstances are formidable: a cantankerous Opposition using scorched-earth tactics, an anarchic citizenry usurping law-making functions after the abdication by the government and the Opposition, and an administration stupefied by the CAG phantom and other witch-hunts, with media Rottweilers searching through the carnage for the scandal-of-the-day.
This article identifies critical factors at the heart of the matter, and suggests remedial action. Slowing growth is the primary problem, and can be reversed without political manoeuvring.
The Crux: Reverse Slowing Growth
Some underlying factors that drive everything else need to be recognised and dealt with. For India at this stage, growth is all-important. This is the issue to be recognised and addressed.
The slowdown is largely self-inflicted, by escalating interest rates in a misguided effort to counter inflation. Yes, there are many other problems, but unless we have high growth for years together, other problems will swamp not only the analysis, but all efforts at execution. The consequences could be devastating — not only because of the large numbers of people who are not adequately housed and fed, but because a flood of young people entering what could be a productive workforce may end up on the streets instead.
There are two aspects to India’s growth. The largest component (growth of six to seven per cent) is driven by domestic demand. On top of that, foreign investment can add one to three per cent, to take annual GDP growth to eight to nine per cent, or perhaps even more. One can quibble, but the relative proportions are from two-to-one to four-to-one. It needs to be understood, however, that the incremental growth is driven by foreign investment, which is attracted by existing growth, and builds on it. Absent domestic growth, foreign investment dries up; worse, it flows out when growth is seen to be decelerating. This in turn increases downward pressure on the rupee.
This is the situation we have been heading towards, and are now squarely in. If domestic growth continues to stall, an outflow of foreign portfolio investments could put more pressure on the rupee. Domestic growth, therefore, has to be revived. Immediate steps are possible in two areas.
Lower Interest Rates
The Reserve Bank of India (RBI) does not need the approval of our contentious politics, nor of the public. All it needs is the understanding and willingness to reduce interest rates. If this happens, large businesses can concentrate on domestic investment instead of being driven offshore to protect their future, while small and medium businesses are not emasculated by high interest. It’s hard enough dealing with poor productivity because of a lack of physical infrastructure. High interest rates – factors within the nation’s control, with no political headwinds – are the last straw.
Academics and theoreticians may argue that with inflation being high, real interest rates are only around three to four per cent, but anyone who has run a profit centre or dealt with practical finance knows that these arguments don’t hold. When margins are dropping and interest costs are high, businesses run down, reinforcing the downward momentum.
In this context, a recent article on these pages by Jaimini Bhagwati highlights an enduring problem: central banks’ lack of accountability (“How unaccountable are central banks?”, Business Standard, December 16: http://www.business-standard.com/india /news/jaimini-bhagwati-how-unaccountablecentral-banks/458599/). It’s as though central bankers play to their own coterie of other central bankers, holding tight while the ships go down. If you need convincing, consider Alan Greenspan’s assessment: “…the origination of subprime mortgages – as opposed to the rise in global demand for securitised subprime-mortgage interests – was not a significant cause of the financial crisis.” Collateralised debt obligations indeed triggered the crisis, but there can be little doubt that loans premised on mansions for everyone lead to disaster, like any pyramid scheme.
As for the RBI’s accountability, the “presumptive loss” from the reduced GDP because of interest rate increases could be two to three per cent a year. One per cent is around Rs 92,000 crore, making three per cent Rs 2,76,000 crore.
Telecom Reforms
Positive sentiments can and must be triggered by constructive reform in telecom, through extending the revenue-sharing approach to pay-for-use spectrum and network sharing. This, too, needs more applied logic and problem solving expertise rather than political finesse.
After an encouraging Draft National Telecom Policy-2011 (NTP-2011) last year, there are unsettling signs. One is recurring delays, with a new policy expected in June 2012.
Second, there’s the confusing juxtaposition of spectrum sharing in the draft policy with recent statements about more auctions. The draft policy mentions spectrum trading for “efficient and optimal utilisation”, but if spectrum sharing results in both, presumably the need for trading will arise only for holders to get the assets off their books. The realpolitik is that dominant operators want auctions to corner scarce spectrum for their exclusive use, while the others want auctions for a lucrative sell-out. But this ignores the public interest, comprising users who want good, affordable broadband services, and defence, security, and other government needs that are in our collective interests.
The government has a unique opportunity to clear up India’s telecom policies, although precipitated ignominiously by the scams. Now, the government must grasp the nettle by extending the revenue-sharing principle of NTP-99 through open access to spectrum and networks. Other necessary elements include:
- compensation for dominant players for giving up their advantage, with
- stakes in appropriately structured consortiums for Next Generation Networks, and
- incentives for affordable broadband delivery.
Interest rates can be cut tomorrow. A sound telecom policy on the above lines could be formulated by June.
Inputs for NTP 2011
The new draft contains several noteworthy initiatives and goals such as Delicensing additional frequency bands for public use, Network sharing, spectrum sharing, pooling and trading , recognizing that revenue generation is not the primary reason for licensing spectrum and that auctions often result in inordinate delays, identifying the mobile phone as a primary instrument for development and inclusion, Convergence of broadcast, telecom and cable infrastructure, promotion of cloud based technologies, Nationwide license, free roaming and one number, promotion of fixed mobile convergence to free up spectrum, promoting consumer interests by increasing choice and quality and addressing concerns of privacy, data security, etc and placing emphasis on research and development, awareness raising and capacity building.
We offer below suggestions to improve the draft with specific changes marked in bold print.
Spectrum Management
We endorse the approach to permit spectrum ‘pooling, sharing and later, trading for optimal and efficient utilization of spectrum’ as described in 4.1. In this regard, we would like to suggest that the Government may consider mandatory spectrum sharing as is being done in USA with respect to white spaces and digital dividends as a better approach over licensing spectrum to a single operator and allowing voluntary sharing since it could result in more dynamic and efficient use of spectrum with access being authorized as per requirement from a central data base driven system.
De-licensing additional spectrum
We agree with the approach to prioritise identification of additional frequency bands for license exempt use for the operation of low power devices, as stated in section 4.6 of the National Telecom Policy 2011. We also support the promotion of the use of technology such as Software Defined Radios (SDRs) and Cognitive Radios (CRs) in white spaces, as mention in section 4.9 of the NTP. These developments in the Indian Telecom policy show promise for the deployment and spread of affordable technologies operating in de-licensed frequencies, which will contribute to the bridging of the digital divide present in India. We offer certain recommendations in this regard:
- WPC should have more unlicensed bands available for internet and multimedia to fuelinnovation and efficient spectrum utilization. Unlicensed bands need to be allocated inbigger chunks in various slots.
- Frequencies in the 5.15GHz-5.35GHz bands, as well as 5.725-5.825GHz bands are delicensedfor indoor use only. These bands should be de-licensed for outdoor use as well in order to facilitate the creation of wider wireless communication networks and the use ofinnovative technologies.
- Bands for the use of DECT technologies have already been de-licensed in Europe and theUnited states. The1800-1890MHz band, which is earmarked for the operations of DECT based devices in India, should be de-licensed for the use of low power cordless communication technologies in line with international practices.
- The 433-434 Mhz band should be unlicensed for data telemetry as it is done in many other countries.
- Unutilized slots in between TV channels (white spaces) should be made available for unlicensed/Class license usage.
Licensing, Convergence and Value Added Services
With respect to allowing the sharing of network mentioned in 3.6, we would like to propose a similar model as suggested for spectrum sharing, which is more along the lines of Singapore or Australia’s NGN, with the network(s) being run by public private partnership (PPP) consortiums, but led by a private operator.
Accessibility for Persons with Disabilities
Persons with disabilities should be mentioned specifically within the policy and steps should be taken to enable access to telecommunications facilities for them. These would include steps like formulating a Code of good practice for manufacturers and service providers, identifying accessibility standards in different areas, investing in R&D in accessible technologies, setting up a nationwide emergency and relay service, mandating broadcast accessibility to ensure that set-top boxes are accessible and that at least 50 per cent of all TV programmes are captioned, carrying out regular surveys to gather statistics on use of telecommunications services by persons with disabilities, etc.
Specific recommendations
Mission
(To be modified to read as)1. To develop a robust, secure state-of-the-art telecommunication network providing seamless coverage with special focus on rural and remote areas and bridging digital divide amongst disadvantaged persons, including persons with disabilities.
Objectives
(To be modified to read as)28. Protect consumer interest by promoting informed consent, transparency, accountability and accessibility in quality of service, tariff, usage etc. 36. Put in place an accessible web based, real time e-governance solution to support online submission of applications for all services of DoT and issuance of licences and clearances from DoT.
Universal Service Obligation Fund
To include ‘Persons with Disabilities, elderly and illiterate persons’
specifically as a category of beneficiaries within the charter of the
fund. Telecom infrastructure/ row issues, green telecom, clear skyline,
(Point to be modified to read as)
5.13. To prescribe sectoral Standard Operating Procedures for
effective and early mitigation during disasters and emergencies. To
mandate Telecom Service Providers to provide alternative accessible
reliable means of communication at the time of disaster by creating
appropriate regulatory framework.
5.15. To facilitate an institutional framework to establish nationwide
Unified Emergency Response Mechanism by providing nationwide single
access number for emergency services and to ensure that the same are also accessible to persons with disabilities.
Broadband and universal service
Given that the uptake of broadband has been rather slow in comparison with mobile phones, a useful step to scaling up broadband penetration and providing ubiquitous broadband services could be to identify broadband as an ‘essential service’ under the Essential Services Maintenance Act, 1981. This could be recognized as an objective in the policy and will help to ensure provision of affordable and reliable provision of broadband.
Specific recommendation
(Point to be modified to read as)3. Recognize broadband as an ‘essential service’ under the Essential Services Maintenance Act and provide affordable and reliable broadband on demand by the year 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed as well as making available higher speeds of at least 100 Mbps on demand.
Multi stakeholder approach
All activities such as setting up a council under 2.3, advisory groups in 2.4, 2.10, etc should necessarily include participation from civil society to ensure a balanced representation of the public interest perspective.
Specific recommendations
(Points to be modified to read as)2.3. To set up a council consisting of experts from Telecom Service Providers, Telecom Manufacturing Industry, Government, civil society,
Academia and R&D institutions.
2.4. To promote synergy of academia, R&D centres, manufacturers, service providers, civil society, consumer groups and other stakeholders for achieving collaboration and reorientation of their efforts for creation of IPRs, development and deployment of new products and services suited to Indian environment.
Implementation and monitoring
While the policy identifies several laudable objectives and initiatives, there is little indication as to time lines and mechanisms for enforcement with measurable indicators. It would be useful to clearly specify these to ensure smooth and effective implementation of the policy.
Protection of consumer interests
Any initiatives taken in this regard, such as formulation of a Code etc, must necessarily involve consumers. The policy also needs to recognize that special effort is required to ensure that information is made available to consumers and more steps are taken towards consumer outreach. This also includes making web sites more user friendly and accessible to consumers. At present even the web sites of the DoT, USOF, and TRAI etc are extremely inaccessible.
Regulation
While it is important to create a conducive regulatory framework for India’s development agenda, we would nevertheless like to caution against over regulation, especially in cases where market forces themselves take care of the situation. It is best to have a light handed approach based on need. It is also suggested that a review of the TRAI act as proposed under 12.1 could result in vesting the sector regulator with greater autonomy and independence.
Specific recommendation
(Point to be modified to read as)12.1. To review the TRAI Act with a view to addressing regulatory inadequacies/impediments in effective discharge of its functions and strengthening it by increasing its autonomy.
Healing self-inflicted wounds
Some months ago, the spectre was of consoling ourselves with a reduction of two per cent in growth, from 9.5 to 7.5 per cent. That’s history. What looms ahead is a larger, more serious threat. This ominous tidal-wave-in-the-making comprises many separate currents converging to undermine India’s take-off yet again. The prospect is long-term growth hamstrung by policy stand-offs, foreign direct investment in retail being a case in point, and social tensions fuelled by high unemployment.
Those who think India has arrived should be aware that it will take another decade of eight to nine per cent growth to be able to fund reasonable basic infrastructure and necessities for everyone. Why should it matter if you live in a rich cocoon? At the very least, you’ll be able to go out without stepping into filth or smelling it, or seeing masses of people struggling to survive.
Instead of a high-growth trajectory, we may get six to seven per cent, with luck. These prospects are clouded by wasteful expenditure, such as the perpetuation of an ill-functioning public distribution system and its concomitant, ration-shop-mentality, instead of efficient direct retail subsidies through electronic transfers. The negativity is amplified by fractious social and political tensions, and shoddy infrastructure crippling productivity: power outages, low-speed communications and poor logistics. One can argue (ah, argument) that the tensions are justifiable as an antithesis to increasing levels of corruption from political, bureaucratic and corporate kleptocracy feeding off the land and people, or hardening sectarian interests competing for predatory control. But if there’s one thing we can learn from others’ experience, it is to work together for better outcomes, or suffer; in game theory parlance, collaborate to optimise, or settle for worse.
Undoing Sectarian Alignments
Undoing the fractious underpinnings of sectarian alignments of language, caste and religion is beyond the scope of this article. The unpleasant reality is that unless such structural social impediments are addressed, malfunctions will continue. So we have this reality where, at one level, India is wonderful in the way people stream and swirl together, and at another, it is horrible because our potential is not manifested in living standards, with people fed, clothed and housed properly, and clean streets.
To return to misapplied intelligence in the political economy, consider three areas: interest rates, airlines, and telecommunications.
Interest Rates
It seems only the Reserve Bank of India (RBI) was unaware that the consequences of interest rate hikes since February 2010 would (a) not control inflation (short of an economic collapse), and (b) lead to a severe curtailing of growth. To be fair, some economists aided and abetted with remarks that interest rates must be raised because of high inflation.
By contrast, the accompanying charts for China and Germany (euro zone) show their negative real interest rates.
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What we have to do is reduce interest rates, with selective credit controls to ensure that credit for speculation is constrained and costs are high, e.g., in certain real estate, commodities, stocks and derivatives. Implementation, likewise, has to be “intelligent”, with online tracking by exception, and not cumbersome or voluminous weekly or fortnightly reports that are manually compiled and/or analysed, filtered and then presented to committees for decisions.
Airlines
The structural anomalies in India’s taxes on aviation turbine fuel (ATF) and airport charges defy logic. For a decade, there has been talk of cuts in central and state taxes on ATF, but the problems continue. Consider the missed opportunity: India has a large domestic market and is well positioned for airlines to use this for establishing global leadership, as well as ubiquitous domestic services. Instead, the sector is bled for short-term government revenues, giving foreign airlines the advantage. ATF charges in India for international flights cost 16 per cent more than they do abroad, and local airlines pay over 50 per cent more because of taxes and additional charges. Consider the ludicrous stipulation that foreign airlines cannot invest in India, and the irrationality defies imagination. Add the illogic of a government-funded, loss-making airline undercutting private airlines, and we have the mess we are in.
Globally, airlines suffer from gratuitous free-market philosophies, the exceptions being airlines from strategically focused countries, e.g., in West Asia, Southeast Asia (Singapore, Malaysia, Thailand) and, of course, China. Wake up! Surely no one doubts that aviation is an integral aspect of logistics and transportation? The government needs to recognise this and build capacity, with policies like uniform, low state taxes. Also, as in telecommunications, aviation requires an oligopolistic structure with limited competition, which if ignored brings chaos and grief, because nothing else is sustainable.
Telecom & Broadband
The draft National Telecom Policy 2011 promises good things. Yet, like India’s potential, the promise will be realised only with convergent action. This iconic sector, which changed the way the country functions and is perceived, is on the verge of being ruined by dysfunctional intervention. For instance, the regulator and the government seem bent on applying retrospective charges for “excess spectrum”, taking the bottom out of the market. Worse, 3G services are hamstrung by government attempts to restrict services, while operators threaten litigation. Meanwhile, the bastions of “free market”, the US and the UK, are initiating shared spectrum policies. What good are our brilliant objective statements about excellent, affordable services if the government acts to achieve the opposite? And is it beneficial for India to hound solid companies like Telenor and Qualcomm (unless they commit transgressions), instead of taking a problem-solving approach?
If the confused doublespeak – of punitive charges, restrictive practices, PSUs building state-of-the-art networks, auctions and spectrum sharing, all in the same breath – continues, we may lose a decade or more because of instability and irrational policies. It is time for decisions on pay-for-use, open-access spectrum and networks. Incumbent network companies can be compensated along a downward-sloping power curve to give up their competitive advantage. We must start being reasonable and do things that make sense.
This article by Shyam Ponappa was published in Business Standard on 1 December 2011. Read the article at Organizing India Blogspot
Telecom Path-Breaker?
There’s much to criticise the government about for not initiating systematic reforms. Yet, the draft National Telecom Policy 2011 (NTP-2011), announced three weeks ago, is a stunner.[1] It begins with a solid, integrated-systems preamble to IT, Communications and Electronics, followed by an excellent vision statement: “[to provide] secure, reliable, affordable and high quality... telecommunication services anytime, anywhere.” A sound beginning, although open-ended in terms of how the details could evolve.
There are potential problems with such high-level pronouncements, of course. A number of commentators castigate the motherhoods in the draft. With a lofty perspective and few details, much depends on how the open-ended possibilities develop, including the difficulties of execution in dealing with ground realities and obstacles.
An Assessment
NTP-2011 addresses six major areas: spectrum, licensing, broadband, convergence, roaming, and manufacturing. Focusing on the first two, there are sweeping proposals:
- licences will not be linked to spectrum; and
- spectrum sharing will be permitted.
Some view the separation of licences and spectrum as retrograde, because spectrum is essential for service delivery. Others suggest that transgressions that led to the scams are now being inducted as new policies, e.g., operators accessing networks they do not own, which is characterised as being against the public interest. Some heap opprobrium, alleging that like the previous policy, NTP-99, which they call retrograde (although it led to the phenomenal growth in mobile telephony), its main purpose is to allow companies to avoid paying licence/auction fees to the government.
- The last expostulation is the most ludicrous, because revenue collections after NTP-99 far exceeded estimated fees foregone: Rs 20,000 crore estimated “loss” by March 2007, but Rs 40,000 crore actually collected, and Rs 80,000 crore collected by March 2010.[2]Add tax collections on exponential growth with increased profits, and the result is even higher total government revenues.
- Opposing operator access to networks arises from confused objectives; blocking access is like cutting off one’s nose to spite one’s face. The purpose of the sector is to provide services and access to users for legitimate activities. The public interest lies in facilitating access on appropriate terms.
- To evaluate licensing and spectrum, begin with the premise of shared spectrum. Spectrum is essential for effective service provision, particularly in the rural and semi-urban areas with about 70 per cent of the population. An aspect not commonly known is that larger bands of spectrum enable more efficient throughput. For example, 1 MHz of a 12 MHz band carries 50 per cent more traffic than 1 MHz of a 6 MHz band. An estimate of the benefit to Indian operators of more bandwidth at international norms is a reduction of 20 per cent in operating costs.
Spectrum Occupancy
In practice, assigned spectrum is idle much of the time, except during the busy hours in India’s heavy-traffic metros, for extraneous reasons: too many operators, with too little spectrum, in too- narrow bands. This aspect becomes clear from spectrum utilisation or occupancy studies. For instance, the chart shows spectrum occupancy in Bangalore, Edinburgh and Stony Brook (New York) sometime in 2011.
The low readings (250 to 850 MHz in Bangalore, 600 to 950 MHz in Edinburgh, and 500 to 850 MHz in Stony Brook, NY) indicate available “white spaces” that can be better utilised.
- High-traffic cities like Delhi and Mumbai have much higher utilisation than cities elsewhere in the world. It comes at increased costs to operators, because of advanced equipment and the closer spacing of towers, as well as having negative environmental effects. If a system with on-demand access to centralised, more efficient spectrum bandwidth were available, the capacity would be much higher, while operators would gain tremendous savings.
- Another aspect has to do with the structuring and pricing of shared spectrum. One scenario for sharing is to enable operators to share assigned bands on mutually acceptable terms, leaving the onus of structuring and deployment on the respective operators, as for mobile telephony towers. As with the towers, there are likely to be coalitions of operators/independent entities who are able to work out arrangements among themselves, while not attaining the ultimate efficiency of unified coordination. For instance, participants who share towers in India share passive but not active infrastructure, and a critical element of active infrastructure is spectrum.
- An alternative scenario would be mandated spectrum sharing. Spectrum on demand could be made available to any operator/counterparties for the duration of every communication “transaction”. This would need a database-driven Dynamic Spectrum Assignment facility, as deployed by Spectrum Bridge in the US. The more efficient throughput would mean higher traffic capacity for a given investment through better utilisation.
- The distributed processing alternative through cognitive radio in every user device is (a) much less efficient, and (b) far more expensive. The market consolidation-through-acquisition approach, with more auctions, is the least efficient and most expensive.
Common-Access Networks
There would be further efficiencies if the entire network (and not just the spectrum) were accessed on-demand for payment per use. Another benefit from a public perspective would be much lower collective investment in resources, because of better utilisation. A third benefit would be the reduced environmental impact because of a lower carbon footprint and radiation from two or three common-access national networks (assuming competition is essential for effectiveness and efficiency).
