Time for India to get its regulatory house in order

Posted by Tony Brown Tuesday, January 27th, 2009

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A little bit of authoritarianism from a government can sometimes be a good thing – especially if it means getting your country’s telecoms industry in working order.
India is praised for being the world’s largest democracy, but there is little doubt that its admirable ethos of allowing every man to have a say on every issue – including critical regulatory ones – is holding back its telecoms market in many respects.

If there is one industry that needs a fast-moving regulatory process in which decisions are handed down smoothly and with minimum delay, it is the telecoms industry.
Few industries can compare to the telecoms industry, where technologies are constantly evolving and competition in a country can be seriously compromised if a regulator does not ensure a timely and orderly deployment of new services, such as 3G or high-speed broadband.
The ongoing farcical distribution of 3G and broadband-wireless-access (BWA) licenses in India offer the definitive example of why the country’s telecoms regulatory process needs a complete overhaul.
The Telecommunications Regulatory Authority of India (TRAI) issued its first recommendations on 3G- and BWA-spectrum policy in September 2006. But well over two years later, India’s 3G- and BWA-spectrum-allocation policies still have more holes in them than a block of Swiss cheese.
Longtime watchers of India’s market will not be surprised at the farce playing out in the 3G-spectrum-allocation process. The country’s telecoms regulations seem almost designed to create chaos and duplication of procedure, and the 3G-spectrum process has followed a familiar path.
In most countries, a body called “telecommunications regulatory authority” might be expected to have at least some power in shaping regulations. But not in India, where the long-suffering TRAI simply gets to make “recommendations” about policy to the DOT.
The DOT is under no obligation to accept the TRAI’s recommendations and has ignored many relating to 3G and BWA. After reviewing the recommendations, it passes them to expert advisory body the Telecommunications Commission, which fine-tunes the policy and sends it back to the DOT.
Typically, the DOT will then say the final regulations are ready for release, after which key details will be leaked to the press, to be met with immediate opposition by other powerful ministries – typically the Ministry of Finance or Ministry of Home Affairs – which demand changes to the proposed policy, forcing the DOT to pass the buck to the cabinet to resolve the impasse.
This dysfunctional regulatory structure cannot be allowed to proceed much longer if India is going to bring its telecoms sector into the 21st century.
The 3G delay is a serious problem, given mobile operators’ dire need for additional spectrum, but a bigger problem is that the delay will also hold up the rollout of WiMAX services, which will play a crucial role in increasing India’s low broadband penetration.
The DOT opted to interlink 3G and BWA pricing, setting the reserve price for BWA spectrum at 25% of the reserve price for 3G spectrum, on which the Cabinet Committee on Economic Affairs has the final say. This means that BWA spectrum cannot be auctioned until the 3G-spectrum reserve price has been set, leaving the rollout of WiMAX in limbo.
India needs to take a serious look at how it develops telecoms regulation and replace its confused, multilayered approach with a streamlined and direct system that delivers policy that is clear-cut and on schedule. To that end, the position of the TRAI needs to be addressed urgently.
The TRAI is staffed by good people, who are knowledgeable about the telecoms market and the policies needed to make it grow. But at the moment it is like a coach on the sidelines who is constantly having his game plan amended by the captain on the field.
There is little point in having the DOT continually ask the TRAI to undertake exhaustive research and draw up detailed policy recommendations, only to ignore many of those recommendations and devise its own policy.
Either the TRAI’s recommendations should be taken seriously or policy should be drawn up completely by the DOT or one of its affiliate bodies, such as the Telecommunications Commission.
In addition, the influence of the finance and home-affairs ministries on the telecoms-policy-making process needs to be greatly reduced. The ministries have their own agendas to pursue, and they are not always going to chime with those of the telecoms industry.
It’s fine to give these ministries a voice in the consultation process before policy is drawn up, but once policies are finalized and sent to the cabinet it is ridiculous to let them demand changes and send the whole process back to the starting blocks.
It might not sit comfortably with the consensus-based approach of many of those in the government, but it is time for the gloves to come off if India is to establish a world-class telecoms industry.