NOFN-Getting it wrong yet again

An editorial humorously titled "Optical Illusion" correctly points out that the latest government effort to revive BBNL/NOFN by way of appointing a private sector chairman etc. is not likely to make much of a difference. However  the newspaper gets it wrong in suggesting that the USOF which is funding NOFN/BBNL, should be scrapped.

On the contrary, BBNL should be wound up and the methodology to achieve the laying of a high speed rural OFC network should go back to the traditional USOF method of achieving rural penetration through multiple (regional) reverse bidding based projects open to both public and private sector.

Just scrapping USOF (funded out of license fees paid by service providers) and leaving more money in the hands of service providers will not guarantee provision of broad band services to commercially unviable rural areas.

 I have written extensively on the subject under the same key words/labels. Please see my previous blogs.

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.

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.

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

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."

Fixing the Market Efficiency Gap in India

I had mentioned in my post titled, "Regulate in Haste Repent at Leisure" about TRAI's recent recommendation in favour of  a considerable reduction in reserve price of spectrum and those relating to permitting spectrum trading. I had stressed that what is important is that all regulation must be based on sound economic analysis placing consumer interests above all. The latter includes a healthy, viable and competitive telecom sector. Another related post is "Regulate in Haste Repent at Leisure-Comments from EU and India" These are all under the labels Telecom Regulation & Competition

A lot has been said about the regulatory deficit in India. A recent article by Sanjeev Aga literally agonsies about this issue in relation to the Department of Telecommunications processing of TRAI's above mentioned recommendations.

A long quote from this article is added here as the writer is interesting and eloquent in his anguish:

"But let us even assume this Trai exercise eventually ends well. Would that address sector issues? Unfortunately, no. Consider policies that allow intra-circle roaming before an auction, and disallow it afterwards. Or those that confer technology-neutrality in 1999 and withdraw it in 2012 in the name of unliberalised-spectrum. For the jargon-challenged reader, spectrum liberalisation and technology neutrality mean the same thing (the Danish Business Authority website offers a clear explanation of this). Such ad-hocisms abound because policies are not supported by robust policy institutions. The better type of investors watch policy, but they derive confidence only from the quality of institutions behind the policy.

Planning Commission member Arun Maira worries that since we are not fixing institutions, India is falling apart. A complex, high growth, trillion-dollar economy, with money power sloshing around, has outgrown the governance model of the 1950s. Among the handful of quality policy institutions we have is the Reserve Bank of India, and that is a product of the Raj. The notion that ministers and ministry departments should run sectors such as hydrocarbons, aviation, telecom, power, or railways is anachronistic. The DoT has capable Indian Telecom Service officers who ran fixed line operations in Bharatiya Sanchar Nigam Ltd's earlier avatar. A quirk of fate finds them designing policy for mobile telephony of tomorrow for which they have been provided neither exposure nor training. With no symmetry between authority and consequence, between work and appreciation, self-respecting people must resent being reduced to their present pass. When spewing out penalty notices becomes a defence mechanism, you sense that these people may be present physically but they have seceded emotionally! What is true of telecom is equally true of several other sectors. The old is dying and the new cannot be born!

Having two policy institutions for telecom, DoT and Trai, was always a crazy idea, an outcome of confused intention and timid disposition. Like in every advanced international jurisdiction, telecom policy formulation should have been tasked to the regulator from its inception. Now, better late than never! But for this Trai will have to step up its game. Amending the Trai Act is a mere first step. The regulator would be tested on its sector knowledge, in widening the talent pool to attract the best, in the quality of its output, in the confidence inspired in investors, in the moral authority exerted, and in the thought leadership provided to India and to the world.

India is at a juncture where the absence of quality governance institutions is strangling growth. This has been the single biggest cause of the economic downturn. Second-generation reforms are not about mindlessly repeating what was done 20 years ago. They require dismantling mental blocks and building quality governance institutions for at least half-a-dozen sectors, of which telecom is one. This fond wish must now await any new government. Meanwhile, the Telecom Commission and the Empowered Group of Ministers should rally in support of the Trai recommendations."

I have written about a possible way forward-Providing a competition policy framework to our regulation. The article is titled "Of Airwaves, Incumbents & Good Governance-The Urgent Need for A Robust Competition Policy Framework"

Markets Miracles-Internet.org

Under the label  Market Efficiency Gap, I have written earlier about How Markets Address Access Gaps. This post was about an Indian telecom operator creating awareness about mobile internet in rural markets.

