The NBN Debate Continues-Lessons for India's NOFN?

It is reported that an independent review of NBN ordered by the new Coalition Government of Australia has found that NBN costs and time lines have been understated and revenues overstated.

The news report states that,

"'The  full cost of Labor's original National Broadband Network plans would blow out by $29 billion and be completed three years late, the strategic review has found.

Communications Minister Malcolm Turnbull released details of the review he started 60 days ago on Thursday.The review found the fibre-to-the-premises NBN under Labor would have cost $73 billion, $29 billion more than forecast, and not be completed until 2024.It also found the current NBN Co corporate plan had overestimated revenues from the network by $13 billion.While the review found the cost and timing of the original plans would blow out, Opposition communications spokesman Jason Clare challenged the review's findings.He released an internal government analysis of the Coalition's plans, which he said revealed the new government's plans were "the wrong approach", and would not achieve the promised speeds.

Mr Turnbull has pledged download speeds of 50mbps by 2019 under the Coalition's plan, which will rely on copper connecting to fibre nodes, rather than brining the higher-speed fibre direct to all homes.

But Mr Clare said the analysis should the two stage approach - with 25mbps promised by 2016, expanding to 50mbps by 2019 - was unworkable.

He said the government's fibre-to-the-node plan would lower revenues from the network by 30% and the actual cost of fixing the existing Telstra-owned copper network, and was "unknown".

But Mr Turnbull said the review found the Labor network was "never achievable", and the results of the review would be "a crucial input into government policy".

Clearly the debate can go on forever. Nevertheless a mid term policy/projectreview and corrective steps are a good idea for any ambitious national broadband network roll out. India's NOFN/BBNL is already in difficulties. Ironically though it is being heavily subsidized because it is supposed to be financially nonviable and the PSU SPV route was chosen to cut red tape in Right of Way and other such causes of delay; the three PSU implementation partners in charge of this project are now citing the very same reasons for their difficulties and delays. Time for a review of costs and revenue projections and last but not lease scheme design? 

A Historic Pact or Something to Worry about?

Newspaper articles are hailing a historic infrastructure sharing pact  between two telecommunications bigwigs namely Bharti Airtel and Reliance Jio.This will reportedly  include optic fibre network – inter and intra city, submarine cable networks, towers and internet broadband services. The Times of India reports that,

"The cooperation is aimed at avoiding duplication of infrastructure, wherever possible, and to preserve capital and the environment. This will also provide redundancy in order to ensure seamless services to customers of the respective parties,"...."In future, the arrangement could be extended to roaming on 2G, 3G and 4G, and any other mutually benefiting areas relating to telecommunication, including but not limited to jointly laying optic fibre or other forms of infrastructure services. ..The pricing would be at 'arm's length', based on the prevailing market rates,"

While infrastructure sharing sounds good in theory, my worry is the lack of competition oversight when such agreements are entered into. Where is the ex ante scrutiny to ensure that other operators/subscribers are not put to disadvantage by such agreements among giant service providers which could easily have a detrimental impact on  competition in  end user service delivery. 

Competition and the PSU Incumbent

For the first time in the history of competition regulation in India, the Competition Regulator of India or Competition Commission of India has penalised a public sector monopolist (Coal India Limited)  for abuse of dominant position (in supply of dry fuel). A news item titled,  "'CCI slaps Rs.1,773 cr penalty on CIL" tells us that,

"As per CCI, CIL and its subsidiaries have been found to be “imposing unfair/discriminatory conditions in fuel supply agreements (FSAs) with the power producers for supply of non-coking coal.” Such conditions violate fair trade norms. Apart from issuing a cease and desist order against Coal India and its subsidiaries, the CCI has directed modification of FSAs. Besides, the regulator has asked the company to consult all the stakeholders for making the modifications in the FSAs. In recent times, CIL has drawn flak for fuel shortages that have been hurting power generation.

This is a positive step as much of what ails the Indian economy arises from monopolies in critical (input) sectors." We need to keep an eye on this aspect as far as telecommunications go too. 

Competition & Consumer Welfare-Infrastructure Provision

I salute the contents of two interesting news items from the Business Standard dated December 7, 2013. The first is titled "Try and Introduce Competition". It suggests that the dismantling of the government monopoly in power supply in New Delhi and replacing it by three area wise private sector monopolies has not sufficiently addressed consumer welfare and that we also need competition in each sub market for lower tariffs and quality of service rather than expecting the present regulated prices to substitute competitive markets. 

The second is a report on an interview with the Civil Aviation Minister and its title says its all- "I am not Minister for Air India." The article tells us that the Minister when questioned about his promotion of private competition made it clear that his job is consumer welfare rather than protection of the public sector incumbent. 

It would be good if the telecom sector were to recover from their past follies and pick up a cue rather than blunder ahead in a manner that harms competition. This is especially so when it comes to public funding/Universal Service. 

Reassuringly Sensible Approach to Future Regulation

It was good to read a press release titled, "ECTA Regulatory Conference - Competition should remain at the heart of EU telecoms regulatory policy." I reproduce it (verbatim) below as it is in my view a very significant post.What is particularly important is to not let political compulsions or economic downturns allow a movement away from competition and towards monopoly as incumbents would like. This is especially important as the arguments against competition in the era of NGN sound very similar to those propagated by interested parties in the eral of fixed line services before mobile services proved them wrong. Telecoms are always going to be subject to disruptive technologies and to be lulled into thinking that competition can harm or than monopoly is inevitable or desirable in view of the pressing need for universal broadband or in view of declining profit margins would be shortsighted.

