Competitive Neutrality in Liberalized Sectors of the Economy

I have been blogging about the need for competitive neutrality mostly in the context of  broadband networks. However, the importance of regulatory neutrality would apply equally to any other liberalized sector be it say, power or airlines. I have written about this in a paper titled,

"Of Airwaves, Incumbents and Good Governance - The Urgent Need for a Robust Competition Policy Framework"

Interestingly, though seldom do papers in India comment on this problem in the context of telecommunications, I find mention of the issue in the context of power transmission. Thus the Financial Express has reported that,

The central power regulator’s bid to end public sector dominance in the transmission sector by putting in place a system to award new projects based on tariff-based competitive bidding (TBCB) is threatening to unravel with the power ministry deciding to virtually persist with the previous regime where the projects are given on a platter to the state-run Power Grid Corporation (PGCIL).

According to sources, the ministry has invoked a provision in the relevant Central Electricity Regulatory Commission (CERC) rules to give eight new transmission projects with an estimated cost of Rs 36,000 crore to PGCIL....The provision of “compressed time schedule” vests discretion with the ministry to nominate PGCIL for executing projects if it is convinced that the bidding route could delay projects that are of critical nature, requiring time-bound execution.

An industry official said: “Any incumbent that continues to have 70-80% market share will have a natural advantage over new entrants in terms of winning even future projects being bid out. Moreover, if that incumbent is a PSU, then it will have clear financing advantages which private players cannot match under current circumstances.”...

Criticising the government’s decision, an executive of a private firm involved in the transmission sector told FE on condition of anonymity that it was the need of the hour to encourage private participation in transmission so that it can bring global technologies to complete projects in compressed time schedules. 

This echoes what I have written about NOFN/BBNL. I particular in my paper titled,  "The State of Broadband in India: A Call for Regulatory Neutrality" wherein I have specifically mentioned that,

"Public funding in a developing nation has to  be undertaken with particular care on account of the opportunity cost of allocating scarce resources. Subsidy schemes are designed to minimise costs and avoid duplicating expensive infrastructure. This could explain BSNL’s nomination in the Wireline Broadband scheme, its winning the bid in the Assam OFC scheme and its role in the forthcoming NOFN.  While this approach makes apparent sense in terms of short term financial prudence, its impact on the long term growth of the sector is unlikely to be positive given that it stifles competition and all its concomitant benefits. From a bureaucratic perspective, relying on public ownership or funding the incumbent is also perhaps more attractive in the short run in terms of relatively less time and effort estimated to commence roll outs (as against tendering/auction), even if we were to assume that public sector could and would deliver. However, the long term impact of monopoly ownership of even open access networks (on competition and accompanying aspects such as innovation/customer service/technological neutrality) merit consideration. If nothing else, our experience with monopoly in wire lines should have cautioned us. USOF had almost got it right with its regional OFC schemes, but it needs to be rescued from over specification of technology and incumbent -centric scheme design through regulation which insists inter alia on competitive neutrality. Thus, rather than doing away with USOF as is the demand of the aggrieved private sector, a relook at its regulatory structure and a focus on competitive neutrality would be the order of the day..." 

NOFN-Better Late than Never?

My last post was about NOFN and the government considering private sector involvement. Not much has been reported about that realization being actually put into practice. Today's Financial Express does report however that,

 Industry analysts have all along being critical of the project from the point of view that its implementation is being done by PSUs rather than awarding work to private sector agencies on a turnkey basis.

In fact, with the delays and a realisation in the top echelons that the deadline would be missed, DoT is also considering roping in private agencies. Under it, the plan is to divide the the entire country into zones and allocate private players to lay the network. In this outsourcing model, [USOF model] the role of the government would be only supervisory, setting benchmarks, providing incentives for completion of work on time and levying penalties in case of delays.

Well what can one say, I have blogged about this a lot. In my view such expensive mistakes are a problem of the (lack of) regularity neutrality problem we face.  Please see my recent paper titled,  "The State of Broadband in India: A Call for Regulatory Neutrality" at
http://circ.in/pdf/Regulatory-Neutrality-in-Broadband-India.pdf

An update on NOFN

My last post "Broadband Planning in India-Missing the Wood for the Trees" had highlighted the tardy progress of the all important NOFN project. I had mentioned  the rejection of the USOF bidding model which would have enabled private sector participation.Now it is  reported the government is contemplating a larger role for the private sector. 

Broadband Planning in India-Missing the Wood for the trees

I reproduce below the text of my article with the same title. It was published in the Financial Express today.