In other words, database-driven, shared spectrum and networks have to be organised and managed as a coordinated unit if the potential benefits are to be realised. America is doing this with TV white spaces/the digital dividend, through the appointment of 10 database administrators (including Spectrum Bridge, Google and Microsoft). This should elicit our interest.
Once the government and stakeholders accept these concepts, the next major task is structuring the networks as consortiums to align the interests of operators and network providers, with state-of-the-art lead partners. In this process, incorporating and reorienting BSNL and MTNL as guardians of national interests with oversight by an adequately empowered regulator will be the remaining major tasks.
[1].http://www.dot.gov.in/NTP-2011/NTP2011.htm
[2].TRAI, 2005: http://www.trai.gov.in/trai/upload/StudyPapers/2/ir30june.pdf
CAG: http://cag.gov.in/html/reports/civil/2010-11_19PA/Telecommunication%20Report.pdf
Shyam's article was originally published in the Business Standard. It can be read here
Facing up to Moral Hazard
Amid the general sense of an ailing socio-economic environment in the country, consider these situations:
Coal supplies for power generation are eight per cent short of generation capacity. Worse, nearly 42,000 Mw of additional generation capacity over the next five years is jeopardised because anticipated supplies are short by two-thirds of the requirement (100 million tonnes against demand for 313 million tonnes).
- The rural employment guarantee scheme, well intentioned and with some reported successes (as in Melghat in Vidarbha), shows few tangible results while distorting farm labour practices and pricing. The reasons are many: inadequate design and supervision (mud roads that are washed away every year), no integration with agricultural programmes, palliatives that deny real infrastructure and support, like extension schemes that build on successes leveraging ICT, no skill development for alternative (self) employment, and so on.
- The telecommunications sector is buffeted by scandal, the downward spiral of public sector operators BSNL and MTNL, and pressures of intense competition with constrained resources and regulations.
Leaving aside venality, a common thread is of laws and rules not upheld, slack standards, contracts not honoured, an absence of hard decisions and the requisite effort, and a degradation of mindsets. These are the grey areas of “moral hazard” on the one hand – where protection from the consequences of irresponsible actions induces irresponsibility – and of adverse or negative selection on the other, avoiding the best feasible choices for easier, inferior alternatives. They are widespread, and need assiduous effort to identify and set right with systems, even as criminality is dealt with by the legal system. Good people do not game situations for self-gain, but everyone faces the hazard in making choices. The importance of devising and upholding credible systems, standard operating procedures and laws that are seen to work through incentives and penalties is that these perceptions uphold the social contract and protect one from moral hazard.
Whatever the policies, they must have integrity and coherence; the hazard arises from not ensuring these conditions. The specific hazard is the change in behaviour for the worse. Absent this skein of expectations and constraints, there is no coherence to every individual’s uncoordinated wish list or gripes. This is the problem with well-intentioned social vigilantism, because it destroys the very fabric of order.
Down the Slippery Slope
The hazards in grey areas are manifested in several ways.
- Abdication of responsibility by the government: The most prominent moral hazard may be the central government’s abdication of responsibility epitomised by the 2G scandal. A redeeming feature is that some alleged perpetrators are being prosecuted eventually — although how matters end will establish whether it is truly a redemption or a perpetuation of banditry with the state’s complicity (by abstaining from intervention). Similar scandals in mining and civil aviation are unravelling or are on the brink. It is these egregious developments added to the hassles in routine dealings with the government that have led to such public alienation.
There are also many errors of government omission or inaction, such as initiatives not taken in infrastructure, like stalled efforts at power supply reforms, including the state governments’ reluctance to address sustainable electricity tariffs, or not reducing the extent of administered pricing and taxes in petroleum products (or state governments imposing non-uniform sales tax), the deterioration in the railways, and so on. - Taking to the streets: Citizens who feel alienated can take to the streets when they are desperate or outraged. This seems to be the sentiment not only in the Arab spring, but also in varying degrees in established democracies in Europe, Israel and India. There are incipient signs even in America, with the amorphous “Occupy Wall Street” movement spreading from New York to other cities, protesting against various inequities.
When both government and citizens are irresponsible, chaos follows. In India, absence of governance is an extenuating circumstance for activism. But equally, there are indefensible lapses by citizens: the unwillingness to be disciplined, to outgrow the anti-colonial paradigm of railing against the government-as-imperial-ruler, of fasting and civil disobedience as acceptable forms of protest, of not subscribing to order, whether in traffic, respecting queues, or managing garbage and sanitation. Yet, reports of queuing by Delhi Metro users suggest that we can perform if we must — as do all the IT professionals delivering services to international markets. But for the most part, we rail against other people’s transgressions, while being unwilling to observe discipline ourselves. - Corporate chicanery: Apart from criminality such as in the mining and 2G scams, there is the grey area of bending the rules. Examples include the financial and operational performance of many real estate developers, or the poor automotive service quality that is an adjunct to the undeniably more refined automobiles themselves.
- Media overreach: The advent of 24x7 news channels is a boon for choice and sourcing. Tragically, many have morphed into whipping up a frenzy rather than delivering solid news and balanced views, given the battle for viewership with a lowest-common-denominator bias for sensationalism.
- Stalled government decisions: Government decisions in a number of areas were already stalled owing to problems in the approach to land acquisition, environmental effects, and in sectors such as nuclear energy. A combination of circumstances comprising all these and hyper-aggressive audits, a popular outcry stoked by frenzied media treatment relating to scams in land acquisition, 2G spectrum, and mines, has in effect created a gridlock, in which no forward-looking decisions seem possible, because of the risk of retribution for perceived missteps or errors of judgment, with hindsight.
The grey areas occupy the space between what we want – superior standards – and what we have, which is a slackness of systems because of widespread shoddiness in the practice of leadership and citizenship, with neither inspiring confidence in the other. The way out is conceptually simple, though difficult to execute: take responsibility, devise coherent systems and practices in all areas, with incentives and penalties applied impartially, and live by them.
Read the original article in the Business Standard here
Reviving Growth
India’s heady economic prospects of a year ago have deteriorated unthinkably. True, the rest of the world is wobbly, too, from America’s unreconstructed and unsustainable headlong decline, to much of Europe’s companion piece. But the possibility of some buffering for India seems to have evaporated. Expectations of better prospects were not so much from decoupling as from our limited dependence on exports, and headroom from activity levels with enormous scope for improvement and expansion — in basic infrastructure, housing, second-order infrastructure like education, sanitation and health care, as well as manufacturing, tourism and retail.
Rising input costs and interest rates started the decline in margins, and self-destructive actions made matters worse, epitomised by the implosion of the scams (2G, the Commonwealth Games, the Karnataka mining scandal, the land scams…). The Reserve Bank of India’s (RBI’s) actions of increasing interest rates when faced with inflation caused by factors beyond its ambit, such as food prices rising because of supply constraints, or energy prices on account of expensive imports, have amplified the negative sentiments.
The Bogey: Growth versus Inflation
The economy is slowing, and earlier estimates of well over nine per cent growth for 2011-2012 have gone overboard. In May, the Federation of Indian Chambers of Commerce and Industry’s estimate was nine per cent; in August, an RBI survey consensus was under eight per cent; Morgan Stanley’s was barely over seven per cent. Yet, policy makers maintain that despite the deleterious effects on growth, raising interest rates to control inflation through monetary policy is paramount.* In absolute terms, the need for controlling inflation is incontestable, but societal needs provide an exigent imperative for making the trade-off in favour of growth. The consideration now needs to be of steps that could alleviate the slowdown, and the likely effects of such actions not only on inflation, but also in collateral damage to economic activity.
Consider India’s shortcomings, namely, insufficient food production and associated storage and distribution, inadequate agricultural extension support services, expensive oil and coal imports, and lack of educational and vocational training facilities for a burgeoning, youth-dominated population. Add another level of inadequacy arising from our continuing lack of infrastructure, from basic sanitation, water and health care, extending through energy, transportation and communications (broadband). These structural bottlenecks exacerbate the negative aspects of our predicament.
Against this backdrop, we have a slowing economy, now threatened by a global slowdown. In the quarter ending March 2011, a third of the Sensex companies had missed their earnings estimates, while in the last quarter ending June 2011, nearly half of them were below estimates. With offshore revenues estimated to contribute nearly a third of FY12 profits, the threat of a global slowdown is ominous.
Inappropriate Rate Hikes
From this perspective, raising interest rates to combat inflation appears decidedly ill-advised. As expected, interest rate increases have not reduced inflation. The reduction can happen only when economic activity slows so much that demand for essentials falls, a horrific prospect. As for attracting foreign investment, rate hikes do little to induce confidence in foreign investors in skittish times, because they look to India and emerging markets for growth, not for stability. To be a safe haven, India has to be perceived not as a developing economy, but as an equivalent of the Organisation for Economic Co-operation and Development — a long way and many years ahead.
The economy, therefore, needs shoring up. Can RBI and the government take steps to reverse the decline? Consider the following corrective actions:
- Reduce rates to revive growth
In these circumstances, the priority has to be growth. Otherwise, apart from minimal foreign investment, domestic investment also is likely to be curtailed further, and social instability triggered by economic pressures could grab centre stage to devastating effect. International commodity prices are outside India’s control, but RBI can reduce interest rates. Cutting rates can raise margins and revive consumer demand.
The central bank needs to reverse its repressive stance on rates, no matter what the textbooks say, so that enterprise profits recover to a high-growth trajectory.
An immediate cut in borrowing rates, together with a concerted move to reset positive expectations and sentiments, is an urgent requirement.
- Selective credit controls for asset bubbles
Further, the RBI has avoided instituting selective credit controls to avoid asset bubbles, perhaps because of legacy reasons concerning commodity pricing and the potential for interference in markets. With smart e-governance at hand, this nettle must be grasped in place of the blunt instrument of overall rate increases, to use real-time, targeted additional margins, cash reserves and rate increases to defuse incipient asset.
- Reforms to build momentum
In tandem, we need reforms to rebuild economic momentum. All sectors need reform, e.g., energy, communications, transport, sanitation/water/health and education. For instance, the energy/power sector sorely needs drastic reforms, but it is so complex, with so many layers that need disentangling, that while initiatives are necessary, they are unlikely to revive growth in a reasonable period. The need, therefore, is to focus on what is practicable with the likelihood of achieving results.
In practical terms, we have to prioritise, and focusing now on communications, specifically broadband, could yield results. Mobile communications grew phenomenally over the last decade. The meteoric rise stalled for a variety of reasons: excessive competition, ultra-low tariffs, saturation in urban markets, limited access to spectrum, no incentives for broadband, restrictive actions against BSNL and MTNL, scandals and policy uncertainties. Yet, if the government initiates appropriate reforms in spectrum policies with incentives for broadband delivery, prospects could revive. If the government can (a) formulate major reforms with a New Telecom Policy 2011 that achieves growth, while(b) resolving problems relating to past irregularities through sound legal processes and judgement, communications could go through another meteoric rise, becoming the growth engine for the economy.
This article by Shyam Ponappa was published in the Business Standard on September 1, 2011. The original story can be read here
The Challenges of Direct Democracy
Direct democracy is alluring. The dangers to our society and economy from reckless governance as well as confrontational activists, however, are the undermining of institutions, and the unintended consequences.
Our governments have a carry-over of feudal and colonial attitudes and do not communicate unless they must. Change is accepted only under duress, and is not initiated through leadership. Mismanagement is tolerated, resulting in various scams such as the 2G spectrum scam and associated problems.
The current anti-corruption drive by Anna Hazare et al and their well-intentioned cohorts uses tactics that echo a righteous, anti-authoritarian and non-collaborative pattern of “us” versus “them”, combined with an insistence on their way alone. Yet, collaboration is essential for solutions that lead to an equilibrium, recognising the legitimacy of all stakeholders – the government and civil society – as well as the criticality of credible institutions and processes.
We in India are not alone in being drawn to direct democracy. Switzerland’s success in citizen participation combined with its federal structure is the epitome of a workable system. But this model cannot simply be transplanted without regard to cultural contexts. Consider the sobering example of California.
California's Predicament
California has been in a state of financial crisis for several years. In 30 years, the Golden State’s credit rating fell from among the best of the 50 states to the worst. Despite everything from Silicon Valley to agriculture, defence, aerospace, biotechnology and Hollywood, why can this state not manage itself? Why does The Economist quote labels like “dysfunctional”, “ungovernable”, even “failed” for this El Dorado (April 20)? To understand what happened in California, we must start with its direct democracy model imported from Switzerland.
The Swiss Model
Since the 14th century, Switzerland has had a tradition of citizens participating in assemblies. Coordination among different sets of delegates, e.g. for building roads and bridges across different valleys, had to be approved by respective assemblies. On this canvas, Switzerland grafted America’s Constitution in 1848. It worked and still works because of its design, and Switzerland’s collaborative approach. Constitutional amendments require a referendum as well as a majority of votes by the cantons (states) in the legislature.
Thus, over half the cantons can overrule the popular majority in a referendum, because of the rule taken from America of two votes per state, even if they represent a minority of voters. After being approved in a referendum, the amendments go back to the legislature for redrafting. This enforces George Washington’s principle of “cool” debate outlined at the time of drafting the US Constitution, and embodied in Senate deliberations for dispassionate lawmaking. Initiatives for new laws by direct democracy go through the same process, but the legislature has the option to draft a counter-proposal. This process of engagement and negotiation is designed to avoid extreme outcomes and promote dispassionate solutions. As with America’s Constitution, this prevents two kinds of abuse: James Madison’s1 concerns regarding minority factions and their “swing vote” capturing outcomes (as in India, where minority factions become king makers), or a tyranny by the majority.
The California Variant
About 100 years ago, the Progressives in California brought in direct democracy from Switzerland. As in India today, the purpose then was to attack corruption, specifically, “The Octopus” of the Southern Pacific Railroad with its tentacles everywhere. California’s direct democracy was designed to achieve the opposite of the Swiss model. Switzerland emphasises compromise and consensus; California encourages confrontation, and the winners impose their will. Starting new initiatives (“propositions”) is easy; calling referendums on existing laws is difficult. In effect, California’s propositions are irreversible, because a retraction or reversal needs a two-thirds majority, which is virtually impossible because of minority factions and special interests.
For over half a century, there were no major problems. Then, in 1978, the anti-tax proponents initiated a property tax cap, Proposition 13. It limited state revenues (placing a ceiling on all property taxes at one per cent of the 1975 value, which could grow at no more than two per cent annually unless sold, thereby establishing a new value). There are contradictory views on the benefits of Proposition 13, with the defenders blaming opportunistic individuals, not the system, for problems. It is the old divide between tax-and-spend liberals versus cut taxes-and-services conservatives. The outcome, however, is that California went from being a liberal showcase with excellent infrastructure and services to a bankrupt state, cutting back on both.
What India Can Learn
India’s polity (at central, state, and local levels), at least now, must start creating systems that harness participation through all means available, so that the voice of popular assemblies is heard within the framework of our representative democracy, and acted upon.
The government needs to move away from the paradigm of “The Administration” against “The People”. Instead, the government must lead a process of collaborative stakeholder engagement for equitable resolution, like the one based on a lifeboat concept of shared interests and survival. As individuals, we need to move away from blaming routines (the government/everyone else is at fault, and I am a victim) to accepting the responsibility and discipline of institution building and processes.
What India Requires
- Discarding feudal/colonial notions of the durbar in political parties, among politicians and in government.
- Channeling righteous public anger into the constitutional process with competence and discipline. Currently, there seems to be no effective way of demonstrating dissatisfaction except by taking to the streets.
Technology allows this on an unprecedented scale, with perhaps 100 million Internet users in India already. To harness and channel this capacity, systems need to be developed on the lines of the Obama campaign2, vastly extended with the expertise and support staff to inform citizens and channel their participation constructively within an institutional framework. These systems will need to cover everything, from issue-based analysis and presentation to spelling out responsible choices with the foreseeable consequences, and collating individual inputs and preferences. If executed with vision, imagination and commitment, this could reduce the instances of people taking to the streets.
This article by Shyam Ponappa was published in the Business Standard on July 7, 2011. Read the original here
NTP 2011 Objective: Broadband
Apart from the scams, confused ideas are roiling India’s telecom sector. One instance is the finance ministry urging spectrum auctions to collect Rs 30,000 crore to help bridge the fiscal deficit. Another is the Ashok Chawla committee recommending spectrum auctions for transparency, making transparency the criterion for managing spectrum. The committee apparently does not mention the disastrous US auction, and attributes the UK fiasco to extraneous reasons; presumably, they knew the facts. Such issues need logical and systematic remedies. Otherwise, the success of the telecom sector will degenerate into yet another failure.
- Objectives: the transaction should be structured in the public interest;
- A life-cycle analysis of costs and benefits, and not just windfall revenues (since short-term cash drives the finance ministry’s concerns, it is important for the ministry and the government to step back and consider alternatives, such as the sale of BSNL’s vast real estate. If the goal is ubiquitous and affordable broadband, this would be much less damaging to the public interest than spectrum auctions); and
- End-to-end solutions are required from an integrated systems perspective.
The New Telecom Policy ’11
For the New Telecom Policy 2011 (NTP ’11), the first requirement is to define convergent goals. We could take a leaf from countries with excellent broadband that built high-quality next generation networks. While the US and UK have strong initiatives, Japan, Sweden, South Korea and Finland have highly rated broadband. Australia and Singapore are now building next-generation networks. Both are common-access, open-to-all service providers.
Spectrum Management
In India we must begin with unravelling the mess of spectrum management. There are two separate skeins. Legacy issues of irregularities and scams form one stream, to be dealt with by the process of law. On the other hand, policies for next-generation networks need a process of stakeholder workouts to deliver services. Broadly, there are two ways of approaching spectrum management. One is to allocate specified bands for exclusive use, as was customary until now. An alternative is to create a common spectrum pool for use by all service providers. In other words, any provider can dynamically access spectrum for carrying voice, image and/or data. This method of dynamic spectrum access is now feasible, and the US is starting off with TV white space. The Federal Communications Commission has appointed nine companies including Spectrum Bridge and Google as database administrators; a tenth, Microsoft, is under consideration. India could start out on this if the government chooses the objective of accessible and affordable services.
Network vs Revenue
The choice is between building/configuring a high-quality, least-cost network and high short-term government collections. Over a longer period, a restrained approach emphasising networks and services is likely to be superior to aggressive government fees, as we found with NTP ’99 — revenue sharing resulted in explosive growth together with higher collections than the amount foregone from licence fees (see data from the Telecom Regulatory Authority of India and the Comptroller and Auditor General2).
How can the government evaluate this trade-off? The diagram below outlines alternative approaches to spectrum allocation and the likely outcomes. The outcomes should be evaluated as public interest costs and benefits.
The first step is to choose between exclusive spectrum use and common access. Exclusive use entails allocation through auctions; methods like first come, first served (FCFS); or “beauty contests”, for example, the evaluation of stipulated criteria such as technology, financial capacity and so on. Auctions are transparent. Common access, too, is completely transparent, provided the usage and payment systems have integrity.
If there are few operators (three or four), each can be allocated 20 MHz or more for exclusive use. In such circumstances, the relative merits are not obvious. However, in an emerging economy like India – without a ubiquitous network and with too little spectrum distributed among many operators – the logical choice for efficient spectrum management is common access.
Auctions often lead to service deprivation because of high costs (the “winner’s curse”). However, there are exceptions, where bidding is kept reasonable, as in Finland, or France because of its timing, after the fiasco of the European auctions. The other alternatives, FCFS or beauty contests, can result in low or high costs depending on government policies. High fees ratchet up costs with windfall gains to government in the short term, but users are deprived of these funds for networks and services. For example, in India, while the government collected nearly Rs 1,03,000 crore for 3G and broadband wireless access auctions, new facilities and services have been slow. Instead, this spectrum is largely used to support 2G users.
Low fees would have improved the odds of high-quality and low-cost facilities, affordable pricing, and better coverage. The government, however, would have lost its short-term windfall gains.
Once the government sets the objective of affordable, high-quality services, the next steps will be:
- Spectrum allocation and management
The decision criteria are:
- Technology: The rationale for optimal channel width is that with lower capital cost there is greater throughput with a 20 MHz band than with several smaller bands.
- Economics: The capital cost of shared facilities through common access is far lower than if each operator invested in separate access networks.
- Practical results: High-quality broadband in countries like Japan, Sweden and South Korea was built without spectrum auctions.
- Carbon footprint and resources: Both are minimised with shared facilities, such as towers and equipment.
These reasons make common spectrum the logical choice, as against auctions for exclusive allocations.
- Common network
A common network is, therefore, a logical and environmentally sound choice. The question is how best to own and operate it.
Notes
- E.g. see: "Winner’s Curse", Chris Anderson, Wired, May ’02:http://www.wired.com/wired/archive/10.05/change.html
- Trai’s estimate of foregone revenues by March ’07: under Rs 20,000 crore: “Indicators for Telecom Growth”, Trai, ’05: http://www.trai.gov.in/trai/upload/StudyPapers/2/ir30june.pdf
Revenue share collections by March ’07: Rs 40,000 crore; by March ’10: Rs 80,000 crore: "Performance Audit Report on the Department of Telecommunications, Ministry of Communications and Information Technology", http://saiindia.gov.in/cag/union-audit/report-no-19-performance-audit-issue-licences-and-allocation-2g-spectrum-department-tele
Read the original here
Spectrum reforms - Good & Bad news
There’s some good news, and yes, some bad news… The good news is that momentous developments are under way in spectrum and telecom policy:
- The Ministry of Communications & Information Technology held consultations with service providers, then posted the transcript on the Department of Telecommunications (DOT) website.