Continuing with this topic, another example of service providers going out of their way to develop markets is seen in a new initiative called Internet.org to increase access to the internet "aimed at drastically cutting the cost of delivering basic Internet services on mobile phones, particularly in developing countries. "

This involves a partnership between big service providers such as  Facebook, Samsung, Nokia, Qualcomm and Ericsson etc. 

"The companies intend to accomplish their goal in part by simplifying phone applications so they run more efficiently and by improving the components of phones and networks so that they transmit more data while using less battery power."

This makes business sense when we understand the need to find new markets as the developed world nears 50% plus penetration levels ad to tap into potential markets in developing countries. 

Thus, it is reported that,

"Poorer countries in Asia, Africa and Latin America present the biggest opportunity to reach new customers — if companies can figure out how to get people there online at low cost.....The immediate goals of the new coalition are to cut the cost of providing mobile Internet services to 1 percent of its current level within five to 10 years by improving the efficiency of Internet networks and mobile phone software. The group also hopes to develop new business models that would allow phone companies to provide simple services like e-mail, search and social networks for little or no charge."

The Regulatory Balancing Act-Not so Difficult

I had written a post titled "Closing the Market Efficiency Gap-Regulation and Competition" wherein I has said that closing the Market Efficiency Gap demands putting in place sound laws and regulation modeled on international best practices but adapted to local context. This would ensures inter alia a level playing field which precludes vested interests from rent seeking behaviour that is detrimental to the economy as a whole.

In this post I has mentioned the likely mandating of a reduction in access charges for fixed line grid by the Italian firm Telecom Italia SpA by the Communications Regulator of Italy. This article also speaks about the general trend towards reduction in network access charges (both fixed line and mobile) across Europe as a result of conscious efforts of regulators to enhance penetration. It does mention that the Italian Regulator was under pressure from Telecom Italia's rivals.

It is now reported that the Italian Regulator's (Agcom) ruling has been put on hold by the European Commission on account of doubts as to whether the proper procedure of a separate market analysis of impact of cut was carried out. A quote from The European Commission er in charge of the digital agenda is enlightening and worth emulating by telecommunications' regulators:

"In departing from the approach announced last year for setting access prices in the Italian broadband markets, Agcom undermines the required regulatory certainty for all market players,” ...... “Regulation must aim at creating a level playing field for all operators.”

The lesson here is that a systematic and scientific approach to regulation can ensure that regulators meet the ultimate aim of consumer welfare and not fall prey to regulatory capture or political pressures.

Wise Regulation, the Order of the Day

For quite a few days now Indian media is carrying the story about the sand mafia and the actions of an honest civil servant to prevent illegal mining. A though provoking viewpoint  has been presented on this issue in an article titled, "Between rock, sand and a hard place" in the Times of India on August 11, 2013. It states that, "[i]n several areas, Indian rules and regulations make honest business impossible. The only choice is illegal business or no business." The author of this article draws attention to the shortage of sand for a booming construction sector on account of " licensing and environmental bottlenecks." The latter creates an artificial scarcity that allows the mafia to step in and profit.I will leave readers to judge the merits of these arguments for themselves. 

Why am I writing about sand and construction? 

That is because in my view it reflects the same underlying problem that is  hampering economic activity in the country today. In a developing country that  is (let us accept it), still below par as far as institutional and administrative capacities are concerned, regulation has to be realistic, practical, simple yet sufficiently detailed in order to be unambiguous, leaving little room for arbitrariness/misinterpretation. It should be forward looking so as to not require too frequent review, but it should be reviewed when need be based on well laid down criteria. Most of all it should keep consumer welfare at its focus. 

Telecom Regulatory Authority of India's Chairperson (TRAI)  has recently commented on the controversial 3G roaming pacts among three large mobile operators in India. According to the Department of Telecommunications, these pacts replicate the characteristics of Mobile Virtual Network Operators' (MVNO) operations, something that is not yet permitted in India. The operators by sharing spectrum and infrastructure were able to provide 3G services to customers even in telecom circles where they had not won spectrum in the 3G auction. 

The TRAI Chief is quoted as having said that, " in a situation where there is no more spectrum available, it ay not be possible to continue with a regime where pacts for intra-circle roaming (ICR) in 3G services are not allowed..............This is a Catch-22 situation. How is it (closing down ICR) a solution?” 

