Subject: [NEXTEL-1] Lessons from telecom's travails

From: [email-masked]
Date: Tue, 10 Feb 2004 12:06:05 -0500

Lessons from telecom's travails
February 10, 2004

It is always dicey to predict peace in the fractious telecom industry, where
recent history has been all about litigation, hackneyed policy-making and
aggressive corporate rivalry.

But the latest growth numbers in mobile telephony -- which show GSM subscribers
growing faster than CDMA -- suggest that the war may, at long last, be shifting
to the marketplace.

These numbers, as well as the general perkiness of telecom shares in a yo-yoing
stockmarket, indicate that most people are regaining their confidence in the
fairness of the system. If anybody needs to be thanked for this, it is
Communications Minister Arun Shourie and his former divestment ministry
colleague Pradeep Baijal, now the Trai chairman.
Between them they have begun to successfully clean up the mess left behind by
Messrs Ram
Vilas Paswan, Pramod Mahajan and even the PMO -- which helped create the WLL
controversy
by allowing 'limited' mobility.

Though the murmur in telecom circles is that the new unified licensing
dispensation has been more than kind to Reliance Infocomm, the fact is Shourie
was presented with a fait d'accompli. He did the next best thing and worked for
peace. The compensation provided to GSM players set right an obvious injustice
and this is what helped put the WLL issue behind us.

The more important thing, though, is to check whether we have learnt our lessons
from the telecom industry's lurch from crisis to crisis over the last 10 years.

In this decade, we have seen the peccadilloes of Sukh Ram, the dubious
interventions of Paswan, Mahajan and others, and the more helpful roles of the
group on telecom, which allowed telecom licensees to shift to a revenue-sharing
mode under the new telecom policy of 1999.

During these years, we have also seen a transition from a more or less partisan
regulator, to a confused one, and, finally, to today's fairly free from bias
Trai. The lessons are clear.

One, it is almost never a good idea to auction resources like licences or
spectrum to the highest bidder because this may lead to reckless overbidding and
chaos.

This is what happened with the first round of telecom licences when Sukh Ram was
telecom minister, and it happened again with FM radio licences. It happened with
3G licences in Britain and Germany. Excited companies made excessive bids and
ruined themselves with huge debts.

The simple lesson for governments is that they cannot afford to kill their
golden geese. If they try to get all the revenues upfront, they will have to
provide for messy interventions later. Governments ought to know that the best
revenues will flow when an industry grows in a healthy manner.

The second lesson is that in any industry, transparent and impartial regulation
must precede any major opening up or deregulation. It is tempting for
policy-makers and incumbents to pretend that they can set the regulatory ball
rolling and set up independent regulators later.

The department of telecom tried for long to pretend that it was an impartial
judge even while going to bat on behalf of the public sector incumbents. The
same mistake is again being made in petroleum, where Ram Naik would like to
retain his say in pricing and subsidies.
The third lesson is that policies cannot be cast in stone since technologies and
operating conditions change. And this means existing arrangements and laws will
have to be altered for incumbents. It follows that licensing conditions may have
to be changed, and compensation paid.

When dealing with industries where the nature of change can be unpredictable, we
need to make the process of change, review and compensation transparent.

For example, in telecom the monopoly of VSNL was ended without regard to the
rights of shareholders who invested in the company assuming it to be a monopoly.

Equally, when the government was toying with the idea of allowing limited
mobility, there was practically no talk about how to compensate those with GSM
licences -- till the matter went to court and threatened to create a legal mess.

The fourth lesson -- a corollary -- is to ensure that there is no reverse
discrimination against incumbents. Public sector undertakings are often
discriminated against just because they happen to be PSUs. Moreover, in our
political culture, ministers tend to treat PSUs as private property.

Equally, private sector players with money power have greater freedom to
influence policy-making than public sector executives. Whether it is Indian
Airlines vs Jet or cellular operators vs MTNL and BSNL or private players vs
VSNL, the fact is none of these PSUs was given the autonomy to defend their
interests when competition was building up in their respective areas of
dominance or monopoly.

There is no alternative but to prise these companies away from their
administrative ministries and put them under autonomous managements when one is
either deregulating or privatising. This way, commercial decisions to keep them
competitive will not be held up by ministers with dubious motives.

-- http://www.rediff.com/money/2004/feb/10guest1.htm

    "NEXTEL-1 IT'S NOT JUST NEXTEL"
  Note The New address
Subscribe to Nextel-1: http://www.groups.yahoo.com/subscribe/NEXTEL-1

  "NEXTEL2 FOR iDEN SOFTWARE DEVELOPERS"
Subscribe to Nextel2: http://www.groups.yahoo.com/subscribe/NEXTEL2

  "WIRELESS FORUM HOMELAND SECURITY GROUP"
     The Complete Resource for Wireless Homeland Security.
Subscribe to WFHSG:  http://www.groups.yahoo.com/subscribe/WFHSG

-- 
    "NEXTEL-1 IT'S NOT JUST NEXTEL"
  Note The New address 
Subscribe to Nextel-1: http://www.groups.yahoo.com/subscribe/NEXTEL-1

  "NEXTEL2 FOR iDEN SOFTWARE DEVELOPERS"
Subscribe to Nextel2: http://www.groups.yahoo.com/subscribe/NEXTEL2

  "WIRELESS FORUM HOMELAND SECURITY GROUP"
     The Complete Resource for Wireless Homeland Security.
Subscribe to WFHSG:  http://www.groups.yahoo.com/subscribe/WFHSG

Yahoo! Groups Links

<*> To visit your group on the web, go to:
     http://groups.yahoo.com/group/NEXTEL-1/

<*> To unsubscribe from this group, send an email to:
     [email-masked]

<*> Your use of Yahoo! Groups is subject to:
     http://docs.yahoo.com/info/terms/