In the recent TRAI consultation paper titled Delivering Broadband Quickly: What do we Need to do?, the issues delineated for stakeholder consultation give the impression that the solution lies in controlling or influencing technological choices or costs. In a liberalised sector, healthy competition accompanied by efficient regulation would mean that market dynamics guide appropriate technological and cost choices, without government intervention. When regulatory interventions go beyond what is necessary to correct market failure, they create and exacerbate market distortions, doing more harm than good. India’s abnormally low ratio of wirelines to wireless connections is part of the broadband problem. While the paper has fleetingly mentioned public sector monopoly in this segment, it has not related the same to poor and falling wireline penetration in our country. Nor has it mentioned the abysmal state of rural broadband penetration, which persists in being negligible in spite of billions of rupees of funding to the incumbent in support of its wireline services by way of access deficit charges and universal service funding.

The relationship between competitive service provision and innovation, quality, and long-term growth in telecommunications is too well known to ignore, and unless efforts are made to correct underlying regulatory problems and consequential market distortions, we may not be able to move forward.

Sadly, one of the most market-friendly initiatives of the government which is key to promotion of broadband—the Universal Service Obligation Fund (USOF)—has also fallen prey to the same lack of understanding. The USOF subsidy is given to willing market players (universal service providers or USPs) to cover the viability gap and hence encourage them to provide services in commercially unviable areas. The USOF subsidised facilities are owned by USPs rather than by the government. Thus, USOF is potentially a valuable tool for minimalistic, targeted interventions to achieve greater penetration of broadband in a competition friendly manner.

A very important aspect of preventing market distortion is ensuring technological neutrality and competitive neutrality. The former would imply defining deliverables to be achieved through the USOF subsidy, while leaving specific technology choices and configurations to USPs’ wisdom. The latter implies that no entity operating in an economic market should be subject to undue competitive advantages or disadvantages.

It is well known that while the government as regulator is supposed to ensure a level-playing field, the government as owner of public enterprises may face difficulties in balancing various conflicting commercial and non-commercial interests.However, regulatory neutrality, which encompasses both technological and competitive neutrality, is a sine qua non for economic efficiency or welfare maximisation.

From data available on the USOF website, it would appear that USOF’s present regulatory framework has been unsuccessful in this regard. USOF had disbursed R17,580 crore of subsidy up to January 31, 2014, of which rural fixed line telephony and broadband based schemes taken together account for about 95%. Yet rural teledensity at 43% is made up almost entirely of private sector wireless connections. Rural wireline teledensity is less than 1% and broadband penetration negligible. BSNL’s monopoly in the rural wireline and optic fibre segment has meant that majority of the USOF support (focused disproportionately on fixed lines) has been given to BSNL on nomination basis. The other technologies mentioned in the Trai paper would perhaps have been deployed by USPs long ago, had USOF’s schemes been technologically neutral.

The USOF website reveals that the roll out of deliverables by BSNL as USP has been delayed consistently. For example, against a target of approximately 8.8 lakh broadband connections and 28,000 broadband kiosks by January 2014 under the Wireline Broadband Scheme, BSNL had provided only about 4.3 lakh broadband connections and less than 11,000 kiosks. Despite its poor track record, BSNL was chosen as one of the three PSUs to partner in the National Optical Fibre Network (NOFN) project through the creation of Bharat Broadband Network Limited (BBNL).

NOFN’s tardy progress has been documented in the consultation paper. While dwelling on which model to adopt for rural OFC backhaul, the USOF model of reverse bidding with the lowest bidder (public or private) setting up open access networks under contract was considered, but rejected as being tedious and long drawn, as it involves subsidy benchmarking. Instead, the BBNL route was chosen. The result of this choice made three years ago is out there for us to see. BBNL has not made even a dent in the targeted roll out (2.5 lakh gram panchayats by 2014) and what’s worse is the reported doubling of estimated costs from Rs 20,000 crore (A crore is 10 million) to more than Rs 40,000 crore. 

Going forward, a focus on regulatory neutrality would be the order of the day and a major part of what needs to be done.

Lessons from Down Under

An article titled "Australia's Last Chance for Infrastructure Competition" describes failed opportunities as far as introducing competition in the wire line broadband market. This is said to be in stark contrast to the mobile telecoms segment where competition and innovation have flourished. The article states that the government is now looking to promote platform competition in high speed broadband.(HSBB)

I am always sufficiently wary of superimposing models from the developed world on to the Indian telecoms scenario because apart from many other aspects, regulatory structures and capacities and penetration levels are different, but I do believe that we can learn something from their experience.

I have written earlier under the same labels as this post in favour of a technology neutral and multi-operator, approach to high speed broadband penetration in India. Getting NOFN / BBNL off the ground in my view would be a Herculean effort whose success in the near future if at all is doubtful. The earlier USOF approach of tendering out region-wise HSBB network projects would work much better as it would allow many operators other than the incumbent to participate. Investment and innovation would take off and the roll out would be much quicker bringing much needed broadband to our young aspiring population,especially in rural India.