The article on this issue goes on to say that,

According to [Mr] Khullar Indian law treats spectrum as a holy cow for some reason.

“I can understand that you don’t want to cap gains on assigned spectrum which is administratively allocated. But if everyone is buying spectrum on auction, why not permit trade in it? These are issues on which the government should no longer brook any further delay. A decision needs to be taken,” 

Again, I leave it to readers to form opinions. I would just like to highlight that I agree with the TRAI Chief that corrective regulation is the order of the day if consumer welfare and not regulation for regulations sake is our aim.

I also invite readers to go through previous posts on Telecom Regulation and the Market Efficiency Gap to appreciate the importance of effective regulation for growth and equity in telecommunications penetration.

Need for Innovative Regulation-Indian Telecom Sector

On the occasion of the Confederation of Indian Industries National Telecom Summit 2013, The Hon'ble Minister of Communications & IT, the Chief of the Telecom Regulatory Authority of India and the Telecom Secretary have all highlighted important elements of the way forward to achieve the goals of universal digital inclusion and to boost the health of the flagging telecom sector in India. 

I am focusing more on the issues affecting the Market efficiency Gap in this blog post.

The need to concentrate of local R&D and design capabilities in manufacturing, the need to improve regulatory certainty including issues like M&A and spectrum and unified licensing were highlighted.  

The TRAI chief  stressed  "on  the critical need to use telecom infrastructure for public service in the fields of disaster management, financial inclusion and digital transactions, in the long term." (source: http://www.ciol.com/ciol/news/192836/government-committed-boost-telecom-sector)

Most importantly the telecom secretary stated that, "[i]nnovation in regulation is also important though legacy issues are there,..... there were complex legacy issues involved in order to fix unpredictability and ambiguity in the regulatory regime." (source: http://www.ciol.com/ciol/news/192860/innovation-regulation-farooqui)

In my view, taking stock of past mistakes, resolving legacy issues and creating a simple but  clearly refined regulatory framework for telecommunications can go a long way to rectify past problems and create a conducive environment for growth of Indian Telecommunications. Please see my earlier posts on Telecom Regulation.

Of course the legal framework of the  telecommunications sector is a part of the overall legal/regulatory framework of the economy which too needs looking at. One of these areas lies in the realm of competition policy. An overarching competition policy framework would prevent many a poor policy /programme from being accepted and would strengthen the ability of regulators and policy makers to make economically wiser decisions. I have written about this is an article titled "Airwaves, Incumbents and Good Governance - The Urgent Need for a Robust Competition Policy Framework" Also, please see my previous posts on Competition.

The Long Term Effect of Too Low Wholesale Broadband Acess Tariffs

Effective regulation of tariffs is never an easy task. One argument would be to leave tariff alone but that luxury unfortunately is unavailable when markets are less than competitive. 

Regulating access to incumbents' infrastructure is often a part of ensuring service competition. I have written about this earlier under http://ictsforall.blogspot.in/search/label/Tariff. 

However, this tool is to be used with care. A European Commission Press Release dated 25th July 2013 highlights the need to balance short term gains of lowering access charges with the long term impact on investment. 

This press release relates to the suspension of the Austrian Telecom Regulator's calculation of regulated charges for access to the Austrian incumbent's broadband network on grounds that 

" it threatens to impede efficient investment in broadband, and could also create artificial barriers in the internal market." 

and

"The inconsistent access prices across the EU have a dampening effect on investment in modern networks. TKK's proposal must give national and multinational operators the right incentive to replace the old legacy copper network with modern technology, and provide stability and predictability."

Telecom Regulation always Contentious

It is interesting as always to read about the pros and cons of proposed telecommunications reforms. Given the high stakes involved in this dynamic sector, both sides' viewpoints are often debatable and hotly debated,

It is clear that EU's proposed reforms by way of removal of roaming charges and standardisation of wholesale access prices are customer friendly. This seems fairly obvious as far as the regulator is concerned. However this is not  a foregone conclusion according to  incumbent operators. They argue that removal of roaming as a source of revenue will force operators to increase local call tariffs and that cheaper wholesale access will create rivals with little or no committed  investment. The latter may provide cheaper services but not necessarily help in terms of  innovation and advanced services that are favoured by fewer larger players.