- The Wireless Planning & Coordination Wing (WPC) disclosed data on all commercial spectrum allocations – frequencies allotted by geography and service provider or operator – on its website.
Terrific first steps in a constructive approach. There’s more: the ministry’s report of 100 days states: "We will hold consultations with key stakeholders to evolve a clear and transparent regime covering licensing, spectrum allocation, tariffs or pricing, linkage with roll out performance, flexibility within licenses, spectrum sharing, spectrum trading, MVNOs, unlicensed bands, M&A, etc, in a technology agnostic environment after due consideration of Trai recommendations in this regard. Interest of the 'aam aadmi' would be the prime consideration." That’s comprehensive alright, which is good, though the 'aam aadmi' bit is either confused or manipulative. Elected governments should act in the public interest, no more, no less. While the private sector is exhorted not to play games, the government at all levels – politicians, administrators and agencies – must also focus on results, and avoid populism.
Display & Presentation
The presentation of information could be more effective for the patterns and structure to be easily accessible. The WPC display is of voluminous raw data. There is no overview, with the ability to drill down to details, nor to aggregate details by operator or frequency. The full set runs into 32 pages of tables (Figure 1).
Compare this with a display in colour from the US’ National Telecommunications and Information Administration (Figure 2). Similar information from the WPC runs into many pages.
Figure 2: Fragment of Allocation Chart (USA)
Source: http://www.ntia.doc.gov/osmhome/allochrt.pdf
However, the US display contains not as much detail, and has no interactive capabilities (these are possible extensions). For an interactive graphical interface, consider the “market map” by Moneycontrol.com for stocks (Figure 3, left).
One can drill down in any sector by clicking on the rectangle. For example, “Telecommunication”, which opens a map with the listed companies, each colour-coded to reflect more detail (green for gains, red for losses).
Clicking on a company shows its daily price and volume chart (Figure 3, right). In a variant (at Smartmoney.com), it opens a menu with access to details like news, financials and so on. Similar spectrum displays could show, for example, information by operator for network rollout and subscribers by frequency.
Figure 3: Market Map of Stocks (Sectors) Companies
Source: http://www.moneycontrol.com/mcplus/marketmap/nse/marketmap.php
An alternate display format is the “Topics most commented on” on The Economist's website.
When the cursor hovers on a topic, related comments are displayed. Clicking on a topic realigns the clusters based on content around that topic, as for India in Figure 4.
Figure 4:
Source: http://www.economist.com/conversation-cloud?days=30
This would work well for aggregating comments on related issues in the consultation transcripts.
Imagine what such a graphical interface to a relational database could do for effectiveness and transparency in spectrum policy. It could be extended to telecom and broadband next, and, eventually, to all of government.
The Bad News: Process Limitations
Judging from news reports, process inadequacies might render the ministry’s grand intentions unachievable. The following examples show why.
- Spectrum sharing is an obvious solution for high demand with limited supply. The DoT has reportedly considered it for years, but discussions so far have been superficial and on "excess spectrum". Also, the statements of intent on sharing or trading are confusing. "Spectrum trading" implies exclusive rights to spectrum, unless otherwise specified. "Spectrum sharing" means aggregating spectrum for redeployment, with Dynamic Spectrum Allocation. This is analogous to “common carrier access” and “big pipes” for railways, roads, oil pipelines, or airways. Therefore, from a policy perspective, spectrum sharing and spectrum trading are mutually exclusive.
Spectrum and airways or flight paths coexist in the atmosphere. Imagine if airways were auctioned to each airline for its exclusive use, instead of being available to all airlines for similar aircraft through Air Traffic Control. That’s what we have with spectrum auctions in communications. The logic for spectrum auctions is based on old technology with no allowances for improvements in managing interference in the last 60-70 years. Also, allocating spectrum in this way means that aggregate capacity is constrained for two reasons. One is that each operator uses only part of allotted capacity. A study in Singapore in 2008 found that only two bands had a utilisation rate of 50 per cent; the overall utilisation rate for 80-5,850 MHz was about five per cent (Figure 5).
Figure 5: Average Occupancy of Frequency Bands in Singapore
Source:http://goo.gl/qVyBv
Second, a large band provides much greater capacity than the sum of smaller bands.
Our spectrum predicament arises primarily from inappropriate allocation policies. Therefore, forward-looking policies need the incorporation of a technical understanding of spectrum occupancy, of the effects of spectrum aggregation versus fragmentation, and of technologies like multiple antenna effects (multiple-input and multiple-output, or MIMO), which enable more effective spectrum use and improve functional attributes of higher frequencies. A backward-looking audit of historical data will not serve these purposes.
- Another damaging effect is the move to extract spectrum from Defence to auction to the private sector. The rationale apparently is the high revenues the government can collect. This cannot be in the public interest, especially since the alternate optical fibre network to have been built by BSNL is still not ready.
- Decisions on issues like the desirable number of operators per circle need an objective rationale. No data have been offered contrary to the UK Ofcom’s findings of maximum welfare at three to four operators.
An inherent limitation of the consultation-and-pronouncement approach (as opposed to a collaborative-stakeholder-workout) is that external expertise in technology and process consultation, sorely needed in India, has to be brought in only by the government. This must be done before formulating new policies, because the issues are too complex to resolve without objective expertise.
Learning from Fukushima
Official statistics report over 22,000 deaths related to fires, 27,000 by drowning and 144,000 in traffic accidents annually in India[1]. By contrast, the number of deaths resulting from the Chernobyl nuclear accident is about 10,000 in total, estimates Frank von Hippel, a nuclear physicist at Princeton, who is co-chairman of the International Panel on Fissile Materials (other estimates: World Health Organisation 4,000; International Agency for Research on Cancer 16,000; Belarus 93,000 plus 270,000 cancer patients; and Ukraine 500,000). Against this, he estimates the number of deaths owing to pollution from coal plants in the US alone at 10,000 each year [2].
In this context, what are we to make of a top Indian scientist’s demand for stopping nuclear power production in India pending a transparent safety audit of all nuclear plants? Why not stop all traffic because of traffic accidents, to paraphrase another leading scientist? Should we shut down all our cities and towns until the sewerage systems work? A conscious effort should be made to demystify nuclear power.
To consider this rationally, let’s begin with some reported facts. The Fukushima accident happened after the earthquake, after the plant shut down. The plant was designed to withstand waves of six metres, but was struck by an eight-metre high tsunami, according to the US’ National Oceanographic and Atmospheric Administration (other estimates range between 6.71 and 14 metres).
The reactor core takes several days to cool after being shut down and requires external cooling. The cooling system lost power from the grid because of the earthquake. The backup diesel generators worked for an hour, then stopped (there are conflicting reports on the reasons). The backup batteries then powered the pumps until they ran out. There are also conflicting reports of alternate diesel generators that were either of insufficient capacity or could not be connected for reasons that are unclear (flooded connectors, incompatible plugs and so on). The tsunami devastated the surroundings even as it hampered assistance from elsewhere. The failure appears to have been in the supply of power and water, that is , ancillary services.
Japan has 55 nuclear power reactors and it experiences frequent earthquakes. Though there have been instances of plants being shut down after earthquakes (2007: electrical transformer fire at Kashiwazaki-Kariwa, and some leaks of slightly radioactive water reported; 2004: one unit at the same plant was shut down), there has been no failure of nuclear plants because of earthquakes. So, no new facts relating to earthquakes or tsunamis seem to have surfaced to cause India to shut down its nuclear plants arbitrarily.
An increase in energy use in India is inescapable, given the correlation between growth and energy consumption. On balance, we need all the energy we can get staying within reasonable risks and costs. Objectively, what can we expect from our government and related agencies such as the Department of Atomic Energy and the Atomic Energy Agency?
Remedial Action
One could be to expect action to reduce risks based on experience.
- After the Indian Ocean tsunami of 2004, a 3.2-km wall was constructed at Kalpakkam, which was in the path of the tsunami, fortified with sandbags, rocks and embankments. (The plant is situated at over 9 metres above the sea, with the reactor floors at a height of nearly 10.7 metres.)
- The backup generators are located some distance away from the plant, out of the reach of tsunamis.
- Mangroves and casuarinas along the coast helped diffuse the impact of the waves in 2004. News reports indicate the Department of Atomic Energy plans to augment these after its recent review of coastal nuclear plants.
- News reports also mention that portable generators will be acquired for backup and tsunami alarms will be installed at coastal sites.
Other remedial measures based on experience may have been incorporated at Indian plants, or if not, could be incorporated now. For instance, referring to Fukushima, Dr von Hippel describes a filtered vent system designed to reduce radioactivity before releasing pressure from the containment building in the event of a meltdown (see diagram). Though it was ignored in the US, Sweden adopted it and so did France and Germany. Presumably, a benefit of Areva’s partnership with the Nuclear Power Corporation of India for constructing India’s new reactors will be the inclusion of filtered vents, if appropriate and not already in our design.
Costs, Benefits and Risks
Another issue is educating people on the risks, costs and benefits of different fuels. Life-cycle emissions capture one aspect of these costs (see figure for Europe).
A similar study is available for the US: “Life-Cycle Assessment of Electricity Generation Systems and Applications for Climate Change Policy Analysis” by Paul J Meier, University of Wisconsin-Madison, August 2002 (http://fti.neep.wisc.edu/pdf/fdm1181.pdf) Besides, there are costs such as population displacement and environmental effects associated with hydroelectric plants, land requirements and the environmental impact of manufacturing for solar generation, noise levels for wind farms, or pollution and the higher risk of accidents associated with coal [3].
Open Information and Communication
A third issue is easy access to accurate and relevant information. After the tsunami in 2004, the information sharing with the public was exemplary, with open and transparent briefings at Kalpakkam. This approach needs to be instituted as a standard operating procedure for governance by all departments and agencies, displaying integrity in systems, thereby instilling confidence in the public.
Prompt and accurate information about safety features including design and remedial measures could be compiled for ready access on websites, with pointers during press briefings. Regular and effective communication of systems and procedures, and measures to mitigate risks, could reduce our unreasoning dread of nuclear energy. Such steps would help assess risks reasonably and provide a good framework for governance and crisis management.
Notes
India's untapped potential: Are a billion people losing out because of spectrum?
Until the global economic downturn that began about two years ago, the economic model for spectrum distribution in India and many developing countries was based on the free market. But Ponappa demonstrates in a new report for APC that spectrum is worth treating as a public utility the way we do roads, electricity and other basic infrastructure, which would allow for people in rural areas to access spectrum-dependant services like mobile phones and wifi and increase quality of services for all.
Currently in India, as in most other countries, spectrum is being treated as a property, where “chunks” of spectrum are sold to the mobile phone and telecommunications operators with the highest bid. Commonly there are 3 – 4 operators in a developed country; however, in India there are up to sixteen. The extreme competition has resulted in the Indian bidders paying outrageous fees that they are never able to recuperate. So while the government makes a profit on the sale, this profit comes at a societal cost.
Ponappa proposes pooling spectrum and to have a set of network providers, who in turn serve operators for retail users. This effectively opens up the spectrum and could make costs ten or fifteen times cheaper than they are now.
“It is appropriate to push the concept of open spectrum in developed markets who underwent their development phase some 60 – 100 years ago and put in place basic infrastructure systems. But in countries like India and the Asian sub-continent, it does not make sense to do this because we are not at the same stage of economic development,” Ponappa told APCNews.
“When markets are well structured and organised,” he continues, “[government control] can be less effective and efficient for society as a whole, compared with open competition. However developing economies don’t have the integrated systems in place that advanced economies do. India does not have an adequately developed network of copper, optical fibre or microwaves covering most of its population. And we are at a stage of development at which infrastructure is a fundamental determinant of productivity, as well as of a reasonable quality of life.”
Ponappa argues that in India’s case it would be advisable for governments to work with other stakeholders – corporations, state-owned agencies, and civil society – on a collaborative solution. “It would be much more conducive to a sound economy to have either the government step in and open up the commercial spectrum, or to have two to three main operators (possibly subsidised, but not necessarily) as we do with the provision of utilities,” he says. Yet, the free market mentality continues to reign, and a surfeit of operators is trying to make a profit in the telecommunications wireless sector.
Everybody wants a piece of the pie
In India, every operator is assigned a sliver of spectrum for their exclusive use and the rest is assigned to the government, the public sector and defence.
The result is high-cost infrastructure for operators (setting up networks with multiple sets of more advanced equipment because of the limited spectrum, with the capital constraints resulting in less extensive networks in rural areas) as well as for users (who have to pay for all this equipment).
“Too many operators make for increased capital costs for each operator, and cumulatively for all operators,” Ponappa explains.
And these higher costs are increasingly difficult to recover from consumer-generated revenue, as India undergoes huge price wars. Many operators may eventually go bankrupt. While no consumers ever complain about low costs –and India has some of the world’s lowest mobile rates– they will complain about poor quality and unreliable service. Consequently, consumers may not have to pay much to use mobile services, but they may not always be able to make or receive calls when they need to, and do not have access to broadband.
While most countries have moved on to 3G networks (which has more capacity for a given spectrum band than 2G, meaning better call quality) as many as four of India’s sixteen operators have not even developed their 2G networks. Making the switch to 3G seems like a good idea, but there are substantial costs associated with deploying these more advanced techniques to both operators (for network upgrades) and for end users (in terms of new handsets).
Too much competition in this case has made operators inefficient.
Spectrum as a national common good
If spectrum were treated as if it were a public utility, posits Ponappa, each operator would have access to a bigger chunk of spectrum, and the traffic-handling capacity of each would increase at a lower cost.
“With the current model the capacity of networks is suffering because networks cannot afford to expand or make technical improvements without economic losses. Other infrastructure services such as electricity and water supply are managed by utility companies, which are typically monopolies for a product-segment, or duopolies for purposes of competition. So why not treat spectrum the same way?” suggests Ponappa.
Ponappa suggests treating networks, and spectrum as a part of networks, as we would an oil pipeline, where everyone accesses the same one, and pays a fee for its use.
This would bring more people onto the network and increase revenues, since operating costs would be shared. The more revenue it can generate, the more efficient operators will be, using the same high-capacity circuits. The more revenue the main operators have, the more they could invest in up-to-date technology to extend their networks and provide a better service to clients. The better the technology, the more people could access the internet and other now vital sources of information, as well as focus on broadband and infrastructure to the country’s isolated rural areas, which today have rudimentary communications infrastructure.
India’s rural populations, the lost resource
As a predominantly rural country, lack of basic IT infrastructure means that the largest segment of India’s population has no access to information and communications technologies.
Ponappa grew up on a farm in a rural area some 200 km from Bangalore where even fixed line phone networks were unreliable. “We have multiple telephone lines because we never know which one will work,” he says.
Given India’s massive rural population, this means that there are hundreds of millions of people that are unable to access the internet. Services like quality distance education are not even an option if basic infrastructure such as fixed telephone lines is not in place and the country itself is losing out on the incalculable potential of this untapped human resource.
Download the report here [pdf - 280 kb]
See the report in the APC website
This article was written as part of the APC’s project work on Spectrum for development, an initiative that aims to provide an understanding of spectrum regulation by examining the situation in Africa, Asia and Latin America.
Photo by kiwanja. Used with permission under Creative Content licensing.
Big-Bang Budgets?
A good holding action in the face of turbulence is a real achievement. It’s a tremendous relief, with a positive spin. That’s what the finance minister seems to have given us with this year’s Budget. So, the glass could well turn out to be half-full, if heaven plays its part, and the demons — for example, rising oil prices because of turmoil in the Arab world — are in abeyance. For now, India’s spirits are up, and we have a shot at getting on with it. And if we don’t, heaven forefend, the government could resort to something as irresponsible as another spectrum auction (2.5 GHz for 4G/LTE) to pull itself out of the morass.
Given this reprieve, how best can we capitalise on it? Some of us have this notion that it is a tradition that major projects or schemes are announced at the time of the Budget. Is this a good way for the government to proceed? Are there better ways, and if so, what might they be? Also, after the Budget, several opinions reflected disappointment with the lack of big moves. What sort of actions would deserve the “Big Move” label?
Ignoring for the time being the FM’s statements about bills for banking, insurance and pension funds that could add up to a big bang, there was in fact a Big Move, with the ground prepared well beforehand, as it should be: the proposed cash transfer of Rs 37,000 crore allocated for kerosene, LPG and fertilisers to BPL users. This move to cash transfers will be a major change that should be for the better, despite apparent misgivings from the Left. In fact, its effect should be much more than an equivalent allocation in the previous system, with its infamous leakages. The logical extension of this process would be smart-card purchases of specified products with designated limits from any retailer, with direct rebates from the government in a single transaction. No forms, no fuss, thanks to the Unique Identification Number (UID). Next could be food subsidies of over Rs 74,000 crore through smart cards.
In this time of drift over several years, there has been an apparent lack of visible leadership until the appointment of a new telecom minister after the destabilisation of the past few months. This was followed by the prime minister’s assertive statements in both houses of Parliament. Similarly, the UID thrust and the first step with cash transfers show that the government can indeed take well planned initiatives. Here we have a set of steps taken with clear objectives (although somewhat muddled in the telling), with plans being developed and executed with what we hope will manifest as high quality, on time and within Budget. So it’s possible, although not our usual practice. If only we could get more of this assertive leadership to good ends.
Imagine if we brought the same clarity of objectives and conceptualisation to, say, addressing the supply of energy to end users. True, this is a very difficult area because of the multiple challenges across several ministries/agencies (fuel production and distribution, transportation, power generation, transmission, distribution, pricing, state electricity boards), and our habitual malpractices as users. The approach, however, would presumably be the same as for the UID. We would start with clear objectives that are coherent, ie, not disjointed or contradictory, and undertake a systematic, multidisciplinary effort — no ivory tower geniuses — to plan and execute through a process of sound project management to achieve the desired results. This would be an end-to-end effort that would have little to do with the budget except for the annual announcement of financial allocations, once the activities and resource requirements are specified. Its fundamental characteristic would be that it would have to be an integrated systems approach to get results.
Most important are well planned, convergent, goal-directed activities. Whether for food storage, anganwadis, power, roads, railways, integrated energy and transport programs, or communications and broadband, the process flow needs to be defined thoroughly, and every aspect specified for our environment in the implementation plan. This process would improve the odds of achieving the objectives. For instance, if cold stores are not meshed with production and markets, or transport linkages are deficient, chances are that they will fail.
The process could begin at any time of the year, and not necessarily announced at budget time in the annual cycle. Once the initial approach is conceptualised and the initiative launched, the programme plans would be scoped and spelt out, and the budget estimation completed. At budget time, as with the cash transfers linked to the UID, there would be an allocation of funds for the activities in the next 12-month phase.
Now to the Railway budget: the much touted Railways desperately need rehabilitation. In view of the significant multiplier effect that the Railways have on many other sectors, the government really must reassert its leadership in the next couple of months (after the West Bengal elections?), and reclaim this crucial area of transportation. The urgent need is to reverse the atrophy over recent years, as well as to begin to build for the future, as for instance China has done, with trains that take passengers over 1,000 km in three hours.*
To conclude, it is time the government took one infrastructure sector or programme at a time, including education/vocational education/continuing education, and developed clear, goal-driven plans to provide the framework for the next budget session.
* 'China Sees Growth Engine in a Web of Fast Trains', Keith Bradsher, New York Times, February 12, 2010:
Read the original article in the Business Standard here
Spectrum auctions - 'Jhatka' or 'Halal'?
Why do people advocate spectrum and licence auctions? Is it because they think auctions work? Is it the appeal of an ideology, like capitalism or socialism? Or is it because governments often collect large sums, and auctions seem fair (in a market-driven sense) and transparent? Theorists apparently cannot find better ways to allocate spectrum or licences, despite the alternative of technical and financial short-listing followed by a lottery. Yet, while desiring high government collections, people really want reasonably-priced good infrastructure, and continue to rail against government waste. Let’s review some so-called “successful” auctions and what followed.
1994: The US spectrum auction Prior to 1994, the US used to allocate spectrum on demonstrated capacity and merit (“beauty contests”). The spectrum auction in 1994 netted record bids. The Federal Communications Commission chairman reportedly said: “Auctions have proven once again to be a success not only by awarding licences to those that value them most, but also by decreasing the national debt.” Then disaster struck, with a number of “successful” bidders declaring bankruptcy. As BusinessWeek put it in 2010 with the benefit of hindsight, “... over time, beauty contests have delivered fewer problems and higher value to society than have airwave auctions.”1
1994: India telecom licences In 1994, India auctioned telecom licences. Chaos followed owing to overbidding and default. Thereafter, the sector struggled from one contention to the next, with the government and operators deadlocked by 1998. The New Telecom Policy of 1999 provided a breakthrough, tossing aside the auction bids in favour of shared revenues. After the percentage share was reduced to reasonable levels, and “Calling Party Pays” halved tariffs in 2003, mobile services grew exponentially to over 725 million subscribers by 2010. Interestingly, the Telecom Regulatory Authority of India estimated that auction fee foregone till March 2007 was over Rs 19,000 crore, whereas actual revenue collections were double, at Rs 40,000 crore; by March 2010, the collections were 80,000 crore.