Previous USOF OFC schemes suffered from flaws such as overspecialization of technology but had several progressive features such as mandatory open access and even allowing the selected Universal Service Provider to complete the project by renting  bandwidth from existing players to  (rather than necessarily laying fresh OFC). USOF India needs to think beyond PSU led nation wide OFC networks if we are to progress. A technology mix in wire line broadband would be welcome. Please see my previous posts in this regard.

If wishes were horses...

It is reported that,

" [t]he cabinet on Wednesday approved the ambitious Digital India programme that aims to connect all gram panchayats by broadband internet, promote e-governance and transform India into a connected knowledge economy......The vision of the programme is centred on three key areas: digital infrastructure as a utility to every citizen - digital identity, mobile phone and bank account, safe & secure cyber space; governance & services on demand - services available in real time on online and mobile platform, making financial transactions electronic and cashless, & digital empowerment of citizens - all documents, certificates available on cloud.Digital India envisages connecting 2.5 lakh villages by broadband and phones, reduce import of telecom imports to zero, wi-fi in 2.5 lakh schools, all universities, public wi-fi hotspots for citizens and creating 1.7 crore direct and 8.5 crore indirect jobs. Other impact points include training 1.7 crore citizens for IT, telecom and electronics jobs, and delivering e-governance and e-services."

As usual the programme that comes at a hefty cost of more than Rs one billion hinges on the success of USOF India's National Optic Fibre roll-out for broadband delivery.

All one can say is good luck with that! The same news item explains why I hold this view:

"Soon after assuming office, IT and telecom minister Ravi Shankar Prasad had said that the new BJP-led government will on priority take up the plan to connect 2,50,000 gram panchayats through the optic fibre network. The government plans to connect 50,000 gram panchayats this fiscal year itself ending March 31, 2014, one lakh in the next fiscal year and a similar number the year after.      The Rs 21,000-crore NOFN project - fully funded by the USOF - was unveiled by the UPA to digitally connect 2,50,000 gram panchayats. However, the project has not progressed much so far - delayed by over three years - due mainly as the cable laying and ducting process is yet to be finished. Among the pillars is mobile connectivity for all, which includes covering all the about 42,300 unpenetrated villages at a cost of Rs 16,000 crore to be completed by 2017-2018."

Views on the manner of planning and execution of NOFN / BBNL and alternative means of achieving broadband  roll outs through USOF are documented in previous posts. 

Interestingly, years after the project was initiated by way of an SPV of three public sector companies, the telecom regulator while commenting on the Digital India Plan has reportedly stated that the NOFN project is running over three years behind target and only 8% of the 0.18 million  kms of optic fibre has been rolled out. He says that private sector should be involved in NOFN roll out and that,

"Investment of private players could significantly reduce the cost of the entire   the project and therefore final tariffs"

The regulator also rightly points out the need for detailed planing of the actual content for the envisaged e-government services rather than limiting the plan to vague terminology such as e-health,e-education and the need to involve private sector in content development (rather than just depending on strengthening/ revamping the state agencies  as a means to achieve the plan.)

Letting the Market Function

A  very  thoughtprovoking paper on Broadband in USA highlights the power of innovation, genuine competition and  allowing markets to grow and cater to demand sans unnecessary regulation.
Its conclusions are reproduced below. They suggest avoidance of overenthusiastic tinkering in markets through market distorting regulation and subsidies. Most of these would be equally important in any context whether we talk about the developed or developing world except perhaps that in many developing countries supply side problems are far more prevalent

America’s broadband networks have allowed the United States to become a leading digital econ­omy. Building on a sound broadband foundation and leveraging the advantages of America’s inno­vation ecosystem have allowed American firms to export their digital goods and services to other countries, making the digital sector America’s third-largest category of exports after industrial supplies and capital goods. Policymakers should take the following steps to ensure that the United States continues to be the leader in global competitiveness:

In order to maximize investment, avoid utility-style regulation. Instead, focus on market-based, technology-neutral approaches that encourage dynamic competition with different networks and technologies.
Avoid subsidies for any particular technology: a variety of broadband technologies keep the market competitive. Government involvement in the broadband market may cause private firms to exit, stifling growth in the industry.
Permit competition-enhancing consolidation of broadband companies because mergers lower overhead costs and make operations more efficient.
Remove barriers to mobile infrastructure at the local level. Municipalities often hinder the deployment of infrastructure, which limits broadband competitors, particularly in rural areas.
Focus on increasing Internet adoption rather than the deployment of network. More than 80 percent of Americans use the Internet, and those who do not cite lack of usability and relevance as their primary reasons rather than cost or lack of access.