The debate surrounding telecommunications regulations in India is equally contentious as may be seen from articles such as TRAI Harder on Roaming. There are invariable some market players who disagree with the Regulator.(http://www.moneycontrol.com/news/business/rcom-flays-trais-revised-rates-says-make-roaming-free_900694.html).

Getting it right may not be easy but is important to bridge the Market Efficiency Gap and hence increase telecom penetration to achieve Universal Service.

How Markets Address Access Gaps

A news item titled "Vodafone to educate students on benefits of mobile internet" shows us how markets can effectively close access gaps. 

Vodafone India  has launched a programme called ‘Gammat Jammat’,  aimed at educating rural school children in the state of Maharashtra  about the  the benefits of mobile internet. To this end they will train over 300 school children and award them certificates of course completion. Simultaneously they will conduct a campaign to create awareness among adults covering 118 villages. Further, they have launched an entry level tariff plan with the same name, which gives concessional  internet access and 'a free 30 page booklet containing basic information on some key internet applications and websites that are relevant to rural customers. It has separate sections and applications catering to the requirements of Youth, Farmers, Job seekers, Housewives and Businessmen.'

It is stated that,

"Vodafone says it sees immense growth potential in mobile internet and are exploring options to further accelerate mobile data adoption through penetration, consumption and value addition. Various industry studies indicate a spiralling growth in sales of smartphones, particularly in locations beyond the metros. However, this community is still largely unaware on how they can get the best out of their data enabled handsets, through mobile internet"

Very recently I had written about "M Education and the Demographic Dividend" wherein I had discussed the potential of mobile screens to impart education in developing countries. India is a young country with 54% of the population being under 25.  In fact India is often cited as an example of the demographic dividend whereby the larger relative share of working age population has the potential to progress the economy to higher rates of growth. However it has been reported that only 12% of the 38 million internet users in India can access internet on their mobiles. The use of internet/broadband in rural areas can effectively compensate for the lack of various essential services and facilities and affordable smart phones and tariff plans and content in local languages can unlock this potential.

This   initiative by a service provider underlines the importance of markets and the need to address the Market Efficiency Gap which in turn leads to a conducive environment for operators to function and serve customers. Once servicing under served segments is seen as an opportunity rather than an obligation the government would need to concentrate only on the actual access gap.

Effective Regulation the key to Bridging the Market Efficiency Gap

 This is a recurring theme that I will be writing on. Its importance lies in the fact that by bridging the market efficiency gap we are economizing on time and cost involved in universal service and 100% digital inclusion. In the absence of effective regulation any attempts towards the latter would only bring short term and non sustainable gains. 

As far as telecom regulation in India is concerned it would appear that we need to take some brave steps to reconcile and simplify our licensing conditions and spectrum regulation. We are at present caught in the trap of  self created rigidities  that are not only at times outdated but often counter productive. The time is right as the telecom sector is at its lowest ebb and even the recent positive announcement of 100% Foreign Direct Investment (FDI) in Telecom is being viewed pessimistically on account of the overall regulatory environment. Please see "FDI Limit Aside, Raise the Bar for Governance"

An article titled An" Emergency Call from the Telecom Sector" appearing in the Business Standard on 17.7.13 draws attention to these issues.It highlights the need for bold decisions akin to the migration policy of 2003. It rues what it considers a tendency on the part of the telecom department to impose maximum penalties for fear of being accused as being partisan to telecom operators. 

Decision makers would find it much easier if rules were clearer.

The state of affairs today can in fact be gauged from the confusion and excessive recourse to litigation that characterizes our telecom sector today.  For example, there is  confusion surrounding the legality of intra circle roaming (ICR) and the distinction between ICR in the case of 2G and 3G licenses. The Controller and Auditor General of India cannot perhaps be faulted for criticizing actions that can be interpreted as being in contravention of stated policy/regulation which is in turn is often ambiguous and hence subject to interpretation.

The improvement of regulation and regulatory capacities is the order of the day. The former is relatively easy as international best practices and experiences can guide us, the latter requires a much broader spectrum of measures extending beyond just the telecom sector.

Talking about regulatory skills and capacities, another news item about the difficulties being faced vis-a-vis Italian communications Regulator's attempts to reduce access charges for fixed line grids, a common trend across EU, indicates that the overall institutional environment of an economy affects implementation and outcomes even where regulation is sound. I had written about this earlier at  http://ictsforall.blogspot.in/2013/07/closing-market-efficiency-gap.html