2000: The UK 3G auctions The 3G auction in the UK was hailed as a spectacular success, reaping bids of about $35 billion.
2000: The France and Germany 3G auctions Germany followed, netting $67 billion, and the finance minister quipped that the auction was for unexpected revenue to pay the national debt. France demanded a flat fee of $4.5 billion per licence.
The dotcom bubble burst in March 2000, followed by communications and technology companies a year later, and the bidders went into a tailspin. The collapse nearly bankrupted not only British Telecom owing to the enormous debt it incurred for the bids, but the entire industry worldwide. The economic slump that followed made it impossible for firms to pay off high debts, as their interest payments increased while their ratings fell.
A contrarian move in France is noteworthy for its prescience and insight. CEO Martin Bouygues (pronounced “Bweeg”) of the third mobile operator, Bouygues Telecom, refused the government’s demand of $4.5 billion as the fee for a 3G licence, making it the only mobile communications company in Europe with no investment in 3G. Mr Bouygues’ letter in May 2000 appeared on the front page of Le Monde, asking: “What should I tell my employees? … That we have a choice between a sudden death and a slow one?” While his opposition was ignored, by 2002, the French government dropped its asking price by more than 85 per cent to induce Bouygues to accept a 3G licence.
In terms of results, the auction “failures” – the Netherlands, Switzerland, Sweden, and “non-auction” countries like South Korea, Japan and Finland (until 2009) – have the best broadband services. 2
Kapil Sibal’s appointment as India’s telecom minister has brought hope, with prospects of radical improvements in infrastructure, especially broadband, with a clean hand. Mr Sibal’s recent pronouncements on a new telecom policy, however, raise the spectre of another deadlock. Here are two examples: (a) “Adequate spectrum will be provided to all service providers.”
This is feasible not through slivers of spectrum for many operators, but only if there is a common carrier access, that is, all operators can access spectrum for a reasonable fee. There is no indication of what “adequate” means, nor of pooling or sharing spectrum.
Let’s hope the domain experts have been heard and not shouted down on “adequacy”. For instance, the Telecom Equipment Manufacturers’ Association had recommended that two blocks of 50 MHz each in the 698-806 MHz band be allocated to facilitate the development of wireless equipment and services. Large blocks of contiguous spectrum offer far more efficient capacity than many narrow bands. For local innovation, to get low costs, we have to think of adequacy in these terms, and not slivers of 4.4 MHz or 6.2 MHz.
(b) “Spectrum henceforth will be awarded only on a market-based mechanism.”
If the criterion for success is high bids and not delivered services, in effect, this means auctions, and the result is likely to be dismal. Those enamoured with auctions focus on the success of bids, ignoring the purpose of spectrum/licence allocation, which is service delivery resulting in consumer surplus (societal benefits).
If the operators choose to roll over and accept authoritarian decrees, the conflict will be between government and the public interest, as spelt out below.
The government’s choices include:
- a genuine effort at developing comprehensive and integrated policies for reasonably priced services, while carrying along stakeholders;
- a cosmetic effort, letting stakeholders vent, and then issuing arbitrary decrees that leaves a mess. For example, too many operators with fragmented spectrum; or
- attempting a political or populist fix, seeking to make the United Progressive Alliance look good, the Opposition look bad, bleeding all operators to avoid accusations of a sell-out, and still leave a mess
The policy langurs
At this difficult point in our hapless trajectory as we thread our way through the divine comedy, there is a sudden burst of light, cutting through the gloom of the new year: an uncharacteristic but effective bipartisan effort by a group of parliamentarians in dealing with a practical problem. This is the saga of the hapless and troublesome monkeys of Raisina Hill and its environs, booted out by the Brits to build the Rashtrapati Bhavan and the Central Secretariat, and the parliamentarians who live on Mahadev Road nearby. Press reports say that BJP Spokesman Prakash Javadekar adopted a problem-solving approach by suggesting to six of his neighbours (five Congress MPs and one Independent) that they collectively hire a langur patrol to shoo away the monkeys that have been marauding in their gardens. Five of the six responded positively, and so they have a langur patrol, as do a number of government buildings there. And the monkeys stay away.
Why is this important? Because of how powerfully it illustrates the obvious: that collective, goal-oriented action can be very effective in achieving results. Now, if this could be extended to bipartisan initiatives (in the sense of government and the Opposition in the context of our fragmented politics), e.g. in building national assets like infrastructure, then constructive, forward-looking policies can be framed, and we can start building on what has gone before. This will take us past the blight of being in a perpetual stall. One example is resource-sharing for countrywide broadband and communications services. Another is our approach to energy production and supply. And so on.
The bipartisan imperative
I have written earlier on the rationale for spectrum- and network-sharing for broadband and telecommunications.
The framework for this kind of resource-sharing and organisation cannot be done without bipartisan efforts at the policy formulation stage for conceptualisation and during implementation, because various state and local governments will be involved, as will many central government ministries and departments. A bipartisan approach is also essential for devising supportive tax policies, including the development and execution of uniform, inexpensive rights-of-way charges at the state level. Not least will be the question of spectrum pricing, a matter muddied by so much contention and confused thinking regarding the economics and the technology, aggravated by opportunists seeking to make a killing, together with the well-intentioned but ill-informed flailing of strident advocates urging counterproductive measures like cancelling licences without due process and/or holding more auctions, all supposedly in the national interest, oblivious of the consequences.(Click for OPTIC FIBRE CABLE NETWORK)
To appreciate the compelling logic, consider the network of an organisation like RailTel, with over 35,000 route km of optical fibre cable (OFC) network, or Gailtel with about 14,000 route km of OFC and planning close to 19,000 OFC in the next few years (interactive maps at: http://www.gailonline.com/gailnewsite/businesses/telecomnetwork.html).
BSNL has over 67,000 route km in the southern region alone, and other PSUs and private operators like Bharti Airtel and Reliance have their own extensive networks. Combining or integrating these will shift the focus to the tasks of last-mile access and spectrum deployment to achieve potential connectivity for most households and users.
Imagine the potential with some (three or four?) consortiums of wholesale service providers for the country having access to the combined networks of all or several such owners, including the collective capacity in terms of spectrum, access, aggregation and backhaul. These, in turn, could enable access to many retailers for local services to end users.
A second substantive aspect of such a bipartisan initiative is in structuring the national backbone facilities organisation, e.g. on the lines of Singapore’s OpenNet*. This may be an opportunity to capitalise on the BSNL and MTNL networks and revive them, perhaps as the anchor investors (possibly with other PSUs, such as RailTel, GAIL, and Powergrid). This anchor investor consortium could hold, for instance, 30 per cent of the equity in the venture. Other participants could include international companies like Axia, which design, build and operate next generation networks. Axia started out in Canada over 10 years ago and now has projects in France, Spain and Singapore, and has bid for a project in America. Other participants could be like Spectrum Bridge, a US company which runs centrally managed spectrum networks in America in the TV “white spaces”, the digital dividend from TV spectrum reallocated for telecom purposes. Their database-driven approach could be applied to the entire pooled spectrum of a large network with the participation of systems integrators like Infosys, TCS, Wipro, or IBM.
A third potential initiative is to encourage R&D and applications, perhaps seeking the development of local standards for wireless communications in the long term, even the Holy Grail of inexpensive “cognitive radio” (self-managing end-user equipment) with open spectrum. The size of our market offers the potential for such ambitious and potentially beneficial development. This will need policy support, especially for collaboration between defence and the private sector, with the creation of sustained support over a long period.
We know the apocryphal tales like that of the four bulls and the lion: the bulls are safe as long as they stay united, but when they squabble among themselves, the lion picks them off one by one. There is Aesop’s fable of the old man who shows his sons that while they can easily break one stick at a time, the same sticks bound together cannot be broken. Or the Mongolian story of the five siblings, the ancestors of the Mongolian clans, whose mother shows them that while each can easily break a single arrow, the five arrows tied together are unbreakable.
Despite this knowledge and evidence that the comforts of civilised living for all Indians require dedicated collective effort, we refuse to work to this truism of the need for collaborative effort. Suddenly, Mr Javadekar’s can-do Langur Initiative changes the game.
Even as the due process of law continues with regard to past wrongdoing, our parliamentarians should be grappling with substantive issues of nation-building such as those described above, instead of wasting time on tearing each other down.
Read the original in the Business Standard here
Take 'Model T' for Telecom
The 2G spectrum troubles give India an opportunity for clear thinking and purposive action for a significant impact on people’s lives. We (all stakeholders: operators, central and state governments and agencies, the media, opposition parties, PSUs and private corporations, and citizens) need to recognise that there are two distinct aspects to the wrangle: legacy problems and the way forward. The 2G controversy has to do with the truth and consequences of legacy actions. The way forward concerns our fundamental purpose, i.e. the delivery of effective and efficient communications services. What then must we do?
1. Past problems: Follow due process
Many commentators and sections of the public take a shotgun approach, demanding the cancellation of licences and auctioning confiscated spectrum. This is outside the purview of the law and will destabilise the sector and the economy, as will any arbitrary government action.
In a democratic society, there is a proper way to address these problems: through the due process of law, not summary judgements ending in figurative lynchings. There are contracts with operators, and we have to learn to respect and enforce the law. Use harsh penalties by all means, but only after (a) going through due process in establishing the facts, (b) provided there is evidence of culpable wrongdoing, and (c) the law calls for harsh penalties. If the law calls for a slap on the wrist, we need to change our laws for serious crimes, not resort to mob violence in the guise of righteous outrage.
2. Present and future needs: Approach needs with a sense of purpose
A different aspect of the predicament relates to how we can achieve improved communications infrastructure and services in India. This includes broadband Internet, voice telephony, TV and radio. We need a constructive approach encompassing services, hardware and software, instead of being mired in outmoded practices based on exclusive spectrum allocation, for example. Our focus has to be on our purposes/needs: ubiquitous access at a reasonable price. We need broadband for every household. How do we get it? (Click for graph)
Capitalising on the low-margin model
The growth of mobile telephony provides a workable model. The graph above shows the rise in subscriptions with declining prices after the shift to revenue sharing in NTP ’99, together with reductions in revenue share percentages for licence and spectrum fees, and in the access deficit charge.
This is a good instance of Henry Ford’s low-margin, high-volume strategy for the Model T. To sustain low tariffs extending to broadband, we need to reduce extraneous levies. A Trai study of 2005 showed government levies on telecommunications in India were far in excess of China, Sri Lanka and Pakistan.*
The study also showed that licence fees from the original auctions would have amounted to Rs 19,314 crore through 2006-07. According to the CAG report, licence and spectrum fees with reduced levies actually amounted to Rs 40,169 crore by 2006-07, i.e. double the auctions; by March 2010, the figure was nearly Rs 80,000 crore.** Over a long period, reduced revenue share for licence and spectrum fees has resulted in explosive growth as well as higher government collections than auctions and high fees.
The study also showed that licence fees from the original auctions would have amounted to Rs 19,314 crore through 2006-07. According to the CAG report, licence and spectrum fees with reduced levies actually amounted to Rs 40,169 crore by 2006-07, i.e. double the auctions; by March 2010, the figure was nearly Rs 80,000 crore.** Over a long period, reduced revenue share for licence and spectrum fees has resulted in explosive growth as well as higher government collections than auctions and high fees.
Initiative by ministry or PMO?
Why can’t the communications ministry, the DoT and Trai effect this transformation? Recall the scope of NTP ’99 and the role of the Prime Minister’s Office (PMO) for these reasons:
First, reduced short-term government revenues. In the long term, the revenue sharing in a vibrant sector far exceeds the auction take, as shown above. Recall that the primary motivation for the licence auctions of the 1990s and the spectrum auctions was collecting government revenues. Hence, the first criterion is the stance of the finance ministry and the government on revenue collection.
A second criterion at the state level is also financial, for rights of way charges.
Third is India’s approach to spectrum management. Spectrum use can be structured like road or rail networks, or oil pipelines, instead of being treated as exclusive property or usage rights. The difference in costs and benefits to society is staggering. It’s like the right to use daylight or the air we breathe. Visible light is a part of the same electromagnetic radiation, so if there is a charge for radio frequency spectrum, why not for visible light and/or the atmosphere? Rentiers might see this as an opportunity for revenues, but democracies surely must consider it against the public interest.
Existing networks of various government undertakings, including PSU operators BSNL and MTNL, PowerGrid, Gail as well as private operators, could be managed as national assets, as described above for spectrum on payment for usage. This need not mean government control and administration, as there could be a consortium with government participation. There are compelling economic reasons for public access to spectrum and networks because of the drastic reductions in investment, with higher asset utilisation, environmental benefits from less redundancy, and reduced radiation from towers, as in one highway network instead of many.
The opportunity
Even as the law takes its course on wrongdoings, we need a new “New Telecom Policy” on the lines of NTP ’99. This is essential for transformational changes in communications services, clearing up confused policies that are at cross-purposes, and extending to boundary domains in ICT. We should aim for “Model T” pricing with access for everyone. We need an across-the-board initiative to replicate the successful aspects of mobile telephony for broadband and other forms of communication (TV, radio). The PMO could orchestrate a workout with all stakeholders that builds in the benefits of shared network resources, including spectrum, with efficient, low-frequency spectrum for rural communications with much less capital investment.
* Study Paper on “Indicators for Telecom Growth”, Trai, 2005: http://www.trai.gov.in/trai/upload/StudyPapers/2/ir30june.pdf
** “Performance Audit Report on the Department of Telecommunications, Ministry of Communications and Information Technology”, http://saiindia.gov.in/cag/union-audit/report-no-19-performance-audit-issue-licences-and-allocation-2g-spectrum-department-tele
Read the original in Business Standard here
3G Life
In the days of dial-up connections in the late 1990s, this was the procedure for downloading a picture from the Internet:
Step 1: Switch on the modem and make sure the phone line is working.
Step
2: Press connect on the dialog box and wait with bated breath to hear
the sound of the “handshake” connecting the modem to the server.
Step 3: Try three-five times to finally get that connection. Increase your ability in creative swearing in the meantime.
Step
4: Hope that nobody calls on the landline while the connection is
running. If somebody calls, go to Step 2. Type the URL, press Enter. Go
to the kitchen. Brew a cup of coffee and come back.
Step 5: Click on
the link of the picture you want to load. Go for a walk, take a long
shower, eat your dinner and get back to the screen. Swear profusely
because the connection went kaput in the middle of loading the picture
and all you can see are pixellated patterns. Begin at Step 2, promise to
be a better person who will be kind to puppies and smile at strangers.
And this is only the truncated version. If your karma was on a particular bad spin, you might have other additional steps (including turning your modem or computer on and off, because it had hung) that would increase your faith in god. To all of us who grew up in those days, the arrival of broadband was an answer to the collective prayers sent by geeks across the (mother)board in the dark hours of internet despair. The world changed with broadband, as email, blogs, sharing of pictures and information, making voice-over IP calls and connecting with people from different parts of the world became a matter of clicks.
True, there were the irritations of buffering and the heartfelt angst of that slight lag between Send and Receive over IM and email, but the accelerated speeds changed our notions of time and space. Instead of Bulletin Boards, which were more like post-it notes on refrigerators, left and collected within 12-hour intervals, we moved to Instant Messaging, which was like passing notes in the classroom to see immediate reactions and responses. For us in India, the World Wide Web opened up, for the first time, not only as something we consume but we also contribute to, adding data, providing alternative perspectives and questioning the existing views. Since the arrival of broadband, geographies have shrunk, time zones have blurred, lifestyles have become homogeneous, the singular silence of solitary voices has been replaced by the cacophony of multiple presences and everybody knows just a little bit more about their neighbours than is beneficial to anybody.
What broadband did to the snail-paced but exciting world of text-based communication and slow information transfers, 3G promises to do to the burgeoning world of mobile data access. 3G, which stands for third generation, promises to change the face of mobile computing drastically. The interface of the computer has become increasingly mobile in the past few years. Smartphones and PDAs have already unanchored us from the tyranny of sitting in one position to use the Net. Mobile technologies combined with access to the internet have led to interesting ways in which digital natives have straddled physical and virtual worlds. It has also led to new forms of participation where first-hand witnesses, citizen journalism and new interaction channels have resulted in structures of good governance and democracy. Wireless networks of mobile phones also mean that remote areas with poor infrastructure are now able to get on the Infobahn to access information.
The opening up of the 3G spectrum and the easy availability of high-speed data access on devices like smartphones, tablets, laptops, netbooks, e-book readers, etc, promises to accelerate these advantages. With extremely high-speed internet available on mobile devices with rich browsing capacities, one of the paradigm shifts will be in how we visually relate to the internet. We often forget that cyberspace, even though it is a visual medium, is also a text-heavy medium. This emphasis on text means that it excludes a lot of people who might not be conversant with English, the de facto language for most international discussions. It also excludes people who might be visually or print-challenged. 3G is hopefully going to change the way in which we interact with information online and bring in more multimedia, audio and video elements into it. And this means that video chatting on phones is now just a dial away.
In countries like Japan, North Korea, Syria, Singapore and the US, where 3G has been rolled out, there have been dramatic changes. Content generation and cultural production have gone up tremendously. As more inexpensive devices offer internet gateway through 3G, people think of themselves as not mere consumers but also producers of online content. Citizen journalism has flourished and events that are often glossed over by mainstream media find visibility and space in an international dialogue. 3G promises easy, affordable and extensive networking possibilities to communities and people who often exist in remote and isolated areas.
Technologies in themselves do not change the world. However, there is no denying that ease of access, scope of expanse and affordability that the 3G spectrum brings is going to create populations, and eventually generations, who are one step closer to Singularity — the vision of creating perfect networks where human memories, thoughts and ideas work in synchrony with technology networks. This Diwali, when Tata Docomo offered 3G services in 20 cities, the biggest bang was in the noisy silence of data travelling at huge speeds in the ether. New service providers will transform your digital device into a magic box, combining entertainment, interaction, communication and information access to stitch you in better into the fabric of a world that is quickly becoming digital.
The ABC of 3G...
How will 3G change the way I use my phone?
3G enables you to access internet on your phone at extremely high speeds. Which means, you can play a YouTube clip on your phone without buffering; check PDF files and attachments on your BlackBerry with ease; download music and transfer files faster. Video calls from one network to another will become easier, and more popular. You can also watch television on your cellphone.
Will CDMA and GSM phones support 3G?
3G will be available to both GSM and CDMA customers, if you are on a 3G network.
Can I use my existing handset to get 3G speeds?
Only if your handset (whether a smart-phone or not) is 3G or 3.5G-ready.
How can I make video calls?
You will need a 3G-enabled handset and a front-facing camera. The person you are calling should have a 3G handset and be on a 3G network. If you don't have a front-facing camera, you will be able to watch the person you are speaking to, but he/she won’t be able to see you. If your phone supports Skype, you will be able to make free calls to another Skype user.
Is a front-facing camera a must on all 3G phones?
It is if you want to make video calls. If you are only going to use 3G speeds to access email, check Facebook, and share documents, you won’t need it.
How does 3G change entertainment options?
Worldwide, the biggest consumption on 3G networks is of television. And not without reason: there is plenty of bandwidth available and phones with 3” to 4” screens make watching TV on the go a pleasure. Most mobile TV users in 3G countries are people who use public transport. But with many urban Indians still driving to work, I don’t know if mobile TV will catch on. You can, though, check the latest news or catch one over of a Test match between meetings.
How does 3G affect the way I interact with my environment?
A friend in Singapore saves approximately $100 every month on parking fees, as his 3G connection tells him about the cheapest parking options in and around his geographical location, at the press of a qwerty key. Similarly, you can find out about places to dine out, the deals the nearest mall is offering or the location of the nearest ATM. In India, such location-based services have not taken off, though some malls and shopping centres send you information about their deals of the day on Bluetooth.
Will I need to pay separately for 3G?
Yes, there will be a subscription charge for data access, above your current voice plan. Though the operators have not revealed price plans, you should typically look at plans in the range of Rs 300 per month and upwards for 3G usage.
Will I be able to use 3G on my PC?
If your phone allows using you to tether its internet connection to your personal computer (or Mac), you can access internet at 3G speeds on your PC. Some laptops now also include a SIM card slot, in which you can slide a 3G SIM to get 3G connectivity. Devices like Apple’s iPad with a 9.7” screen, the Samsung Galaxy Tab (7”) and the Olivepad (7”) can also connect to 3G networks, letting you surf, stream music or videos, or work on the move.
Do I need 3G?
Like with each technology, there will be late movers and early adopters. I know of a lot of people like me who would like to have high-speed internet access on the move. And I also know of people who don’t want to check email more than once a day. It will depend on where and when you want to get connected.
What kind of speeds can I expect?
Depends on your service provider, but you can expect an average of 1 megabits per second download speed, allowing you to stream videos and music without buffering, as well as do high-speed file transfers. There might be a limit of 300 Kbps on upload speeds. So sending large files may still take more time, but downloading will be faster.
What tariff plan should I choose?
If you are going to use 3G mostly for video calls, choose a service provider with a good tariff plan for video calls. If you are going to use 3G to access internet services such as Flickr, YouTube and Facebook, and are a heavy Web user, unlimited data transfer plans make more sense.