Messing up the Market Efficiency Gap in a Hope to Address the Actual Access Gap

Readers may please refer to my earliest posts about the Market Efficiency Gap and my recent one titled "Going around in Circles"

Somewhere along the past decade, USOF India has lost its way and we have come back full circle to thinking of relying on roll out obligations to achieve desired levels of rural teledensity. The proposition of Department of Telecommunications (DoT) that future spectrum auctions be designed to include  rural roll out obligations (as per a news item in Economic Times ) displays a complete lack of appreciation of the concept of USFs and the failure of roll out obligations in the past. All we will achieve is distortions in the spectrum allocation process. 

How exactly are the operators to find funds to fulfill the mandatory roll out obligations in areas which are obviously not commercially viable? Were they waiting only for a diktat from DoT all this while? What if they bid lower for spectrum to compensate for this additional cost and then circumvent roll out as in the past? Why should only spectrum winners (of this future auction) be considered as prospective suppliers of services to meet the gap?Well designed USOF schemes can provide the required (financial) incentive to any operator without creating unnecessary market distortions. This thinking by DoT is perhaps indicative of the inability of USOF India to fulfill its mandate and this malady has been the subject matter of many of my previous posts.

Self Help in rural areas-How Long can They Wait for Internet

An inspiring and at the same time saddening news item in the Times of India today describes how NGOs are helping rural folk especially in remote parts of the country like the state of Jharkhand connect to the internet. This involves training locals to rig up and maintain local networks. The connectivity is not very high speed and relatively expensive, but it is working and helping local businesses.

The sad part is that  USOF India has not been able to utilize its sizable resources to empower those who want to and can provide rural broadband like these niche operators, but instead is channelizing all its efforts and funds into huge incumbent centric projects broadband which are either under performing or not performing. A USOF wire line broadband project has rolled out less than a third of mandated number of connections. The connections under this project were to be available to rural pubic at a fraction of the cost of the locally set up networks described above, thanks to USOF subsidy. Also public access broadband facilities have not been set up properly / at all defeating the purpose of the project. Optic fibre connectivity through NOFN / BBNL is badly delayed. There has been a very apparent move away from bidding which is required by the USOF Rules to handing over projects on nomination basis. Curiously, this problem seems to arise from bureaucratic  fear of the implications of dealing with private sector (on account of vigilantism by vested interests) rather than on a sound socioeconomic basis including public good.

Its time for USOF to rescue itself from such distortions. As it is, there have been several demands from industry to scrap the Fund which is based on contributions portion of license fee) of operators. A more thorough ex ante policy / programme analysis including competition related vetting is the need of the hour.

The Long and Winding Road to Universal Broadband-USOF India

I have expressed reservations about the choice of methodology for OFC connectivity to rural India adopted by USOF India in earlier posts.

A network that was to cover 250000 village panchayats (local self government offices) by 2014 has not been able to cover even 50000 as of now. The new timeline is 2017. Can India afford this time overrun, let alone the inevitable cost overrun this would most likely entail?

The reasons for delay are the inability of  the public sector incumbents BSNL, Railtel and PGCIL (that constitute the implementing agency BBNL) to conclude contracts for purchase and laying of OFC. This is a commonly known problem that anyone familiar with these public sector units would have pointed out in 2012 itself. Interestingly, at that time, avoiding delay in roll out was the reason that the work was given on nomination basis to PSUs rather than bidding it out as per USOF Rules. It was said that benchmarking and tendering would lead to delay! This is in spite of USOF already having initiated two regional OFC projects through the bidding route earlier, implying availability of previous experience in benchmarking and scheme design.

Please see my earlier posts under National Broadband Plans,  Competition and Broadband Networks.

State-run Bharat Sanchar Nigam Ltd, RailTel and PowerGrid Corp, which are executing the NOFN project, told the review meeting that they were facing challenges in concluding cable laying, trenching and ducting work in their respective zones, said the USOF official who was present at the NOFN review meeting. USOF now expects the three-phase broadband coverage to be concluded earliest in March 2017, which would translate in a five-year delay since the project has already suffered a two-year time ov ..

Read more at:
http://economictimes.indiatimes.com/articleshow/37105173.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

State-run Bharat Sanchar Nigam Ltd, RailTel and PowerGrid Corp, which are executing the NOFN project, told the review meeting that they were facing challenges in concluding cable laying, trenching and ducting work in their respective zones, said the USOF official who was present at the NOFN review meeting. USOF now expects the three-phase broadband coverage to be concluded earliest in March 2017, which would translate in a five-year delay since the project has already suffered a two-year time ov ..