This argument applies equally well to developing countries. In India, a short phase of  cut throat competition in the mobile voice segment caused by faulty policies of the recent past (ending with cancellation of licenses) and a sudden resurgence of faith in public rather than private sector for rural roll outs (owing to a beleaguered bureaucracy facing the aftermath of a phase of crony capitalism)  is leading many to the wrong conclusions.

The post reads as follows:

"European policy makers, regulators, key players from the telecoms industry and other stakeholders meet for three days under the auspices of ECTA to discuss pressing issues for the telecoms sector, including the recent European Commission proposal on the telecoms single market.With high level speakers, including Vice-President Neelie Kroes, the ECTA Regulatory Conference will address a plethora of issues ranging from net neutrality, data protection and consumer protection to regulation, competition, market structure, investments, the review of relevant markets and spectrum harmonization.

The implementation of a genuine single market for telecoms ranks high on the EU agenda, as does the role that regulation should play going forward. This conference will promote an open debate on the challenges the sector is facing and provide the opportunity to discuss how regulation can continue ensuring that tangible benefits are delivered by the EU’s pro-competitive framework and maintained in an NGA setting.

Tom Ruhan, Chairman of ECTA said "This conference is a great opportunity to stop and think. Alarming misconceptions regarding the state and performance of the sector and the role of regulation could divert the EU from a competition and end-user friendly path. We must not forget that competition has proven to be the best driver for efficient investments and also acknowledge the key role played by competitors in driving innovation and affordable prices for users (consumers, businesses and public administrations) as well as network investments. The immense benefits associated with open and competitive telecoms markets must not be undone by attempts to push for premature de-regulation. The review of relevant markets is particularly important in this regard. Regulation should also not be used to give a hand to those dominant companies, which have failed to take the necessary business decisions to adapt to a data centric world and now want to reduce competition instead of correcting their mistakes. Using regulation to implement the wrong industrial policies is a no-go.”

Erzsebet Fitori, Director of ECTA said “Experience has shown that ‘two is not enough competition’ for European consumers. More than ever we need pro-competitive policies, which recognise that regulation of the fixed infrastructure remains an essential competition enabler in an NGA environment and that investments are fostered and not hindered by competition. We must ensure that regulation remains neutral to whoever invests.”

The pro-competitive principles enshrined in the EU Regulatory Framework, namely the need to promote market liberalization and ensure open access to infrastructure, have been regarded outside EU borders as “best-practice”.[1] Indeed access based regulation - namely to physical access products of dominant operators - has played a key role in ensuring that new entrants are able to enter the telecoms markets, climb the ladder of investment, start rolling out their own networks and take the driver’s seat when it comes to NGA broadband deployment.[2] The need to make available, across all EU Member States, fully equivalent and fit-for-purpose wholesale access products, at a fair price and tailored to the needs of business services, is all the more necessary in the transition to NGA.

The development of a true single market depends on the genuine barriers being tackled, not on meeting demands of dominant operators for intervention aimed at reducing competition. Premature de-regulation or the implementation of unfit regulation must therefore be outright prevented. The upcoming review of relevant markets will have a fundamental role to play in this regard."

Internet for Indian Villages-Where does the solution lie?

One possible answer is that we have to encourage community participation rather than purely top down supply side big schemes. We have had little success with the former as for example the Common Service Centre scheme of Department of IT. 

My previous post "Wi Fi Internet for Indian Village Local Government Offices-Going Around in Circles?" has already suggested that USOF's proposed project for wi-fi and internet at panchayat offices may not necessarily meet with success as far as bringing internet to ordinary rural folk goes. I believe we have to allow big schemes to include the end users and NGOs into the design is we are to succeed. 

A good example of such a project has been documented in an article titled "Let NGOs provide rural net services" It describes a success story wherein involving and training locals in villages to provide services where big operators are not interested with the help of NGOs has enabled even illiterate villagers to benefit from online content (such as audio-visual content).

Such schemes require far more effort and time as was the case of USOF's Sanchar Shakti. However they are worth it in terms of outcomes.

 Einstein had famously said insanity is repeating the same thing again and again and expecting different results. Time to change our approach? 

Wi Fi Internet for Indian Village Local Government Offices-Going Around in Circles?

A news item in the Times of India (November 30, 2013)  titled "Govt clears internet wi-fi plan for rural India" states that a proposal to provde wi-fi hotspots and internet connections to India's Gram Panchayats has recently been approved. Slated to cost Rs 37.5 billion and targeted to be completed by 2016, the project will be funded by Indian USOF and will ride on NOFN infrastructure, 

This may be an excellent idea with two caveats. 

One is that past experience has shown that telecom services in Panchayats tend to be used only by the rural elite and are unavailable to the common people. During USOF inspections I have seen private public calling offices doing roaring business whereas the USO funded village public telephone located in the village panchayat (local self government office) bang opposite, on the other side of the village mud track was being exclusively used by the local elite. Villagers were in fact unaware of this state funded facility. Thus, given the social and economic set up of Indian villages such facilities could encourage better data keeping and connectivity within the government set up but are likely to percolate to rural society at large. The village school may have been a better venue for such a facility if empowering the common people is the aim, but then more effort would be involved in managing, maintaining and manning the facility. I have written before about the need to look at various other facets of the demand side eco-system. You need applications and trainers/facilitators in rural India. This requires a multi-stakeholder approach to project design. A good and successful example is USOF's Sanchar Shakti.

My second concern is who is providing the last mile service. I hope it is not NOFN. The entry of NOFN into access segment would in my view negate the very idea of Universal Service as a modern mechanism in a liberalized sector as being different from state owned monopoly service provision. Please see my previous articles in this regard under the same labels.