What are the 3G plans available now?
Currently, MTNL provides 3G services in Delhi and Mumbai; BSNL offers it across the country. Tata and Reliance have high-speed USB data cards, which work on the 3G platform but provide data access to PCs, not phones. Tata Docomo launched its 3G services in select circles this month. Aircel, Airtel and Vodafone also plan to start 3G services by early next year.
Read the original article in the Indian Express here
Ideology and ICT Policies
Why do the same facts regarding people’s needs for ICT infrastructure give rise to different policies? Apart from problematic motivation such as malicious intent and opportunism, even well-intentioned policy-makers may prescribe entirely divergent solutions for a given situation. This is evident if one compares India’s broadband policies with those of most countries. There are at least two reasons for this: differing perceptions of the facts, and differences in underlying beliefs and assumptions, i.e. ideology, as distinct from objective data.
Consider the facts of India’s ICT space. In one sense, there has been spectacular success in the communications sector. One statistic cited as evidence is the phenomenal increase in mobile phone subscriptions (over 12 million in September 2010). Equally, to those who focus on aspects like the shortfall in services outside the big cities and towns, or the meagre broadband coverage and its inaccessibility in rural areas (i.e. in much of the country), the communications sector falls tragically short of its potential, and requires policy change.
In this time of India Rising interrupted by the Great Recession, there is a stark contrast between the orientation of our ICT policies and that of most other countries. One area is the extent of government intervention and spending on broadband development. Governments of most advanced economies have stepped in to dramatically improve their broadband networks and policies for user access. This is not only in the EU where, historically, the approach is that government acts to extend consumer welfare, but also in America, the UK and Australia, which are considered much more free-market-oriented in their approach, and in many countries in Asia, including China. Unlike in America since Reagan, regulatory intervention in Europe is part of more supportive policies at the national and local levels. But this time around, even America has embarked on a comprehensive Broadband Technology Opportunities Program, with the goals of providing access to users in unserved areas, improving access in underserved areas, supporting public interest schemes for broadband access, improving broadband use by public safety agencies, and stimulating demand for broadband, economic growth and jobs; there is also a separate Rural Utilities Service.*(Click for graph)
With regard to underlying assumptions and beliefs, an analysis on how economic doctrines affect policies by Robert D Atkinson of the Information Technology and Innovation Foundation offers a way to think through alternatives for better decisions.** His analysis is on ICT, although it can be applied to all sectors. To quote from his conclusion, for advocates and policy-makers, “differences over doctrine cause partisans to view facts differently and to focus on small segments of complex debates, leading to a breakdown of constructive dialog and much ‘talking past each other’.”
He summarises four ideologies or economic doctrines:
- Conservative Neoclassical (CNC)
- Liberal Neoclassical (LNC)
- Neo-Keynesian (NK)
Innovation Economics, also called structuralist-evolutionary, neo-Schumpeterian, or evolutionary economics (IE)
While he describes differences in nuanced detail, the simplified abstractions rendered as a logic tree in the accompanying diagram (above) show how economic beliefs affect network policies.
CNCs are characterised as being less concerned with fairness, and less likely to expect market failures. Therefore, network and broadband markets in which governments do not intervene are considered to be competitive, and require no unbundling or price prescriptions. Their bias is for pure competition.
LNCs are more concerned with fairness, as are NKs and IEs. They accept that telecommunication markets are not competitive, and that there may be market failures. LNCs and NKs would use policy to increase competition in different ways. LNCs expect more competition to lead to increased consumer surpluses. LNCs favour regulated competition, viewing more competition as better. NKs want more competition through directed government subsidies, e.g. for municipal broadband or to small companies (which they consider less rapacious than large corporations).
IEs believe broadband markets have economies of scale, and that increased competition could result in excessive and redundant investments. They consider duplication of existing, expensive infrastructure as inefficient investment. IEs view communications infrastructure as a “general purpose technology” that drives economic activity, innovation and productivity. Therefore, they advocate policies that invest in higher-speed broadband, and in extending network services to more people, favouring a national broadband policy. The US National Broadband Plan defines broadband as a “Transformative General Purpose Technology”, and most countries practise IE. Irrespective of their economic philosophies, most countries have embarked on an aggressive broadband plan.
In comparison, India’s approach does not fit any of these categories. There are no policy incentives for broadband, and actions like the spectrum auctions this year indicate a focus on collecting government revenues rather than on facilitating communication services. Whereas the OECD countries and other Asian economies are working on network resource-sharing schemes, India seems to have previous-generation preoccupations: revenue-collection-for-the-government, increasing competition per se, or abstruse technology considerations, such as loading the most traffic on every unit of commercially available spectrum, instead of maximising the economic benefits from it. Costs and benefits in the public interest are apparently ignored.
BSNL, MTNL and DD have networks that, if they could be channelled with the right mix of policies and private enterprise, could be part of the overall backbone infrastructure for open network operations, as is being done by a consortium in Singapore. If our policy-makers understand their biases as well as those of others, they could adapt beneficial policies from other countries, as demonstrated by many countries with different philosophies converging on improving broadband.
* “Broadband Stimulus Policy in Europe and the US: A Comparative Review”, Dariusz Adamski, Berkman Center for Internet and Society, Harvard Law School: http://www.nyls.edu/user_files/1/3/4/30/84/187/245/Adamski,%20SPRING%202009,%2018%20MEDIA%20L.%20&%20POL%E2%80%99Y.pdf
** “Network Policy & Economic Doctrines”, Robert D Atkinson, The Information Technology & Innovation Foundation, October 2010: http://www.itif.org/files/2010-network-policy.pdf
Read the original in Business Standard
Broad-basing Broadband
The central government and the Delhi administration have shown they can engage in sheer execution to save face for the Commonwealth Games. Couldn’t our governments choose to make similar efforts to improve an aspect of infrastructure that is perhaps the most powerful means for enhancing our productive capacity and quality of life: broadband? One might ask: why broadband, and not energy, water/sanitation, or roads…? While all infrastructure is essential, broadband gives the quickest, biggest bang for the buck, because of its nature vis-à-vis energy, water or transportation and our regulatory environment and functional organisation (for instance, the complexity of addressing power supply). If we could increase mobile phone coverage to present levels by reducing costs and increasing availability, it should be possible to do so for personal computer (PC) also, to draw on the wealth of free educational and training material for our vast numbers.
Unfortunately, for such infrastructure, there is no triggering crisis like the threat of failure of the Commonwealth Games, and consequently, no face-saving or glam factors, like the arrival of foreign teams and visitors. This article makes a case for a Commonwealth Games-type crisis management for broadband through a collage of factors.
Consider these aspects of our demographics1:
- Nearly 460 million people are aged between 13 and 35 today.
- Of these, 333 million are literate.
- In 10 years from now, the countrywide average age will be 29, compared to 37 in the US and China, 45 in Europe, and 48 in Japan.
- As many as 100 million Indians — the combined labour forces of Britain, France, Italy, and Spain — are projected to be added to our workforce by 2020, which is 25 per cent of the global workforce.
This indicates our productive potential. Its realisation would require education and training, efficient functioning, i.e. the matrix of enabling infrastructure, and organisation. If these needs remain unmet, the demographic opportunity can become the liability of an unproductive population, with attendant difficulties and social hazards.
We have many formal and informal institutions providing training and education. We add nearly 300,000 engineering graduates every year to our pool of 2 million engineers. India’s vocational training capacity is estimated at 3.1 million a year, whereas about 12.8 million people enter the workforce. However, the National Sample Survey (2004) found that only 2 per cent of the 15-29 age group had formal vocational training and another 8 per cent had non-formal vocational training. In the developed economies, the proportion of skilled workers is 60-80 per cent; Korea has 96 per cent skilled workers.2
Five years ago, McKinsey reported that only a quarter of India’s engineers were employable in the IT industry. Recently, a survey showed this has reduced to 18 per cent.3
Apart from training and education in specific disciplines, the processes that make for good work practices are: systems thinking, a scientific temper, and goal-oriented work practices to meet standards of quality and time. Then there are the attributes of playing team, while engaging in a hard-charging individual effort. All these skills and practices are necessary and can be learned and renewed over time.
How will our workforce of over 500 million, adding 12.8 million every year, have access to continuing education and training, information for civic amenities and facilities and easy, efficient access to commercial and public services? What about the prerequisites of schooling, vocational training and university education? To answer these questions, consider parallel developments in domains such as distance education, e-learning and smart applications. Here are glimpses of the transformation underway in university and secondary education, especially outside India:
- iTunes U has become one of the world’s largest educational catalogues for free educational material. After three years, there are over 300 million downloads. Over 800 universities have their websites at iTunes U, including many of the top universities from the US, UK, France, Germany, the Netherlands, Singapore and so on.
- Khan Academy (http://khanacademy.org), a brilliant, free educational site by an ex-hedge fund analyst and manager, Salman Khan (Salman Khan of Silicon Valley, not Bollywood), covers mathematics, physics, chemistry and biology, with over 18 million page views in August (http://khanacademy.org). Started in late 2006, Khan is reportedly developing an open-ended set of material covering many subjects, and is a favourite among people like Bill Gates, and John and Ann Doerr (Fortune: http://money.cnn.com/2010/08/23/tecnology/sal_khan_academy.fortune/index.htm). Of the 200,000 students who access this site every month, only 20,000 are from India.
- There are many other educational sites from school level upwards, for instance, the Open Courseware Consortium (http://www.ocwconsortium.org) by MIT, with US members like the University of California (Berkeley), Michigan and so on. Many universities and schools have their own websites. There is the Wikiversity, with portals from pre-school through primary to tertiary education, non-formal education and research (see http://en.wikiversity.org/wiki/Wikiversity:Browse).
India, BCG estimates that Internet usage will increase from 7 per cent of the population in 2009 to 19 per cent in 2015 (237 million). PC penetration, which was just 4 per cent in 2009, is estimated at 17 per cent by 2015 (216 million). To quote BCG: “India has among the highest PC costs and lowest PC availability of all the BRIC countries (including Indonesia).” Mobile phone penetration, however, is 10 times higher, at 41 per cent. This appalling situation needs to be redressed.
Inferences
Hundreds of millions of Indians should use these websites and the Internet for radical transformation. This will require policies and practices aimed at providing:
- inexpensive access to broadband;
- greater access to PCs and PC-equivalents as they evolve (e.g. Pranav Mistry’s SixthSense); and
- systems and processes that encourage distance education, and discipline in all fields, with professionalism and excellence across all activities.
Regulations and tax regimes determine which activities are profitable, and to what extent. This is where the government and its policies come in. Could Internet users in India converge public opinion to rouse governments to address these needs, emulating the example of Delhi Chief Minister Sheila Dikshit?
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http://indiatoday.intoday.in/site/Story/114002/India/aroon-puries-welcome-address-at-youth-summit.html
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Employment Report, Ministry of Labour, July 1, 2010: http://labour.nic.in/Report_to_People.pdf
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http://www.business-standard.com/india/news/engg-college-students-not-industry-ready-survey/388620/
What a highway can do
Even as the country reels from the extended rains and the imminent Commonwealth Games, there are unmistakable signs in Delhi’s environs of an unprecedented transformation. To see and feel this, try driving to the Delhi-Noida toll bridge (the “DND”), and go past Noida on the expressway to Greater Noida.
It isn’t perfect, and there are many details that could be handled better, from the assets built to how we use them. These include unfinished verges with construction debris near the Ashram crossing, cambers without proper drainage that get flooded in some stretches of the expressway, motorcyclists sheltering from the rain under the flyovers/overpasses spilling on to the expressway, pedestrians with no place to cross, trucks at night without even reflectors, trucks that are parked without hazard lights, tractors, and occasional cattle. Most dangerous are the undisciplined drivers who act as if they are puttering along at 30 km per hour while going at the 100 km speed limit or more, or who drive on the wrong side against oncoming traffic. And the resurfacing of the road in parts leaves much to be desired…
The transformation under way
Ignore this cavilling and carping, however, and it is bliss. One can cover 30 km from the DND toll plaza to Greater Noida in 20 minutes legally, although within New Delhi, it may take as long or even longer to travel just a few kilometres. I was amazed recently driving from Shantiniketan to Greater Noida in 40 minutes. It was like driving in California — quite different from the contentious driving that is customary on our roads.
The sheer ease and convenience apart, another, arguably greater, benefit is the gain in productivity. It is this potential for productivity that, if we can wring from ourselves, is one part of the equation in our pursuit of an improved quality of life. It is especially important because of our vast numbers, including the much-bruited potential demographic dividend, which is not new. As Babur put it in the 16th century*: “…if they fix their eyes on a place in which to settle …as the population of Hindustan is unlimited, it swarms in.” Little has changed, and much needs to be built from the ground up, starting with sanitation and water, not to mention energy, communications, and transportation systems.
But just consider: the limited instance of the drive on the expressway reveals a productivity gain of three to four times at 20 minutes for covering 30 km, compared with covering only 7-10 km in the same time (or taking three to four times longer for 30 km). That’s a gain of 300-400 per cent!
There’s another noticeable change: a willingness of everyone to work very much harder at whatever they do. All levels of people, from entrepreneur-managers to electricians, plumbers, gardeners, and day labourers, work so hard that a major change seems to be afoot. I am familiar with the hardworking farmer and rural wage earner, having grown up on a farm myself. I have also experienced the recalcitrance of some public sector employees and private sector unions, as well as the productive, hard-charging PSU, government, and private sector employees. Yet, in the work attitudes of boomtown Greater Noida, I see impressive energy and application.
The failings
Let me not gloss over the weaknesses. There are big failures in delivery capability, and these arise from two critical lacunae:
a) SOPs, systems and procedures
A major failing appears to be the lack of Standard Operating Procedures (SOPs) even for simple construction jobs, like painting metal: the ramrod, sequential steps of first scrape, then clean, apply primer, apply the first coat of paint and dry off; then apply the second coat… People simply don’t follow sound work practices — systems and procedures that, when applied, yield consistent good results. This is partly an endogenous failing, arising from lack of appropriate education/training and discipline. It is also partly attributable to the lack of organised systems and procedures.
b) Infrastructure
An equally critical exogenous failing of the environment is reliable infrastructure, whether in the form of energy (power/electricity), communications, transportation excepting a one-off good stretch of highway, or water and sanitation. Take any single area, say energy. The extent of wasted manpower because of lack of adequate electricity supply is beyond imagination.
Add the bases for learning and functioning competently, and there’s education (including training) and health care as a support function. Proper education and training — and discipline — are absolutely essential for learning and developing sound work processes, and for applying them. There was an impression many years ago that incompetence or recalcitrance in delivery resulted from the inadequate capacity of individuals. In the last several years, it is evident that we have good people, but they have very poor training, systems and organisation, and equally poor infrastructure. You could call it a lack of leadership and discipline at all levels.
What we need
We need two sets of fixes. The first is for our inherent failings: the lack of SOPs and the need to learn to work to inexorable checklists and timelines. It is imperative to learn the discipline of project management at all levels — starting from the top, not the bottom! This is a sweeping change that entails shifting from feudal criteria to respect for professional competence and processes.
The second fix required is a supportive environment: good infrastructure and the appurtenances of good policies. Going by the figures, we will build more roads, power plants and factories in the next few years than in the last 60. But the net gain to society will depend on their quality. If they are shoddy, the gains will be much less. Assets that are not integrated into coherent systems will be less beneficial than if they are integrated to deliver results, e.g. isolated housing without a web of transportation and communication links near where people work; isolated good stretches of highway. It is imperative that we design and execute the infrastructure to support our productivity. This is an area of weakness we must address and execute more comprehensively.
Read the original in Business Standard
'Containing Inflation' - A myth
It’s as if there’s a conspiracy to beat India’s growth surge to pulp, making sure the economy is hamstrung in the months and years ahead. Those of us seeking rational signals in the economy have watched incredulously as the cost inflation from edible oil, food and energy was misconstrued as overheating from 2006, leading to a series of misguided, self-destructive steps. Moreover, there has been a baffling obscurantism spread by many different quarters — the RBI, the Finance Ministry, and many economists including from the private sector, the media and press — spouting irrational sophistry about the need for the sledgehammer of rising interest rates “to contain inflationary pressures”.
Mutterings about the pass-through of international energy prices are of a piece. The effect of pass-throughs is to increase inflation further, and unlikely to reduce short-term demand (i.e. control inflation), unless the increase is so large that the economy slumps because of a drop in demand.
The build-up with the convoluted explications started with the RBI’s nagging suspicion [sic] in October 2006 that there “could be elements of overheating in the Indian economy”. This led to the hike of the repo rate from 7 per cent to 7.25 per cent, making financing more expensive in the Indian economy. By December 2006, the RBI raised the cash reserve ratio (CRR) by 50 basis points to reduce inflationary pressures, and by the end of January 2007, raised the repo rate to 7.5 per cent citing the demand-supply mismatch in food. By March 2007, the repo rate was raised to 7.75 per cent and the CRR by 50 basis points to 6 per cent citing continuing inflationary pressure. In June, the repo rate was raised to 8 per cent.
The benefit of hindsight makes it evident to all of us including the RBI and the government that these measures have done nothing to improve the supply of food or edible oil, or for the surge in petroleum prices. Inflationary pressures are expected to continue into 2009 despite these actions that have slowed the economy. So, what is the purpose, other than reducing growth precipitously? All that increasing rates and financing costs will do is to kill India’s growth story. This shows clearly in the figure in the slowdown from 2007 in GDP growth and in the Index of Industrial Production.
Increasing rates can only curb inflation by reducing growth so much that demand is curtailed for those whose ability to buy food increases because of higher earnings. That’s what the obfuscatory talk of “containing demand” boils down to: forcing the economy to slow so that some people can afford to buy less food. It is also clear that by increasing demand through the loan waiver and NREGS without addressing supply constraints, the government’s actions increased inflationary pressures. Likewise if the Pay Commission recommendations are implemented now instead of delayed for a year.
What rising financial costs have done to the Indian economy is to vaporise all prospects of high growth and profits. Further aggravated by the global slowdown and the repercussions of the continuing meltdown of home loans and overleveraged US consumers, this has reduced the prospects of currency inflows that have so far provided a ballast to India’s dream investment run.
Corrective Actions Require Substance, Less Form: The government and RBI could take a constructive, problem-solving approach to growth, inflation, interest and exchange rates, provided their purpose is solution-oriented and not a preoccupation with appearing to take action. These involve (a) avoiding gamesmanship — loan waivers, NREGS, the imperfections of the PDS — and addressing more effectively (b) fuel taxes and pricing, and (c) supply and distribution.
The first step may be to acknowledge that in the short term, there is little that can be done to ameliorate high food prices with one exception, while taking measures to improve supply over the medium and long term. The exception is interim steps to help the poor through food coupons that enable direct subsidies through existing retail systems.
Over the medium term, a system using smart cards needs to be planned and implemented through the retail network that provides direct subsidies for food and fuel to lower-income users. On fuel, there has to be a concerted move to reduce taxes and remove anomalies in petrol and diesel pricing (i.e. subsidising private vehicle owners, inappropriately encouraging the growth of small diesel vehicle manufacture and sales).
Equally important, we have to learn to take the good examples of applied research and extension to make them more of a reality. It’s as simple or as difficult as getting good applied research work done in the field, and providing convincing extension support to local farmers. I had the opportunity recently to review an excellent instance of applied research, combined with sound extension practices that ensure supplies of fresh vegetables wholesale, organised and channelled flawlessly.
Of course, unique aspects make this not easy to replicate. The first is a well-managed farmers’ cooperative. This was organised in Ladakh by the late Rigzin Namgyal Kalon of Leh with great foresight, integrity and ability some 40 years ago. Mr Kalon had the ability to see how farmers could prosper by organising themselves for supplying farm produce to the sizeable army presence in Ladakh. When Mr Kalon passed away in 2002, his peers had the good sense to appeal to his family to continue to lead their effort. The second is a wholesale buyer (the Army). The third is the presence of an institute engaged in effective applied research in agriculture, horticulture and animal husbandry in Ladakh. Started as the Field Research Laboratory under the Defence Research and Development Organisation, this is now the Defence Institute of High Altitude Research. This combination of elements provides the ingredients for a winning formula for the farmers of Ladakh.
Here are object lessons for those who see the potential for cooperatives, but think it cannot work in India. After all, there is Anand (the Gujarat Cooperative Milk Marketing Federation Ltd) and its extension to the National Dairy Development Board to prove that it can be done. We have to stop thinking of shortcuts, learn to replicate these ways, and teach ourselves to collaborate.
Read the original in Business Standard
Catching up on broadband
When it comes to broadband, India is “notably lagging its peers”, to quote Booz & Co, an international consulting firm.1 Its report recounts our pathetic coverage — less than half the anticipated 20 million — and recommends that both industry and government must act in concert. Spelling out the roles for both, it concludes that we need a national policy to improve fixed-line infrastructure more rapidly than the current market-based approach does, as well as satellite-based communications.
The report recommends this because advanced economies have broadband on widespread fixed-line networks, and many are pursuing strategies to further empower their citizens through state action, as before. The effects are many, but let’s start with examining costs. Figure 1 shows the relative cost of broadband in a sample of countries.