Read more at:
http://economictimes.indiatimes.com/articleshow/37105173.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

State-run Bharat Sanchar Nigam Ltd, RailTel and PowerGrid Corp, which are executing the NOFN project, told the review meeting that they were facing challenges in concluding cable laying, trenching and ducting work in their respective zones, said the USOF official who was present at the NOFN review meeting. USOF now expects the three-phase broadband coverage to be concluded earliest in March 2017, which would translate in a five-year delay since the project has already suffered a two-year time ov ..

Read more at:
http://economictimes.indiatimes.com/articleshow/37105173.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

State-run Bharat Sanchar Nigam Ltd, RailTel and PowerGrid Corp, which are executing the NOFN project, told the review meeting that they were facing challenges in concluding cable laying, trenching and ducting work in their respective zones, said the USOF official who was present at the NOFN review meeting. USOF now expects the three-phase broadband coverage to be concluded earliest in March 2017, which would translate in a five-year delay since the project has already suffered a two-year time ov ..

Read more at:
http://economictimes.indiatimes.com/articleshow/37105173.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Fibre, Regulation & Competition

It may be noted that a common strain running throughout my blog is my concern with huge, national level roll out of incumbent centric state-sponsored fibre networks. In the enthusiasm for broadband and its inclusion as a key component of growth or stimulus plans, developed nations too seem to have relaxed their strict concern for competition or at least have had to modify competition/telecom regulation to accommodate these projects (NBN). Developing nations like India that have adopted a "me too" approach are perhaps even worse off for the lack of adequate regulation and almost complete lack of competition assessment at a policy and project level. (BBNL)

I have often warned that there would be problems ahead. Please see my posts under national broadband plans, broadband networks and competition and have suggested an alternative approach based on tendering and infrastructure sharing.

It is of interest that the fears surrounding fibre backhaul as a key, potentially bottleneck input are being articulated even in Europe with much more sophisticated regulation in place. These have led to plea for (re)regulation of access to especially backhaul owned by former fixed line incumbents.Please see the report on Vodafone lobbying for regulated fibre access,

Do we want to go back to the era of complicated (and often less than perfect) fixed line type of regulation or can we learn from the past?

Going Around in Circles?

The whole idea of universal service funds was that at least  theoretically they are considered to be a more transparent, targeted and efficient means of achieving universal service as compared to cross-subsidies, access deficit charges and roll out obligations. 

The Economics Times today reports that USOF, India is considering a reduction in universal service levy for operators that meet roll out targets. This is a flawed approach. 

Firstly roll out obligations in Indian licenses do not  and cannot ensure that specific rural areas (uncovered/.under-served) will be covered. They generally require coverage of a certain percentage of rural area in the licensed  service area or telecom circle and history has shown that the areas covered are those closest to cities/towns. Secondly, mere technical roll out cannot ensure universal individual/household access which requires inter alia affordability or accessibility of connections. A well designed USF scheme can achieve both these objectives.

 An overall reduction in Universal Service Levy based on assessed requirement of funds is a different matter but retaining/relying on roll out obligations as a means of achieving universal service when a universal service fund exists is not advisable. It is likely to increase the government's regulatory and administrative burden while defeating the purpose of the Fund.

The Future of Wireless Communication?

An extremely interesting article from the Economist hints at the possibility of bidding farewell to electrical signals as the prime means of wireless communication.

The article explains that chemical based communication as found in nature-animals do it (your dog leaving urine samples replete with telling "chemical markers" at every nook and corner during his walks or internal communications within the human body are examples), could be used to transmit data which would be read by sensors.

Present trials are crude at best, with very low speeds, but there is hope for higher data transmission becoming a reality in the future especially if messages can be encoded in the molecules themselves.

A particularly useful application of such technology is in disaster related search and rescue operations where the situation does not permit normal mobile communications. This happens when a building collapses as mobile services are not of much under the debris. However a group of robots could go under the collapsed material and leave each other chemical messages about what areas were searched and what has been found.

Another lesson to learn is that we should not preemptively put all our eggs in one basket  assuming that a particular technology is the best-please see my post titled "Disruptive Technology and Public Funding of High Speed Broadband Networks." under the label Technology

Banking on Incumbent Status

Recently the Department of Post (DoP) has been in the news as regards its attempts to obtain a banking license. As analysts point out its one thing to have non-computerized make-shift rural post offices housed in a single room huts to deliver letters, but quite another to run a bank from such post offices. These rural branches lack physical infrastructure and human resource (with the requisite skill set) to run banking services. Even DoP's attempts to tender for hand held devices to serve as mobile ATMs are unsuccessful apparently due to rudimentary specifications and infeasible terms and conditions.