India seems favourably placed with its low purchasing power parity (PPP) cost. However, relative to costs in India, this is about 6 per cent of average monthly gross national income (GNI) per capita, ranked 78th, as shown in Figure 2. In comparison, the first 23 countries — Macao, Israel, Hong Kong, the US, Singapore, etc., Greece and Spain included — have costs below or close to 1 per cent; the next 16 have costs below 2 per cent. As the 39 countries have PPP costs of only 0.25 per cent to twice India’s cost, India’s cost as a percentage of its GNI is six times theirs, i.e. Indian users have to pay relatively more. Increasing GNI, while desirable, is harder, more complex, and will take much longer. By contrast, costs can be reduced quickly by sharing network resources and limiting government collections to a reasonable percentage of revenues, instead of auctions and arbitrary levies.
Broadband leaders
Wired Asian countries like Japan, Hong Kong and South Korea already offer broadband on the next generation of high-speed networks. Singapore’s approach especially should be of interest to India, with policies supporting a blend of public subsidies and private investment, while separating three activities: infrastructure, network operations (wholesale), and user services (retail).2
Two years ago, Singapore set out to create an environment with more open access to downstream operators by separating the building of infrastructure from the running of the network. It drew on the experience of local community networks in countries like Britain, France, the Netherlands and Sweden. Three Singapore companies partnered with Axia Netmedia, a Canadian broadband company, to form a consortium called OpenNet, the infrastructure operator. OpenNet uses one partner’s existing network (SingTel’s) as a base. With a government grant of 750 million Singapore dollars, OpenNet is building an extensive fibre-to-the-home (FTTH) grid to be completed by 2012. The second partner is a subsidiary of Singapore Power, SP Telecommunications, which leverages Singapore Power’s experience in developing infrastructure. The third, Singapore Press Holdings, is a leading media services company.
The network operator, a subsidiary of StarHub (a cable and phone operator), is Nucleus Connect. Residential services at 100 mbps have been announced, to be provided by over 10 retail service operators. While some analysts opine that increased competition may not lead to appreciable cost reduction, Singapore is already ranked fifth-lowest in cost as a percentage of average monthly GNI per capita.
Can India do some catching up?
a) Can India do something similar? Don’t we need to? How?
The answer to the first question is: only if the government decides on a concerted drive.
To the second: yes, to be competitive.
To the third: with a comprehensive, integrated systems approach. It is insufficient if only one or a few ministries and agencies are involved, because the development and execution of solutions require cutting across turf boundaries. The conventional approach of the ongoing Trai consultation followed by recommendations addressed by the DoT is simply inadequate, because their charter is too limited. Many issues concerning commercial and user decisions, particularly of government agencies and the Department of Defence, and radical changes in approach need active participation from these players as well as the private sector for resolution. Examples are Booz & Co’s recommendations of a better fixed-wire network, and satellite communications in the Ka band, or the possibility of exploiting the cable and satellite TV network of around 110 million households. The entire communications network, or at least the backbone, needs to be shared for efficiency, unlike the existing limited tower-sharing. Also, state governments need to be closely involved in issues like Rights of Way and user needs.
b) Governments at the Centre and all states need to facilitate the productivity of their citizens, instead of hamstringing them with taxes, levies, auctions and dysfunctional policies. This is more easily said than done, with our predatory history, fractious coalitions at the Centre and states, and freewheeling, combative state governments. Governments at all levels have to coordinate this problem-solving initiative for all stakeholders, adapting the experience of leading broadband countries, instead of predatory behaviour seeking personal gains. The consultative process needs to agree on goals, and then figure out practical ways to achieve them.
c) With inspired leadership and a constructive approach, half of the over Rs 1,00,000 crore from the 3G and BWA auctions could support a broadband gambit drawing on concepts like Singapore’s public-private partnership, instead of being just a damaging revenue-collection exercise. Again, easier said than done, but with result-oriented, strong leadership to elicit enlightened employee engagement, even MTNL and BSNL could be partners in a core network in a role like SingTel’s. A public-private network-builder can draw on the combined strengths of its participants to provide a platform for a number of private operators. Separating the infrastructure building and operations from wholesale network services and end-user services could make this feasible and practicable.
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“Bringing mass broadband to India: Roles for government and industry”, Booz & Co, June 7, 2010: http://www.booz.com/media/uploads/Bringing_Mass_Boadband_To_India.pdf.
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“Singapore gets wired for speed”, Sonia Kolesnikov-Jessop, NYT: http://www.nytimes.com/2010/06/15/technology/15iht-rtechbroad.html?ref=internet.
India's sorry spectrum story
The network of roads is mostly public property. What if the government decided to make more money from our use of this property? Made users pay for these public assets, whether the roads are there, or yet to be built? Demanded upfront fees for a fixed-term right, followed by annual fees marked-to-market to reflect “fair market value”?
All roads would be expensive, and few people would be able to afford their use. Imagine what it would do to plans to build new roads. Imagine how much you would have to pay for road use, how road usage would drop, the sheer inconvenience it would cause, and the impediments to productivity that will be created.
This is not happening to the majority of our roads, but it is to communications, especially broadband. With some differences, this is what spectrum fees are about. The major difference is that spectrum fees are levied on operators, not end users (the equivalent for roads would be fees from government agencies/road operators).
For instance, Bharti and Vodafone paid upfront fees of Rs 12,300 crore and Rs 11,000 crore, respectively, for 3G spectrum. This is one reason why the country won’t get widespread broadband networks in a hurry, nor would it get reasonably priced services. The investment in spectrum fees and networks is so high that operators will probably offer limited, high-margin products. They will focus on high-traffic routes and ignore the rest, serving 50-100 million, instead of a billion — this is exactly the opposite of what we need.
The spectrum story
This approach to spectrum management is an object lesson in how not to use information and communications technology (ICT) for development. Each operator is exclusively assigned a sliver of spectrum. The resulting “scarce spectrum” predicament demonstrates why this approach is entirely unsuitable for optimising net benefits. Optimisation requires making trade-offs between technology, economics and commercial interests for development and the common good.
The situation is aggravated by three additional factors:
- Too many operators in a franchise area (12-16 in India, as against an international average of three to five), resulting in limited capacity and high capital costs.
- Limited availability of spectrum for commercial use, because of the extent assigned to the government, defence and the public sector.
- The government’s periodic efforts to extract as much revenue as possible from spectrum — an exploitative approach — instead of nurturing capacity to generate fair tax returns over the long term. Even in advanced economies, high auction bids have been disastrous.
Consequences
The average spectrum available per user is of the order of 5.5 MHz in India, compared to an international average of about 22 MHz. Delhi and Mumbai have cell sites that are less than 100 metres apart, compared with around 200 metres in Istanbul, 300 metres in Munich, and 350 metres in Berlin. Decreased inter-cell distances increase interference, thus restricting capacity. If each operator has more spectrum, traffic-handling capacity increases at a lower cost. Improving technical efficiency at the cost of economic efficiency loses out on capacity at low cost. Cellular operators in India are forced to extract greater spectrum efficiency, which sounds good until you factor in the increased costs and opportunity losses.
The report titled “An assessment of spectrum management policy in India”, Plum Consulting, December 2008, by David Lewin, Val Jervis, Chris Davis, Ken Pearson, estimates that spectrum assignments increased to international norms would have lowered industry costs by an 21 per cent (Rs 11,700 crore or $2.6 billion in 2008). This would have resulted in a more extensive coverage at less cost, with greater consumer welfare.
The result is high-cost infrastructure for operators as well as for users. Too many operators make for increased capital costs for each operator, and cumulatively for all operators — unless they use common networks. Higher efficiency requires more base stations and more advanced technology, both adding to costs. Despite this, operators are exhorted to improve their spectrum efficiency. After a detailed assessment, the report concludes:
- The claims regarding the scale of the capacity increases possible with the use of various techniques are significantly overstated.
- In the case of adaptive multi-rate (AMR) codecs, this technique is already being deployed on a widespread basis.
- The claims wrongly assume that the capacity gains from the different techniques are additive. This is simply not true in a number of cases. For example, the gain achievable with DFCA is less if AMR has already been implemented.
- There are substantial costs associated with deploying advanced techniques — both for operators in terms of network upgrades and for end users in terms of new handsets.
- It is important to be aware that deployment of some of the techniques, such as AMR HR, leads to lower quality of service.
- The focus on spectrum optimisation techniques for 2G networks fails to take into account the fact that the efforts of the suppliers have now shifted from 2G optimisation to 3G deployment.
Those making these claims seek more intensive deployment of advanced techniques to maximise technical spectrum efficiency. But a better policy objective, as we argue (in a later section), is overall economic efficiency. From this perspective, it only makes sense to deploy advanced technologies when this is a lower cost way of increasing capacity than adding further base stations. Indeed it is against the interest of the Indian economy to deploy them if this is not the case.
The approach is counterproductive and against our interests. Advanced economies are doing the opposite, encouraging investment in broadband to improve productivity, while India’s policies actually constrain productivity.
A third consequence is the non-availability of spectrum in the more efficient bands, eg, 700-900 MHz. This has a negative effect on last-mile roll-out and services in rural areas. Lack of coverage in the hinterland is a severe deficiency in areas that are poorly served by fixed-line networks. It only perpetuates the vicious circle of low potential in rural areas with deficient broadband and Internet access.
The curse of spectrum auctions
Two recent developments have created additional burdens. One is the 3G auction, with bids of over Rs 67,000 crore (almost $15 billion). Another is the Telecom Regulatory Authority of India’s recommendation that 2G operators with over 6.2 MHz must pay for additional spectrum at prices determined by the 3G auction, resulting in a precipitous fall in the shares of major operators.
Why should governments be concerned when stock prices fall? For the same reasons, they should want stable markets: Investment and prosperity, leading to public welfare. It makes little sense to entice investment into high-potential, sunrise sectors, only to batter successful enterprises with arbitrary “taxes”. Bharti described the changes as “shocking, arbitrary and retrograde”; Vodafone called them “opaque, illogical and discriminatory”.
Like an absurd play, events have taken a surreal turn, with the Department of Telecommunications reportedly demanding spectrum fees from the defence department. However, no additional demands were made on companies cashing in on assigned spectrum rights that sold for windfall gains without any networks or users. This seems equally absurd.
The government needs to give up making short-term revenue killings, and instead, maximise net welfare through building productive capacity. Ubiquitous broadband is good for productivity and for the environment. As for auctions, remember that collections from revenue sharing after the New Telecom Policy, 1999 (NTP ’99), far exceed the bids. Let us have the wisdom to collect those golden eggs over time, instead of eating the goose now.
Read the original in Business Standard
China Club instead of Bombay Club?
With the momentum of the past few years, India’s potential for growth is enormous, despite the chaotic loose linkages. In sectors like power and telecommunications, this translates to demand far outstripping capacity. Some contend that domestic inability to build capacity — i.e., being able to actually pull it off, as against the perpetual potential — will conscribe not only these sectors, but also limit overall growth. So the argument goes, e.g., let China build India’s power plants, because we need the power and don’t have capacity/they do it cheaper.
Comparative advantage notwithstanding, this reasoning is fallacious given the realities of national interests and self-interest. To understand why, consider the naïveté of the underlying assumptions — about “rational man”, that capitalism is fair, capital is immobile, surplus value accrues to countries and not to companies, or that the pursuit of self-interest maximises societal benefits.
Our quandary is aggravated by our inability so far to orchestrate supportive policies for even a level playing field. Ironically, one need only consider India’s approach to IT and IT-enabled services (ITeS) in the initial growth years to realise this. India’s policies in IT and ITeS, while far from perfect — in fact, sneaked through by stealth, as in the preferential 64 kbps communications lifeline, and the tax breaks for software service exporters — provided the foundations for transforming IT and then ITeS/BPO/KPO (Business Process and Knowledge Process Outsourcing).
These sectors also benefited from a controlled exchange rate, as the Reserve Bank of India (RBI) managed a steady depreciation during those years. But they did not have another vital ingredient of coordinated policies as did the Asian tigers: low borrowing rates (see the diagram)
This is one reason why, for instance, India’s machine tool manufacturers or shipbuilders have not matched the growth of knowledge-based services. The former need inexpensive, long-term capital for production and marketing, as well as for continuous innovation, upgrade and scale.
Why labour arbitrage and not products
This is also one reason why we lack product orientation, because product design, development and marketing require the support of easy access to cheap capital for a long period. Labour arbitrage needs little capital. Therefore, we have been better mercenaries than producers of products, compared with the chaebols (Samsung, Hyundai) or keiretsu (Mitsubishi, Dai-Ichi/Mizuho). There are, of course, many additional reasons: their education, training, work practices, our policies against large corporations, etc.
With growth in domestic markets across a broad range — telecom equipment, engineering goods, power — there are domestic manufacturing initiatives, such as L&T and Bharat Forge in power generation joining Bhel, or Tejas Networks in optical switching. But for the transformational changes we have witnessed in IT, we need coordinated industrial policies that support domestic manufacturing, because that’s the competition. Unthinking acceptance of “open markets” without heed to how others — including developed economies — cosseted and built their manufacturing capacity will ensure that India stays a raw materials and commodities exporter, while importing trains, aircraft, machine tools, and equipment for power generation, telecommunications and defence.
Integrated policies work
Ideally, supportive policies comprise a coordinated range, such as state and central taxes, favoured locations with good infrastructure — energy, transport and communications, subsidised land, favourable exchange and interest rates, preferred access to domestic markets, and barriers to unfair competition, like import tariffs not below the WTO floor, and safeguard duties. Without this orchestration, the victors are companies and countries that have understood these principles, and have these systems in place. (This applies equally to farm products.)
Many are apprehensive that what works elsewhere will not work in India because of malpractices, as seen in recurring scams. There is every need for systems with integrity, and for enforcement with penalties. But just as corruption in government or civil society does not do away with the need for either, misuse does not negate the need for incentives. It would be self-damaging to lose the opportunity to try and get our act together simply because of apprehensions of corruption and/or incompetence. That would be like not subsidising food for the poor; it’s a different matter that we need better methods to prevent gross misappropriation.
The consequence of heedless, ad hoc muddling through instead of orchestrated strategies is that manufactured imports will dominate our markets, while domestic manufacturing is fragmented, hamstrung or absent. Having said that, consider India’s needs in electricity or communications — telecom, Internet and broadcasting — and it is apparent that crafting policies is not simple. So many conflicting images, some based on facts, others, mere impressions, which are often more important than facts. What should policy-makers do for our needs on such a massive scale with growing shortfalls?
Emulate China
The short answer: learn from China. In the power sector, Chinese suppliers have the following advantages:
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Low-cost access to capital.
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An exchange rate advantage (10-30 per cent).
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No sales tax and octroi, aggregating to about 11 per cent.
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Zero customs duty on equipment for large plants (China imposes a 30 per cent import duty)
Corrective action discussed for years has not resulted in concrete steps. The power ministry, citing supposed user benefits, opposes the planning commission’s recommendation of a safeguard duty. This is as shortsighted as “free electricity” that undercuts investments in power.
In telecommunications, consider Huawei, with revenues of over $20 billion, nurtured for 20 years with the People’s Liberation Army (PLA) as an R&D partner and guaranteed customer, vis-à-vis, say, Tejas Networks from Bangalore, with no government support.
Our policies need to focus on our long-term interests with strategic intent and execution, as in other countries, balancing costs with the benefits of domestic capabilities. These sectors need government procurement support, not criteria that disqualify Indian companies in strategic sectors like power and communications. They also need interim methods for Chinese companies to contribute while upgrading our skills and processes. Our aim needs to be a level playing field.
Read the original article in the Business Standard
The Right Ring Tone
Just five years ago, Bharat Sanchar Nigam Ltd (BSNL) was India’s second most profitable company, with net profit of nearly Rs 6,000 crore — nearly equal to Hindustan Unilever’s revenues — with over Rs 36,000 crore in revenues. By March 31, 2010, BSNL expects a big loss, while a competitor, Bharti, with revenues of only Rs 8,000 crore then, has caught up in revenues and is far more profitable. Mahaganar Telephone Nigam Ltd (MTNL), too, is struggling to stay profitable.
While these public sector giants are in a graveyard spiral, they still have valuable assets in their reach and their networks of hundreds of thousands of kilometres. They also have a corps of technical professionals, with unmet user needs burgeoning in cities, towns, and all over India’s hinterland.
How can BSNL/MTNL be extricated from their predicament, and built up to become more like a State Bank of India, instead of a moribund Air India and the once-dominant Indian Airlines? Consider the present and future possibilities.
The pertinent facts are:
- The network and capacity are valuable assets for operations, provided services are rationalised and extended in commercially sound ways.
- Neither BSNL nor MTNL has been able to successfully capitalise on its headstart in WiMAX and 3G.
- Given present trends, both will run up mounting losses.
All management and employees, including the Indian Telecom Service (ITS) officers, will have to engage in radical changes voluntarily. This is why all stakeholders, including the government, have to seek collaborative solutions, to resolve anachronistic legacy situations that cannot continue on terms as fair as possible, including a VRS, and possibly pay cuts for deferred profit-sharing. The alternative is losing a strategic backbone network-operating capability, something India needs, with the associated hardship for so many employees.
Dire prospects
The outlook for both BSNL and MTNL shows in their performance (Figures 1 and 2).
For BSNL and MTNL, increased employee costs after the Pay Commission recommendations, together with declining fixed-line revenues, led to deteriorating profits. Meanwhile, years of stalled procurement, decreasing earnings and a recommendation to divest 30 per cent have all led to a stand-off at BSNL, with a threatened strike. Whether in public or private sector, there have to be good services with good profits; otherwise, competitors will devour them.
Doing the unthinkable
Are there ways out? Can these investments in equipment and people be resuscitated by some miracle of management and IT engineering to be at the heart of the country’s expanding communications services? Can their personnel pull together?
That magic could come about if individuals and interest groups rise above themselves, avoiding opportunistic self-enrichment, and approach problems collaboratively instead of antagonistically, and if the government can abjure misguided fiscal zeal.
- Instead of divesting a stake as a one-shot, revenue-raising deal, induct a strong partner to build services and revenues.
- Serve user needs, instead of offering “products” with some internal geographic or technological definitions that are not easily understood.
- Rationalise services like EVDO cards (broadband data cards) that are not customer-centric, because if they work in the rest of the country, they don’t in Delhi and Mumbai, and vice versa.
- BSNL and MTNL could go for collaborative data-streaming with 2.4 Mbps EVDO cards usable everywhere, offered with a service level and style that can only come with a hands-on partner changing the off-putting way BSNL and MTNL treat customers.
- Get politicians out of procurement, and induct technology like wireless corDECT at 512 Kbps for rural areas if appropriate, even if it is “old” and not state-of-the-art, instead of waiting for years for alternatives that aren’t there of 3G or LTE (Long-Term Evolution or 4G), and will cost much more.
- Move up to 3G/LTE after some years of generating profits.
- Work with India’s technology companies to build local equivalents of Huwaei and ZTE, with India’s assured markets. (This requires policies far beyond the ambit of the DOT, as in the way China has nurtured Huawei/ZTE for years.)
Put the whole package together, end-to-end, and BSNL/MTNL could be winners, as would the public.* Private operators will face competition if this happens, but they can gain from the rise in business levels. These are big issues for immediate consideration and action. Such challenges are best addressed collaboratively.
Although collaboration seems far removed, notable exceptions like Amul, Operation Flood, the Sirmour farmers’ cooperatives for irrigation, SEWA (Self-Employed Women’s Association) and Infosys prove that it is feasible.
Problem-solving vs confrontation and attrition
Thinking and acting in our collective interests require making hard choices after cost-benefit analyses. From this perspective, we should address BSNL and MTNL from an assessment of India’s needs and available alternatives, rather than only as a historical mess. True, the mess has to be dealt with, but with forward-looking considerations of public benefits for the common good. Employees need to recognise this, juxtaposed with the consequences of unyielding self-interest. We need problem-solving, not battles of attrition from hardened, silo positions of unions, government, and management, or ITS versus the rest, or any entrenched interest group. These legacy positions are “dug in”, and perpetual confrontation leads to desecration: of service capability, of competitive staying power, productivity and of sheer employability. There is so much more they could do for a potential one billion users.
It isn’t that self-improvement is not being attempted, like the Sanchar Nigam Executives Association (SNEA) addressing processes such as Call Detail Record (CDR) systems for customer care and billing, or Managed Services and Managed Capacity, Bharti’s innovations in outsourcing not only development and maintenance, but even procurement to Ericsson, as recommended by the Pitroda committee.** The change that is required is for all groups to pull together, however simplistic it may sound. Then, these national assets — the networks and human resources — can be leveraged to compete effectively with private operators.
Read the original article in Business Standard
Understanding Spectrum
Twenty years ago, “spectrum” implied the colours of the rainbow. Now, we understand that spectrum also relates to mobile phones. We encounter spectrum daily, in TV remote controls, microwave ovens, even sunlight. So, what exactly is spectrum, and how do government and commercial decisions on this scientific phenomenon affect public facilities and costs?
“Spectrum” is short for “electromagnetic spectrum”, the range of radiated energies that envelop the Earth. This electromagnetic radiation (EMR) is primarily from the sun, and secondarily from the stars/cosmos, radioactive elements in soil, rock and gases... .
One section of EMR is visible light; another is radio frequency (RF) spectrum. There are many other “wavelengths” in EMR with different characteristics and effects, such as infrared and ultraviolet rays. All countries have the same RF spectrum in equivalent areas.
How is spectrum used?
The length of a wave, its associated frequency (“wavelengths” or “cycles” per second) and energy determine its usage (see Figure 1).
- Radio waves are relatively long, with wavelengths from 1,000 metres (1 km) to 10 cms, and frequencies from 3 kilohertz (3,000 cycles per second) to 3 gigahertz (GHz) or 3 billion cycles per second for the shortest, sometimes also called microwaves. (There are longer waves, e.g., electric power, of several km.)
- Microwaves in the centimetre and millimetre range can have frequencies up to 300 GHz. There is an overlap in terminology depending on use; microwaves for cooking use several hundred watts of electricity at RF wavelengths of about 32 cms (915 MHz) and 12 cms (2.45 GHz). Microwaves from low-powered devices of a few watts at these frequencies are used for communications, and emit insignificant heat.
- Infrared waves are smaller, and are felt as heat, e.g., from lamps and infrared grills used for cooking. Higher infrared bands used for communications in remote control devices and for imaging/night vision have no heating effect.
- Wavelengths between 700 and 400 nanometres (about 430 to 750 terahertz or THz) form the visible spectrum from red to violet, combining to form white light. For example, we perceive wavelengths of about 635-700 nm (430-480 THz) as the colour red.
- Shorter wavelengths form ultraviolet rays, of which those around 380-280 nm cause sunburn. Sunlight at sea level comprises about 53 per cent infrared, 44 per cent visible light, and 3 per cent ultraviolet rays.
- Yet smaller waves are classified as X-rays, and the smallest as gamma rays, both used in medical and industrial imaging.
The sweet spot in the RF spectrum for telephony and the Internet
For telephony and broadband, lower frequencies (700-900 MHz) are most cost-effective, as they traverse long distances without attenuation, penetrating walls and foliage. Radio waves in the atmosphere are affected by water vapour and ionisation, as well as events such as solar flares with bursts of X-rays. Depending on temperature, moisture, etc., radio waves may be absorbed, refracted, or reflected in the atmosphere, and by hills or other obstacles. Low frequency waves penetrate buildings and trees, and curve over slopes. Higher frequencies are more absorbed or reflected by the atmosphere; they are also more attenuated by distance and rain. Networks at lower frequencies require fewer towers than at higher frequencies.
What are 2G and 3G?
These signify different stages of technological development, starting with 1st Generation (1G) analog wireless in the 1980s, e.g., in car phones. 2G (2nd Generation) began in the 1990s with the digital wireless GSM standard for mobiles, extending to other standards, e.g., CDMA. 3G (3rd Generation) has faster data speed and greater network capacity.
What is 2G/3G spectrum?
There is no difference in the spectrum; only the convention of government regulations and harmonisation between countries by the International Telecommunications Union (ITU) earmark wavelengths for different applications. Both 2G and 3G can and do work at 800-900 and 1800-1900 MHz.
Combined with the advantages of prices dropping as volumes rise, one estimate puts 3G coverage with 900 MHz at 50-70 per cent lower cost than at the designated 2.1 GHz. 3G networks using 900 MHz (“2G spectrum”) exist in Finland, Iceland, Australia, New Zealand, Thailand, Venezuela, Denmark and Sweden, and countries like France encourage 2G networks to upgrade to 3G services.
Spectrum allocated for 2G and 3G by various countries is at Figure 2; the current and proposed allocation in India is shown below.
This shows India’s dearth of spectrum for public use because of government and defence allocations. We need innovative methods to maximise capacity given our needs, limited landline networks, and the relative costs. (For details on the chart, please see umtsworld.com.
For example, China has allocated 250 MHz in the 800/1800 MHz bands. By not charging auction fees and spectrum charges, ubiquitous networks were built at lower cost with high capacity. These result in lower costs for users and higher productivity. With its focused approach, China also developed its own standard (TD-SCDMA).
India’s spectrum allocation is burdened with short-term revenue collection for the government, and a shortage mentality. There is apparently insufficient clarity on spectrum usage for ubiquitous broadband/telephony as in other countries, let alone more ambitious targets, such as developing an Indian standard.
Our policies could address the requirement for enhanced coverage/capacity at low cost to make services available everywhere at reasonable prices. Innovative approaches to spectrum management could help get these, through:
- Technology-neutrality: the UK and Norway have not restricted the use of recently auctioned spectrum to any technology.
- A focused strategy for service delivery at low cost, as in China.
This needs a combination of methods, e.g., along with technology-neutrality, (a) data-base driven, shared spectrum usage, under trial in the US, (b) “Cognitive Radio”, whereby smart devices sense available channels for dynamic, non-conflicting use in unlicensed spectrum bands, (c) incentives for rural broadband delivery, e.g., by subvention of fees and government charges, with (d) subsidies.
Follow the original article on Business Standard
Alternative Scenarios
Like the industrial revolution, India missed the infrastructure systems building stage. As a consequence, even in 2001, the telecom network covered a mere 4 per cent of our population. Now, it covers about 48 per cent, but with only 20 per cent rural coverage. Our need being extensive coverage, the following what-if scenarios explore how alternative approaches might pan out.
The market-driven scenario
One approach is that all that’s required for an effective communications infrastructure is to go ahead with the spectrum auctions — that long-delayed, but always expected “3G” auction, to begin with. Imagine that it happens. What then?
Current policies will result in three winners of 10 MHz each. If they are from among present operators, they could be any three of Airtel, Vodafone, Reliance, Idea, Tata… or one or more new players: Google, Intel… until one of these wins the fourth “3G” slot when that band is made available, and so on. These operators will probably roll out networks and services where heavy traffic is expected, as with 2G so far: more extensively in urban areas. Provided other policies evolve rationally, e.g., that acquisitions are allowed and spectrum holdings can be consolidated, in the long run India may have around five or six large countrywide operators. There may be regional/segment operators with lesser franchises, or addressing specific segments. Each company will incur capital costs for spectrum and network investment, which then must be recovered from users. Network growth is likely to be on similar lines as before.
Take the evolution of India’s telecommunications policies in the 90s, and the desultory state of the sector until the reforms of the National Telecom Policy ’99 (NTP ’99), followed by reductions in revenue share to more reasonable levels in 2002. Even so, the facts show that:
- network growth is skewed heavily towards urban users; and,
- broadband coverage is abysmal.
Urban bias in network growth
By November 2009, urban coverage was at 107 per cent of the population, while rural coverage was at 20 per cent. In addition, rural wireless lines grew to 91 per cent, while the wire-line share dropped to 9 per cent; hence the increased importance of spectrum. Networks need more rural reach.
Low broadband coverage
Broadband subscriptions in August 2009 were at just seven million, two million short of the estimate for 2007. According to Comscore, at the end of September 2009, India had under 36 million Internet “unique visitors” (excluding access from Internet cafes, mobile phones and PDAs). This is roughly equivalent to the installed base of PCs, compared with about 560 million phone lines, of which under 40 million are wire-line. Something must be done to increase broadband coverage at lower prices.
The shared-network scenario
Now, imagine what shared-network facilities could do to lower costs, with no duplication of capital investment. Consider the added benefits of shared spectrum as part of this shared network — which, given the fragmented, inefficient present allocation, is the primary need for effective last-mile coverage. Then, add the benefits of substituting revenue sharing for up-front spectrum auction payments. With incentives for performance, the savings in time and money in network build-up and throughput will be immense, while the green footprint from less network hardware will be a double bonus. Government revenues will be far in excess of the foregone auction bids, together with more tax from higher profits, provided the revenue-share percentage is reasonable, as witnessed after NTP ’99 plus reduced revenue-share.
Need for reforms: Networks, spectrum and broadband
Significantly, much of the wire-line rural network is reportedly unsuitable for broadband, because of the length of “last-mile” connections, their quality and the problems of maintenance in difficult terrain. Besides, the cost — more than five times wireless, according to one operators’ association — and difficulty of laying cables in rural terrain, compounded by the impediments of clearances from multiple local authorities, render this impractical. The need is for more coverage with the same investment, even if it is private sector investment.
Therefore, network-building with spectrum reform and broadband need more supportive policies. In particular, incentives and disincentives/penalties are needed for intensive rural coverage as well.
Imagine the IT companies capturing the Y2K opportunity and outsourcing without special communications facilities and tax breaks. Those regulatory measures enabled the development of an essentially outward-oriented IT services sector. Likewise, NTP ’99 with lower revenue-share has led to high growth in telecommunications. This appears to be the best way to establish broadband as an essential infrastructure, especially in rural and semi-urban areas.
Required measures
The initiatives required cover three areas:
- Policies that make it profitable to build networks and provide broadband services all across the country, not just in heavily-trafficked areas. This will enable communications access to all, providing a platform for service delivery for government and the private sector with tremendous user benefits. These services could encompass education, health and sanitation, extension services related to economic activities, including logistics, telecommuting, entertainment and information.
- Formulating incentives and implementing them so that the primary objectives are achieved. The public-interest broadband objectives are likely to be on the lines of access anywhere — realistically, in most populated places — at reasonable prices. Key results have to be defined and tracked to ensure achievement. There’s a mountain of work in defining reasonable cost so that many more people can access broadband, while the business is commercially attractive. However, that is a separate issue. It needs to result in a large number having subsidised access, just as they must have access to food, education, and other necessities.
- Equally important, formulating disincentives that are then applied impartially, so that transgressions that detract from the objectives are penalised.
These issues must be addressed simultaneously from the perspectives of technology, economics, defence and security, and commercial interests, including existing operators’ legacy interests. For this, the government has to work with all stakeholders and specialists to develop solutions with experienced, objective facilitation. Business, government, and consumers can benefit.
The article appeared in Business Standard.
Plan and Execute for Results
What is a good way to plan and build enduring systems, e.g., for sanitation and water in our cities and countryside, roads (rail/waterways/air for logistics), or a broadband network for communications? Some thoughts on Standard Operating Procedures (SOPs) — beginnings, processes and ends — and on some “invisible” aspects that facilitate good outcomes.
The Big Picture
Start with the big picture: the engineering background of China’s leaders has no doubt contributed to their conceptualisation and achievement so far. President Hu Jintao and Premier Wen Jiabao were engineers, as were former President Ziang Zemin, and Premiers Zhu Rongji and Li Peng. While pondering if that’s what it will take to improve India’s record on conceptualisation and execution, we find that former President Deng Xiaoping, who got China going on its current track, didn’t have it. No engineering degree, although he went to France when he was 16 for a work-study programme. Despite a difficult experience with entry level jobs in shoe manufacturing, metals, automobiles, and restaurants, he was very effective in applying himself to building China. So, there’s hope if our leaders apply themselves to long-term solutions, rather than to self-aggrandisement. This might be of their own volition, or because the public and/or circumstances force them to do so. For instance, if RTI activists concentrate on one major objective at a time, while paying attention to facts, thinking, talking and acting logically in close cooperation and coordination, i.e., with sound direction, we might get results.
Fundamental SOPs
Some fundamentals are clear enough, although we rarely seem to follow them, like an integrated systems perspective with disciplined project management (listed below). There are, however, many assumptions and enveloping circumstances that affect the drivers directly, as well as their boundary conditions and interactions. These can be easily lost sight of in pursuing a line of thought or action, or even particular disciplines. This is valid for all issues, for instance, increasing the hit rate for road projects put to bid by the National Highways Authority of India (NHAI), or the successful completion of power projects, or efforts to structure and manage spectrum for broadband. Therefore, for user-centric area planning/spatial planning, the overriding emphasis is necessarily on an interdisciplinary (i.e., multidisciplinary) approach. This is because societies and their needs are multi-dimensional, and solutions must work in a complex set of circumstances. Silo thinking and action won’t work.
This is true whether for neighbourhoods or for country-wide networks such as road systems, railways, or broadband. It is also true for the content, i.e., for broad areas like education from kindergarten to postgraduate levels including vocational training and Continuing-Education for all people, or for a single vertical space, such as health care or hospitality.
The fundamental elements (SOPs) include:
- End-to-end systems, i.e., comprehensive, integrated pieces that fit.
- Convergent objectives.
- Systematic, disciplined project management, starting with the desired end results, and a backward induction for intermediate goals at each step with the required resources and time, all the way back to the start.
- An interdisciplinary/multidisciplinary approach, because sound inputs are required from multiple perspectives, such as overall strategy, structure, systems, technology, human resources, finance, and markets, tailored to our culture and practices, even as we improve them.
- Coordination & Direction: above all, there needs to be convergence of efforts to achieve a desired goal or direction. Without coordination and direction, efforts are unlikely to converge, and therefore unlikely to achieve desired outcomes.
Other Essential Aspects
- Self-Governing Systems vs Government Intervention
Much has been made recently of Prof Elinor Ostrom’s ideas on polycentric governance and self-regulation. However, there is insufficient appreciation of and attention to her stress on (a) trust as the most critical attribute, and (b) checks and balances (incentives/penalties) that are “accepted”, as she understates it. Cooperative action is certainly a winner, provided there is an effort by players to build trust, and sound rules are devised and applied impartially. Can you imagine a country-wide highway system or broadband network in the public interest, designed and developed by independent commercial interests? Possible, but unlikely. That’s why governments need to act in the public interest. - Allowing for the Non-Rational & Emotional
Years ago, Carl Sagan popularised the ideas of Paul MacLean, who headed the Laboratory of Brain Evolution and Behavior in America’s National Institute of Mental Health. The concept was of a three-part structure of the brain: the deep down R-complex (for reptilian-complex) where aggression resides, the limbic system which is the seat of emotions, and the neocortex, which is rational and cognitive. While neurology has moved on in the details, e.g., the hippocampus is now apparently thought to be less important in emotions than in MacLean’s view, and the brain may be less simply compartmentalised, the idea of rational man is no longer assumed as a truism. - The Normal Curve & Dysfunctional Elements
For those not familiar with statistics, there is a universal phenomenon of distribution along the “normal” curve: any group of objects (or people) measured for any attribute — height, weight, goodness — is likely to be distributed along a probability curve, as in the graph above, with some outliers spread over the lower and higher ends or “tails”, and the rest bunched around the middle/mean/average.
The takeaway: plan for the dysfunctional elements in the left tail, and build protection mechanisms in systems. Consideration with item 2 above indicates the kind of protection robust systems might need.
Good SOPs are a starting point, but there’s more under the surface that will affect results, regardless of external factors.
Link to the original article on Business Standard
Developments in spectrum sharing
As the Telecom Regulatory Authority of India (Trai) deliberates on spectrum and licensing after the hearings ending December 2, some important points are worth highlighting. Spectrum is public property and, therefore, need not add a layer of cost (through auctions and such other artifices), provided it is available to network builders, and these networks are available to operators for their customers on payment. The question is whether the government should give spectrum
free, or for an up-front price, i.e., a hefty spectrum fee, or through a progressive revenue-sharing arrangement as for telecommunications. This can be to network builders for their use, or to operators, to pool through either their own arrangements or through network builders-cum-operators.
One way to think about communications networks is to consider an analogy with road networks. The road network is accessed by paying road taxes and special tolls as required, e.g., when using a toll bridge or highway. The rest of the time, once a transport operator pays road taxes, the fleet’s vehicles have access to the entire public road network.
In the same way, it should be feasible for operators to access communications networks. These networks may be the operator’s own, or the public network, i.e., the Public Switched Telephone Network, paying as they go. In other words, whether operators use their own or others’ networks should be immaterial as long as they pay the tariffs, which result from a mesh of interconnection agreements. In this manner, network builders/service providers can use the spectrum as part of their “plant” for wireless transmission, just as they use optical fibre and copper wire for wire-line transmission.
Networks are already being built and operated by network builders-cum-operators. According to The Economist on developments in network operations, initially in New Zealand and then extended on a much larger and broader scale in India, “The vendors... gain economies of scale because they build, run and support networks for several Indian operators. Ericsson’s Mr Svanberg says his firm can run a network with 25% fewer staff than an operator would need. Bharti’s operating expenses are around 15% lower than they would be if it were to build and run its network itself, and its IT costs are around 30% lower, according to Capgemini.”*
Meanwhile, a momentous experiment in spectrum sharing is taking place in America. A company called Spectrum Bridge has developed a database-driven model for dynamic spectrum allocation in unused spectrum bands, the “white space” in the TV bands. This is in the 200 to 600 MHz band, with considerable advantages in propagation over distances, through foliage and walls, without attenuation as experienced at higher frequencies.
This system is being tried in Claudville, a rural community on the border of Virginia and North Carolina. As is likely to be true in rural India, using open spectrum that is unlicensed is impractical because of the distances, terrain and foliage. Fibre and copper lines are not only impractical, but also prohibitively expensive, a fact that people who suggest the use of existing wiring for broadband don’t seem to realise.
In this context, given the discussions on the possibility of spectrum trading as a solution going forward in the Trai hearings, it is instructive to note that despite the US Federal Communication Commission’s secondary market initiatives taken in 2003, not much spectrum trading had actually taken place until Spectrum Bridge’s introduction of their tracking and trading model, SpecEx (see www.specex.com). Subscribers view available spectrum at a chosen location and frequency band with pricing details when they want to buy, or list available spectrum to sell by location and frequency band. Therefore, any recommendations by Trai or decisions by the Empowered Group of Ministers (EGoM) or the government should take this into account in considering the path of market traded spectrum based on exclusively assigned bands. It would be unrealistic to expect such trading to take place simply because it is allowed, without other
facilitating developments as have been achieved by Spectrum Bridge in America.
A second problem is that trading in spectrum can result in effects equivalent to land-grabbing in real estate. This serves less for effective communications than as an asset play for profit.
Like SpecEx for priced spectrum, www.ShowMyWhiteSpace.com is a free website that the company supports to show free TV white space (the “digital dividend” that is talked about) that can be used on the basis of open access to unlicensed or open spectrum.
In the trial at Claudville, Spectrum Bridge deployed the network with Dell and Microsoft contributing computer equipment and software to the local school. Teachers can now incorporate distance learning resources into the school’s curriculum.
Our policy-makers need to move beyond debates over slicing and dicing the spectrum to determine the smallest efficient band — 2.5 MHz for CDMA and 4.4 for GSM? Is 6.2 MHz all that any operator needs?... and so on. A direct solution is to not assign spectrum for exclusive use, and instead enable its use as a common resource that must be accessed by everyone
who needs to communicate on the network, exactly as public roads are accessed by paying road taxes and tolls. If spectrum must be assigned nominally to operators for administrative reasons, they should be obligated to pool this spectrum for common access.
Once we are able to aggregate spectrum in the frequency range which allows propagation over distances and through natural and man-made obstacles — buildings, foliage, etc. — we will have the open “highways” for broadband for its widespread usage across the country. This can only be achieved at relatively low cost through a progressive revenue-sharing arrangement, which is what happened eventually for voice communications with the National Telecom Policy 1999.
These are complex technical and commercial issues, and require the concerted effort of stakeholders and experts to devise the most effective solution in the public interest. The Trai hearings are the first step in this process.
[email protected] <mailto:[email protected]>
* ‘The mother of invention’, The Economist, September 24, 2009
India Study Tour - Report: The South African Telecommunications Sector: Poised for Change
India Study Tour Report
2009-10-17 to 2009-11-01
Sagie Chetty, Masters of Management ICT Policy & Regulation
Student Number 0617514V
Supervision: LINK Centre
Graduate School of Public and Development Management
University of the Witwatersrand
Sagie Chetty is a Senior Manager at Eskom, South Africa’s largest Electricity Utility and a Masters of Management student in the field of ICT Policy and Regulation at Wits University. My research dissertation is entitled “Analysing processes for regulating interconnection in India and South Africa.” Wits LINK Centre and the Centre for Internet and Society (CIS) in Bangalore arranged for a study/lecture tour to India for the period from 17th October 2009 to 1st November 2009. As part of the tour, I presented a number of talks to students and faculty members at various universities and institutions around the country, on the subject of the Telecommunications Landscape in South Africa. I used the opportunity to inform students on the development of the telecommunications sector in South Africa; to build relationships between the LINK centre and the institutions I visited; and, most importantly, to conduct interviews with academia, economists and regulatory authorities in India to gather essential material for my research paper.
Presentations were held at a number of universities, namely the Indian Institute of Technology (IIT), Chennai and IIT, Mumbai; the International Institute of Information Technology (IIIT), Bangalore; and the Indira Gandhi National Open University (IGNOU), the National Institute of Science, Technology and Development Studies (NISTADS) and the Jamia Millia Islamia University – all based in Delhi. The visit concluded with meetings with officials from the Telecoms Regulatory Authority of India (TRAI).
The presentations were well attended and discussions were robust and thought provoking. The South African telecommunications sector was seen as being non-competitive with unnecessarily high ownership by government in the telecommunications sector. From the information provided, students concluded that the SA telecommunications regulator was weak and lacking in the commensurate skills to manage this highly technical sector.
On the other hand, students gravitated between having admiration for India’s own telecommunications regulator, TRAI and criticism of TRAI’s inability to improve broadband take-up in India. Students commended TRAI’s technical skills, independence and its courage in standing up to powerful mobile companies and incumbent telecommunications companies. However, lack of policy direction with regard to broadband rollout is seen as a major failure. Comments regarding this failure are attributed to TRAI’s driving down of telecommunications prices to levels that do not allow for infrastructure investment.