The recent liberalization of banking in India is intended to attract  more players so as to inter alia make banking inclusive, but the postal department may not be the ideal candidate to do so.

The persistence of efforts by the DoP in this area is  more about a loss making incumbent postal operator trying to survive in the face of competition (from private couriers and broadband/email) by reinventing itself,  than about helping the banking sector thrive and ensuring that its customer base increases or is better served. It must be remembered that this reinvention is not costless and these costs including recruitment/retraining of staff, must be weighed against benefits. (This applies equally to National Broadband Plans like NOFN/BBNL that hinge on huge public investments in enhancing incumbent's networks.)

This is exactly the sort of iffy policy that government's should be wary off. Universal Service whether in banking, airlines or post or telecommunications should not become an excuse / for helping an incumbent survive. This is throwing good (public) money after bad. Not something a developing economy can afford. In the end economic efficiency must allow for creative destruction rather than endless and expensive preservation of redundant public investments

National Broadband Plans- Cracks Emerge

Two interesting pieces of news that make me feel like a seer. 

First a post titled "Fibre fanaticism overrode proper NBN planning says report" that quotes Australia's   National Productivity councils draft report as follows,

 Early planning for Australia's National Broadband Network (NBN) focused on “how best to implement the government’s policy objectives, rather than considering the merits of different options.”

This implies that rather than exploring various options on how to provide high speed broadband to end users, a policy decision on fibre as the preferred mode  and the NBN  as a delivery mechanism was taken. This obviously restricted options.

Thus instead of "conducting a cost benefit analysis to ensure economic efficiency and value for money", an implementation study was conducted which "did not evaluate the decision to implement NBN via NBN Co" or the macroeconomic and social benefits of implementing a super fast broadband network.

This often happens in Government, but in fast changing field like telecommunications, such costly mistakes lead to long term regulatory headaches and negative consequences in terms of competition, growth and customer service. Please see my previous post on disruptive technology in this regard.

In the short term  NBN is already facing time and cost overruns.

Another news item  about USA's National Broadband Plan 2010, states that, "major U.S. carriers have started to seek relief from their vow to support the plan as its enormous costs become clearer...........They are persuading state legislatures and regulatory boards to quietly adopt new rules—rules written by the telecoms—to eliminate their legal obligations to provide broadband service nationwide and replace landlines with wireless. This abrupt change in plans will leave vast areas of the country with poor service, slow telecommunications and higher bills." 

Please see my previous posts on National Broadband Plans and Competition.

Renewable Energy for Powering Smart Phones

The Times of India today has an article that reports  that scientists have developed bio-batteries that use sugar to generate electricity enough to power cell phones for 10 days. These batteries are also lighter. In the Indian scenario this would be a boon. At present rural areas face heavy power cuts and people resort to unconventional means such using tractor batteries to charge cell phones.

The smart phone with its potential for job search, education, data, e-commerce  and e-government applications is the primary device though which the average Indian would access ICTs and ICT enabled services. Making it last is vital. Long lasting batteries are also vital from the disaster communications viewpoint.

Disruptive Technology and Public Funding of High Speed Broadband Networks

In my posts on the issue of National Broadband Plan and Broadband  Networks, I have consistently cautioned against creating publicly funded monopolies for OFC Networks and reminded readers about the regulatory issues involved in managing our legacy of wire line based incumbents. One of the reasons for avoiding the same is the nature of telecommunications where technology change is the rule.The advent of affordable  and competitively provided mobile services debunked the notion of telecoms as natural monopolies, yet we risk repeating this faulty argument when it comes to high speed broadband.

In India, the Public Sector Incumbents BSNL and MTNL have been supported with billions of rupees to survive in a competitive environment. However, not even their dominance in wire line telephony has helped them compete with a nimble private sector. On the other hand, regulatory protection of legacy public investment in their wire line networks has had a negative effect on competition in that segment in the country. The result is very poor broadband penetration.

Today's Times of India carries an article about a new laser developed by the California Institute of Technology that promises to greatly  outdo the speed of existing OFC cables (that are based on older S-DBF lasers). This sort of disruption should be expected in telecommunications. There could be many more such developments even before the roll out of nation-wide  OFC network projects which is underway in many counties (like India's NOFN by BBNL) is even completed. What then will be the fate of the sunk (public) investment in these (then) obsolete megalithic OFC networks?

This will inevitably throw up complex regulatory issues such as those described above, with less than optimal results. This brings me back to what I wrote in my posts titled  "Broadband Networks through Infrastructure Sharing" and National Broadband Networks: Regulation, Universal Service, Competition and Monopolies."

We may need to learn from the story about the "Tortoise and the Hare" that we may not win in the long run if in our haste to speed up high speed broadband deployment, we ride roughshod over hard learned lessons about competition and technological neutrality.

Worship Worthy Connectivity

Its been a while since I blogged.

 Finally found inspiration in a story about a man who was saved from a tigress attack by mobile connectivity. In rural Madhya Pradesh (a state of India), on the outskirts of a national park, two villagers clambered up a tree to escape a tigress. The humble cell phone was how they could be rescued. So now the cell phone in question is being worshiped by its owner as yet another avatar or proof of God's presence.

In another article the FCC's drive for universal broadband connectivity is being seen as a shot in the arm for public safety communications.in USA.

ICTs have all the answers.

Delay in NOFN Roll Out-As Expected

The Economic Times today reports yet another delay in roll out of NOFN by BBNL as the PSUs are unable to award contracts worth Rs 6 billion for cable laying and trenching. 

I would invite readers to review my post titled, "National Broadband Plans-The Largely Unexamined Competition Debate" under the label NOFN. I have already covered in previous posts, my reasoning as to why  India should have hesitated before venturing to roll out a country wide network using the nomination route involving Public Sector Incumbents. When various option were being examined as to which methodology to choose for NOFN, there was an explicit impatience with the usual USOF method of first arriving at subsidy benchmarks and then bidding out a scheme on a regional/sub-regional basis to all eligible operators. This was frowned upon as too tedious and a source of delay. 

It was decided that creating an SPV of PSUs would be the better way forward especially as BSNL already owns the chunk of rural OFC networks.

I have examined this debate in my post "Broadband Networks through Infrastructure Sharing Route"  (also placed under the label NOFN). An alternative model has been presented to readers. One that is based on bidding.

 The right way in  my view would have been to encourage/mandate  BSNL to share its OFC capacity with the region wise winning bidder and to include the leasing plus incentive cost in the subsidy benchmarks. With this arrangement the network could have been rolled out by multiple USPs thereby creating the required  non-discriminatory open access  OFC backbone in rural blocks  with no adverse impact on competition. The facilitation extended by USOF (Central Government) by way of coordination with state governments for right of way clearances could have been done in this model too. This would probably have gone faster and ensured that at least  a good proportion  if not all villages would be reaping the benefits of high capacity OFC backbones connectivity by now.

Lesssons for US Regulation from Plight of Government Schools in Rural India

An article titled "Education Scam" in today's Financial Express speaks about the poor service delivery from government schools  wherein relatively well-paid government school teachers don't go to school to teach. Students of these schools have been found fare much worse in terms of educational performance compared to those attending private schools in rural India. The former  do much better when given tuition but that means parents having to spend themselves in spite of the state funding school infrastructure and regular teacher's salaries. It has been concluded that it would be much better to allow private schools to flourish and give poor parents cash to pay school fees. 

This reminds me of the billions of Rupees pumped by USOF/Government into rural land line infrastructure (incumbent owned) with abysmal results in terms of improvement in voice or data connections.

On this analogy would it not be better to address the Market Efficiency Gap in rural telecommunications through effective regulation and resultant competition and then to focus targeted subsidies only where markets fail either because there is no viability for suppliers or certain population segments cannot afford required services. 

 I would much prefer a situation where there are a multiplicity of suppliers for the public to choose from, even if in terms of various (less than state of the art) technology platforms, than one in which much money is spent on a supposedly ideal technology platform but with sub optimal  results.  This could well be  the fate of ambitious government sponsored roll outs of OFC networks which recreate monopolies and limit competition at huge costs.

Progress the E-way

A though provoking article "Solving Social issues through Technology" draws attention to the progress India has made in the realm of technology (reference the latest Mars mission) and the need to harness technology to bring education, facilities and opportunities to rural Indians and others who aspire to break out of poverty. It pins hope inter alia upon the NOFN.

Another article, "Technology rings in Financial Inclusion" highlights that in India, 65% of population has no access to banking but mobile phones  can change that. Innovative applications can enhance financial literacy and in fact, it has been proven by field research that even illiterate Indians take to financial inclusion apps and become adept at mobile banking.

All this has been said before (and posted about before in this blog). What we need most in my opinion is the Market Efficiency side of reforms to ensure that connectivity is widespread and universally available and that regulations encourage the use of ICTs including all aspects of the mobile/broadband ecosystem. This includes of course Universal Service Regulation.

Mobile Connections for the Poor-Is this the Right Way

I have written on more than one occasion on USOF India's Schemes aimed at providing subsidised devices and mobile connections to the rural poor. This scheme has finally been cleared by the Government for implementation. In general my posts have inter alia tended to caution against potential  implementation problems. These can be seen under the label USOF India.