The future for broadband in India lies in mobile technology and some predict that fixed line will be defunct by 2025. Some academics also believe that there are too many players in the telecommunications sector in India making spectrum allocation highly competitive and therefore, very expensive. These costs will have to be recovered and the end users will pay dearly for this. Therefore, the model that the Department of Telecommunications (DOT) is using for spectrum auctions is being questioned by students and academics.
The innovation that I observed in India relates to CIS’s early work in projects assisting the visually impaired to read; the writing of 4G standards at the IITs and the innovation with regard to interconnection usage charges (IUC) at TRAI. These are some of the lessons that I have taken back to South Africa.
My observation of students in India is that they are highly motivated and eager to learn. Entrance to the universities is highly sought after and universities have high standards and are generally difficult to get into. The IITs certainly are increasing the requirements for students to get into them. The institutions are vibrant and are fertile grounds for thought leadership and innovation. India is producing a veritable number of PhDs and institutions seem to offer funding for capable students. South Africa needs to re-examine the funding model for students here. My impression is that students in South Africa do not have similar support as their counterparts in India.
The talks generally concluded with a re-affirmation of the strong historical and cultural links between South Africa and India. Mahatma Gandhi’s time spent in South Africa developing his notion of non-violent protest is well known in India and will always bind our countries together.
India is a vibrant country with an economic engine that is gathering revolutions. Its future is bright and its institutions are producing bright young minds to take their place in this awakening economic giant. South Africans can do well in learning from this super power in the making.
Videos
Response to TRAI Consultation paper No. 6/2009
Shyam Ponappa November 12, 2009
Distinguished Fellow
Centre for Internet & Society
Bangalore/New Delhi
cis-india.org
Telecom Regulatory Authority of India
Attn: Sh. Sudhir Gupta, Advisor (MN)
Mahanagar Doorsanchar Bhawan
Jawahar Lal Nehru Marg, New Delhi-110 002
Tel. No.011-23220018 , Fax No.011-23212014
E-mail : [email protected]
TRAI Consultation paper No. 6/2009- October 16, 2009
"Overall Spectrum Management and review of license terms and conditions"
Sir,
It would help to have a logical framework that defines overall objectives, prioritizes issues, and structures and organizes issues and questions. This would facilitate analysis and response, as we have attempted below.
We begin by responding to Question 57 as a preamble to all the questions:
57. What in your opinion is the desired structure for efficient management of spectrum?
[This question addresses only one of two essential criteria, efficiency. The other criterion is effectiveness; both need equal emphasis.]
Please see separate attachment for answers to Questions 1-56.
Status
Currently, communications services in India comprising Internet, voice and SMS have the following attributes:
- Low broadband usage, with relatively high prices: eg, direct satellite TV subscriptions at Rs. 200/month, compared with 512 kbps Internet at Rs. 1,000/month.
- Fragmented spectrum allocation for exclusive use by each operator in a service area.
- Very high intensity of spectrum use by operators compared with international norms because of constrained availability.
- Too many operators per service area (11-14 or more [15-16 with all potential operators with GSM and CDMA counted separately], versus the global average of 4-5).
[For details on (2), (3) and (4), please see: 'An assessment of spectrum management policy in India', David Lewin, Val Jervis, Chris Davis, Ken Pearson, Plum Consulting, December 2008
http://www.plumconsulting.co.uk/pdfs/GSMA%20spectrum%20management%20policy%20in%20India.pdf]
Needs
Our needs are:
- good services for Internet, voice and SMS,
- at reasonable prices, eg, comparable pricing for TV and broadband,
- accessible from/to most households across the country.
The need is especially great in rural areas, as broadband can be the medium for delivery of essential services like education (from basic to advanced to vocational training and Continuing Education at all levels, including high-level professional CE), health (again, from basic diagnostics and monitoring at home, to advanced care at adequately equipped centres), and security and law-and-order services at significantly higher levels than is possible without excellent communications infrastructure.
In view of the above, we suggest that the Government of India consider adopting the following policy goals in the public interest ( and therefore, that where appropriate, the TRAI set these objectives/make appropriate recommendations to the GOI).
Suggested Policy Goals/Objectives [based on needs]
- Adopt the criteria of long-term net benefits in the public interest for decisions, eschewing short-term cash collections from auctions and fees.
- An approach to policies for telecommunications services (not for broadcasting) that limits the number of operators per service area in line with international experience, because of the economics of networks.
[This implies an explicit reversal of prior policies to maximize competition, and requires allowing for consolidation through mergers and acquisitions.] - Access to broadband (to be defined as at least 512 kbps in keeping with international norms) at all feasible locations in the country for all users.
- Develop incentives and penalties favouring good rural service provision, with the emphasis on broadband: an Administered Incentive Pricing mechanism.
- Explore ways to structure policies to reduce costs/maximize utility through facilities and resource sharing, so that prices can be reduced while maintaining good scope for investment from growth and profits.
This implies two areas of exploration:
a) Shared use of facilities and equipment/networks;
b) Shared use of spectrum.
(i) This is best done by collaborative consultations between experts (from the GOI, private sector and academia), operators, equipment providers, and government. Without the requisite interdisciplinary skills combined with operating expertise and investment capability, the effort is too complex for an iterative, serial consultation process.
(ii) Even within the GOI, this requires interdisciplinary and cross-jurisdictional convergence, both to develop solutions as well as to implement them.
(iii) This also needs GOI initiatives to invite companies like Ericsson, Nokia, Motorola and Qualcomm as well as Google and Intel, possibly cable companies like Liberty Global, and electricity companies that deliver Internet through their networks.
(iv) The GOI also needs to depute experienced representatives from various ministries and departments including the WPC, the Defence Services, and specialist agencies such as the DRDO/NTRO.
[Please see ‘Managing Spectrum’ in the Business Standard November 5, 2009, and related references: http://organizing-india.blogspot.com/2009/11/managing-spectrum.html] - Monitor operations online and intervene actively where revenues (the totality of rates/tariffs) are far above total costs, i.e., profits are unreasonable. This is a necessary adjunct to accepting a monopolistic/oligopolistic market structures.
Suggested Approach
The use of a decision tree as in the ‘Issue Map for Spectrum & Broadband’ below (please see Exhibit) facilitates a logical sequence and prioritization in exploring alternatives. (Please note that this is for broadband, voice and SMS, and not for broadcasting.) A similar exploration process for networks and facilities (sharing versus exclusive use for delivery) could follow. However, stakeholders should be free to use any analytical process to improve on this in the common interest.
Once decisions are taken on these two issues (spectrum and network/ facilities sharing), other issues like pricing and consolidation can be logically addressed based on these decisions, probably within the scope of existing laws and regulations.
New regulations or laws should be considered only after comprehensive analysis on the lines of Project LARGE (Legal Adjustments and Reforms for Globalising the Economy by Sh. Bibek Debroy).
Exhibit: Issue Map on Spectrum & Broadband
Shyam Ponappa
Centre for Internet & Society
cis-india.org
TRAI Consultation paper No. 6/2009 – October 16, 2009
Overall Spectrum Management and review of license terms and conditions
Chapter 1
Spectrum requirement and availability
- Do you agree with the subscriber base projections? If not, please provide the reasons for disagreement and your projection estimates along with their basis?
Do not disagree. - Do you agree with the spectrum requirement projected in ¶ 1.7 to ¶1.12? Please give your assessment (service-area wise).
Agree if exclusive bands of spectrum are used by different operators, and the spectrum requirement is linked to subscribers. Disagree if common use of spectrum is adopted. Please see preamble (reply to Question 57) for details of shared/pooled spectrum approach. - How can the spectrum required for Telecommunication purposes and currently available with the Government agencies be re-farmed?
(a) By rationalizing usage, as advocated in the preamble for commercial operators, by pooling spectrum for common use where possible.
(b) By inducting equipment that allows more efficient usage and usage of other bands. - In view of the policy of technology and service neutrality licences, should any restriction be placed on these bands (800,900 and 1800 MHz) for providing a specific service and secondly, after the expiry of present licences, how will the spectrum in the 800/900 MHz band be assigned to the operators?
(a) Please see suggestions on shared/pooled spectrum as above.
(b) In the event that common use of spectrum is infeasible/not accepted by the Government of India, and exclusive bands of spectrum are assigned to operators as is the practice now, work out ways to consolidate fragmented bands (other than through M&A) for operators, to enable operators to hold contiguous bands for greater efficiency, and explore shared use of pooled spectrum. - How and when should spectrum in 700 MHz band be allocated between competitive services?
Preferred method: for common use (can be pooled or shared even if assigned for exclusive use, immediately). -
What is the impact of digital dividend on 3G and BWA?
Should extend its reach and access because of lower costs.
Chapter 2
Licensing Issues - Should the spectrum be delinked from the UAS Licence? Please provide the reasons for your response.
If spectrum is treated as a common resource, the logical requirement is for a linkage that is not dependent on ownership, but to access for service delivery, i.e., common access. - In case it is decided not to delink spectrum from UAS license, then should there be a limit on minimum and maximum number of access service providers in a service area? If yes, what should be the number of operators?
Follow global practice: do not exceed five operators in any service area unless there are compelling reasons to do so. - What should be the considerations to determine maximum spectrum per entity?
Minimum contiguous band for effective rollout and efficient delivery, i.e., inexpensive capital outlay for equipment and towers/network while maintaining Quality of Service. - Is there a need to put a limit on the maximum spectrum one licensee can hold? If yes, then what should be the limit? Should operators having more than the maximum limit, if determined, be assigned any more spectrum?
This depends on the overall approach to spectrum management, i.e., common use, or exclusive use. The logic for a limit is effective delivery capability at ‘normal’ cost. There is no logic for assigning more than this. However, if spectrum is for common/shared use, the only criterion is throughput/capacity. - If an existing licensee has more spectrum than the specified limit, then how should this spectrum be treated? Should such spectrum be taken back or should it be subjected to higher charging regime?
As in No. 10. If common/shared spectrum use is adopted, there needs to be a transition worked out, as in the transition to revenue sharing. - In the event fresh licences are to be granted, what should be the Entry fee for the license?
The principles followed should be:
(a) Low license fees to minimize access costs.
(b) Provided licenses are delinked from spectrum and few in number, there need to be strict rollout requirements.
(c) Incentives for broadband and rural coverage in the form of a structured Administrative Incentive Pricing mechanism.
(d) Penalties for failure. - In case it is decided that the spectrum is to be delinked from the license then what should be the entry fee for such a Licence and should there be any roll out condition?
As in No. 12. - Is there a need to do spectrum audit? If it is found in the audit that an operator is not using the spectrum efficiently what is the suggested course of action? Can penalties be imposed?
(a) Operating attributes should be monitored online on a continuous basis.
(b) Spectrum use probably needs to be monitored as an operating attribute.
(c) Penalties and incentives are needed, including forfeiture for continued transgression. - Can spectrum be assigned based on metro, urban and rural areas separately? If yes, what issues do you foresee in this method?
This needs to be considered only if common/pooled usage is decided against. With common use or sufficiently large blocks/bands of spectrum, no problems are likely to arise. - Since the amount of spectrum and the investment required for its utilisation in metro and large cities is higher than in rural areas, can asymmetric pricing of telecom services be a feasible proposition?
Yes.
M&A issues
If the common/shared use approach is adopted, M&A can be under existing laws and regulations. - Whether the existing licence conditions and guidelines related to M&A restrict consolidation in the telecom sector? If yes, what should be the alternative framework for M&A in the telecom sector?
- Whether lock-in clause in UASL agreement is a barrier to consolidation in telecom sector? If yes, what modifications may be considered in the clause to facilitate consolidation?
- Whether market share in terms of subscriber base/AGR should continue to regulate M&A activity in addition to the restriction on spectrum holding?
- Whether there should be a transfer charge on spectrum upon merger and acquisition? If yes, whether such charges should be same in case of M&A/transfer/sharing of spectrum?
- Whether the transfer charges should be one-time only for first such M&A or should they be levied each time an M&A takes place?
- Whether transfer charges should be levied on the lesser or higher of the 2G spectrum holdings of the merging entities?
- Whether the spectrum held consequent upon M&A be subjected to a maximum limit?
Spectrum Trading - Is spectrum trading required to encourage spectrum consolidation and improve spectrum utilization efficiency?
At present, trading is required to allow consolidation. However, if a comprehensive approach is taken to spectrum use, and especially if common use through common access is established, this set of problems will no longer exist after a transition period. Nor will there be any shortage of spectrum. - Who all should be permitted to trade the spectrum ?
As in No. 24. - Should the original allottee who has failed to fulfill “Roll out obligations” be allowed to do spectrum trading?
There should be penalties and forfeiture for failure to meet rollout obligations, and clawbacks as an interim measure during the transition. - Should transfer charges be levied in case of spectrum trading?
- What should be the parameters and methodology to determine first time spectrum transfer charges payable to Government for trading of the spectrum? How should these charges be determined year after year?
- Should such capping be limited to 2G spectrum only or consider other bands of spectrum also? Give your suggestions with justification.
This question assumes there is a difference in “2G spectrum” and other spectrum, which is incorrect. The difference is in equipment that has evolved in different phases along different bands. Spectrum should be treated as technology-neutral for the purposes of service delivery. Any service should be deliverable on any band, subject to interference limitations. - Should size of minimum tradable block of spectrum be defined or left to the market forces?
- Should the cost of spectrum trading be more than the spectrum assignment cost?
Spectrum sharing
These questions are addressed in the preamble in the cover note. - Should Spectrum sharing be allowed? If yes, what should be the regulatory framework for allowing spectrum sharing among the service providers?
- What should be criteria to permit spectrum sharing?
- Should spectrum sharing charges be regulated? If yes then what parameters should be considered to derive spectrum sharing charges? Should such charges be prescribed per MHz or for total allocated spectrum to the entity in LSA?
- Should there be any preconditions that rollout obligation be fulfilled by one or both service provider before allowing the sharing of spectrum?
- In case of spectrum sharing, who will have the rollout obligations? Giver or receiver?
Perpetuity of licences - Should there be a time limit on licence or should it be perpetual?
- What should be the validity period of assigned spectrum in case it is delinked from the licence? 20 years, as it exists, or any other period
- What should be the validity period of spectrum if spectrum is allocated for a different technology under the same license midway during the life of the license?
- If the spectrum assignment is for a defined period, then for what period and at what price should the extension of assigned spectrum be done?
- If the spectrum assignment is for a defined period, then after the expiry of the period should the same holder/licensee be given the first priority?
Uniform License Fee - What are the advantages and disadvantages of a uniform license fee?
- Whether there should be a uniform License Fee across all telecom licenses and service areas including services covered under registrations?
- If introduced, what should be the rate of uniform License Fee?
License fees should be treated as part of the overall scheme of Administered Incentive Pricing.
Chapter 3
Spectrum assignment - If the initial spectrum is de-linked from the licence, then what should be the method for subsequent assignment?
Please see comments on common/shared use in the preamble in the cover note. - If the initial spectrum continues to be linked with licence then is there any need to change from SLC based assignment?
The SLC basis for spectrum assignment gives rise to many distortions and is not in line with international practices. - In case a two-tier mechanism is adopted, then what should be the alternate method and the threshold beyond which it will be implemented?
- Should the spectrum be assigned in tranches of 1 MHz for GSM technology? What is the optimum tranche for assignment?
- In case a market based mechanism (i.e. auction) is decided to be adopted, would there be the issue of level playing field amongst licensees who have different amount of spectrum holding? How should this be addressed?
- In case continuation of SLC criteria is considered appropriate then, what should be the subscriber numbers for assignment of additional spectrum?
- In your opinion, what should be the method of assigning spectrum in bands other than 800, 900 and 1800 MHz for use other than commercial?
Spectrum pricing - Should the service providers having spectrum above the committed threshold be charged a one time charge for the additional spectrum?
- In case it is decided to levy one time charge beyond a certain amount then what in your opinion should be the date from which the charge should be calculated and why?
- On what basis, this upfront charge be decided? Should it be benchmarked to the auction price of 3G spectrum or some other benchmark?
- Should the annual spectrum charges be uniform irrespective of quantum of spectrum and technology?
- Should there be regular review of spectrum charges? If so, at what interval and what should be the methodology?
Structure for spectrum management - What in your opinion is the desired structure for efficient management of spectrum?
Please see the preamble in the cover note.
Shyam Ponappa
Centre for Internet & Society
cis-india.org
November 12, 2009
Managing Spectrum
In communications services, the high demand for spectrum compared with limited supply is well established. The Telecom Regulatory Authority of India (Trai) estimates demand in five years at 580 MHz, with current assignment to commercial operators at about 160 MHz. In this limited amount, fragmented spectrum holdings reduce efficiency, and broadband
growth and availability have been abysmal. Therefore, the policy alternatives evaluated should include ways to maximise utility through conserving resources and facilitating broadband Internet. The Empowered Group of Ministers (EGoM) needs this analysis to make informed decisions. The related issue of maximising utility from facilities, i.e., sharing networks for maximum benefit while conserving capital, thereby resulting in lower prices, likewise deserves serious consideration. For this, they need inputs on the benefits and costs of coordinated policy reform to promote broadband through incentives and penalties.
Having said that, it is for the officials providing support to the EGoM to structure, analyse and prioritise issues and provide the requisite information to facilitate informed decisions on complex choices. This requires appropriate inputs on technology as well. Efforts on all these aspects seem inadequate, with the EGoM being simply not adequately informed.
Trai recently began a consultation process, addressing a host of issues relating to 3G, Broadband Wireless Access (BWA) and licensing. A major deficiency is that no purposive goals and objectives are indicated, nor is there a facilitating logic to the structuring of issues (57 wide-ranging questions, with roughly three weeks for comments).
This is because Trai has posed issues built up over the years in one burst, resulting in the equivalent of a “flash flood”. Instead, structured consultations on discrete sets of questions, as in the indicative example below, are likely to yield better results. However, given where we are — the usual how-far-to-go-in-how-little-time — an organised, logical presentation with relevant inputs would improve the chances of good decisions and outcomes. Here is a suggested road map.
GOALS & OBJECTIVES
The first requirement for the consultation process is clear objectives based on needs. As Trai has not provided this, here are indicative constructs:
Our policies for infrastructure should be in public interest. In communications, these are:
- Ready access anywhere in the country to: (a) good services and (b) at reasonable prices.
- The services can be thought of as “Broadband Internet” and “Voice and SMS”.
(Note: There are very different objectives for broadcasting, which is outside the scope of these comments.)
DECISION TREES & ISSUE MAPS
A decision tree is an alternative to wading through a welter of unstructured questions, starting with fundamental objectives, using a logical decision map/issue map as a framework (see graphic). This requires judgment in selecting, organising and prioritising issues. The example assumes that the least capital and operating costs (while maintaining high quality) are appropriate criteria for services in public interest.
These decisions will determine how issues of licensing and consolidation/acquisitions pan out. Questions on pricing remain, e.g., per cent of revenues for licences and spectrum charges, and the timing of fees (i.e., cash flow from a fiscal perspective). If the decision is to pool spectrum, there are critical questions on Administered Incentive Pricing. The same principles of concessions and incentives (i.e., subsidies) as for sectors like power and highways need to be applied. Finally, there needs to be rationalisation in non-commercial uses, e.g., governance and defence.
SPECTRUM & NETWORK EFFICIENCY=LOWER COSTS
Given our fragmented spectrum holdings, perceived scarcity and economic efficiencies of limited competition in networks, there is reason to explore an approach to conserving spectrum and consolidating facilities. Spectrum can either be given or licensed for exclusive use in bands to separate operators as is done now, or be made available in large (at least 20 MHz) blocks to all operators for common use. Alternatively, operators can be given incentives to pool licensed spectrum to create a common capacity. The same approach can be explored for networks (facilities that use spectrum); these too can be pooled and shared if individually owned. Operators do this in a limited way, e.g., sharing towers, but pooling can be organised and extended much further.
Ill-considered policies that increase competition for its own sake because of the predominance of doctrinaire “free-market” notions have displaced more appropriate market structures. In India, this has resulted in 12-14 operators per service area, compared with the global average of three-five. The economics of networks favour limits to competition, because networks lend themselves to a limited-player (monopolistic or oligopolistic) market.*
Interestingly, an economist at the US Federal Communications Commission has this to say: “…For what should competition be promoted? Promoting competition for particular services can have major implications for the evolution of regulation and the long-term competitive structure of the industry. Unfortunately, the ‘competition for what?’ question has not received adequate consideration.”**
The benefit of using contiguous bands of spectrum is that costs could be significantly lower for equivalent voice and data capacity because of less advanced technology and less density of towers and equipment. Likewise for shared networks. With competition and good regulation, the likely result is lower costs, both for Broadband Internet and for Voice and SMS.
CONCLUSION
An inter-disciplinary consultation with stakeholders and specialists is essential to consider spectrum and sharing of facilities. Companies like Ericsson, Nokia, Motorola and Qualcomm as well as Google, Intel and possibly cable companies (Liberty Global?) should be invited. The EGoM’s goal should be nothing short of a broadband revolution. We need this for
education and vocational training, health care, governance and economic productivity across the board.
*A rational spectrum allocation policy, BS, July 2, 2009
** Douglas A Galbi, Senior Economist, US FCC
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