A news item about  FCC's detection of rampant misuse of the United State's Universal Service Fund's Lifeline Programme in North Carolina should further caution us. Here people in the eligible category were found to be beating the call limit associated with this subsidised facility by taking multiple connections under the programme (from different telephone companies in the state). While in this case the fraud has been detected, there are calls to close this programme.

USOF's own experience with the (fixed line) individual rural household phone scheme has been that it posed a monitoring headache. Why compound the error with mobile connections?

US Regulation in a liberalized environment

An interesting article titled "As Regulatory Power Wanes, State Crafts New Telecom Plan" about the state of Vermont captures the problem of achieving Universal Service (US)  in an advanced, competitive and liberalized without making typical public investment mistakes and in my view underlines the importance of US Regulation.

The article points out that when much of what the telecommunications sector does is de-regulated the government has only investment as a tool to achieve the desired level of penetration. However, it cautions against the government getting involved in the following quote:

“The danger, of course, when government gets involved in these kinds of investment activities, is: Is government going to put money in the right places?”

My answer would be to better define government's role and methodology within the regulation of US so that public interventions don't end up doing more harm than good. 

Digital Literacy and the Huge untapped Demand for Internet in Rural India

An article in the Financial Express titled "Time to Push the Pedal" highlights yet again the huge potential of imparting digital training to rural Indians including grown ups and particularly women. 

My own experience with USOF India's project for ICT facilities and skills  for women is exactly as stated in this article. Parents/mothers in rural India and even ultra conservative states would like their daughters to educate themselves and seek employment as a means of financial independence. For that purpose alone they would happily embrace a tool like the internet which provides convenient access to information and knowledge on a vast range of topics from online courses, university admissions to entrance exams and job opportunities. Please see my post titled " Special Initiatives, ICTs for Women" under the label ICTs for Women. My articles on this scheme may also be seen at 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2103235

and

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=230247

Needless to say along with supply side measures like broadband infrastructure, local language content and useful applications, efforts to precipitate demand as envisaged in India's National ICT policies are of critical importance. While doing so we must focus on adult education and ensure inclusion of women and the disabled.

Adopting Open Access Models

Today's newspaper carries a report about USOF India's project to provide mobile towers in naxalite affected areas. This project is being implemented by the incumbent PSU BSNL on nomination basis. The report states that BSNL is soon to finalise its tender for equipment which is being sourced from indigenous manufacturers.

I have written earlier on this topic in my post, "USOF India's Scheme for Mobile Towers in Disturbed Areas" under the label USOF India and mentioned that this project could have  been awarded based on  bidding basis as there is no information in the public domain that indicates that private operators were unwilling to compete for such a project.

In my view, competitive neutrality is possible even when security concerns are paramount and viability is non-existent in the short to medium run. 

Bidding could have been carried out for setting up and running of the sharable mobile towers at hundred percent government cost (as is being done in this case)  for a predeclared period covering at least the the life of the towers. Thus the company setting up the tower would be fully compensated for its costs and (possible) lack of tenants/customers. 

Additionally, the possibility of (other/multiple) service providers being willing to compete in the access segment could have been explored. The  underlying condition could have been the requirement for the infrastructure providing operator to provide non-discriminatory access to licensed mobile service providers. The latter would be enabled to  hoist their antenna on this tower free of cost and provide access to customers in this region. This would bring in competition both from economy in use of public funds (assuming that at present USOF would necessarily bear the cost of service provision by BSNL too) and from choice for customers.

Given that some of these areas may not attract service providers even with rent free passive infrastructure being in place, BSNL could have been asked by the government to be the provider of last resort on towers where no service provider came forth with due compensation.

Such a scheme would require more effort on the part of USOF in terms of design and implementation. It would however be worth the effort as it would lay the ground for access competition in in the medium to long run if not short run even in thsi disturbed region.

There is a need to learn from past experience regarding the easy option of monopoly service provision, especially when public funds are used.

Infrastructure Regulation and the Market Efficiency Gap

An article caught my eye today. It is titled "Biting the Silver Bullet" in the Economic Times and is about the need to improve regulation of infrastructure (utilities) which speaks of dismantling superfluous ministries and concentrating on strengthening regulatory institutions in India and doing it now when a (political) revolution of sorts is underway and change is perhaps possible. Significantly he points out the need to improve infrastructure rather subsidize services to make them accessible to all.

Personally I believe that much of the lag in telecom penetration in India is the consequence of poor regulation especially in the fixed line segment. There is a pressing need to undo some of the competitive neutrality issues in USOF regulation too. 

My views on this subject can be seen in posts under Market Efficiency Gap and Competition