The Hindu Business Line : The regulatory static

WITH THE TELECOM Regulatory of India dropping radio paging from its quarterly report on the telecom sector, the industry has for all practical purposes ceased to exist. With wireless telephony offering both voice and messaging service, there were anyway few takers for the paging service. But its demise holds lessons in designing the regulatory structures. First, the principle that it is a folly to construct a regulatory structure around specific technologies rather than in broad terms. In the decade since the telecom sector was opened up, the technology has grown at a pace significantly faster than regulators can fashion policy responses. Thus, long after the advent of CDMA-based mobile technology for wireless communication, wireless telephony was regulated on the principle of GSM standards, which led to protracted litigation between service providers and the government and, then among the former. The matter was resolved by putting in place a universal licence for the telecom service.

As innovation gathers pace, the regulator and the government will be confronted with more difficult policy choices. These may range from, say, allowing the last-mile facility (or unbundling of the local loop) monopolised by BSNL/MTNL to private operators, to the creation of an unlicensed radio spectrum band for Wi-Fi and Wi-Max (over longer distances). Competition in mobile telephony has no doubt widened consumer choice and driven down tariffs making this service affordable to the masses. And the experience of the past five years has also brought clarity to some of the ground rules for the sector. It has become obvious that `revenue sharing' is the only sustainable model that the regulator/government can advocate for the sector.

Licence fee in any form is an anachronism that the government will have to avoid. Two recent instances point to the direction in which the industry is headed. In FM radio, the regulator has made out a strong case for moving towards a revenue-sharing regime, as the licence fee is taking a toll on the players. Similarly, the regulator recently recommended a switch in the Access Deficit Charge regime to revenue sharing in the place of loading on a specific amount on each call as ADC, payable mainly to BSNL. Had the revenue-sharing proposal for ADC been considered earlier, the imbroglio between BSNL and Reliance Infocomm/Data Access over the alleged illegal carriage of international long-distance traffic may have been avoided.

This piecemeal approach to telecom regulation, on TRAI's recommendation, may prove counter-productive to the sector. A slew of unresolved issues, ranging from unified access licence for all services, spectrum allocation for 3-G services and the ADC, continue to dog this sector. Having allowed unified access licence to basic and mobile services late last year, TRAI has recommended a level field for long-distance services. TRAI's failure to spell out a clear migration path for GSM and CDMA operators from 2-G to 3-G services may lead to a fracas over spectrum allocation. Since TRAI had offered an ADC levy to BSNL of over Rs 5,000 crore for 2003-04, it is finding it tough to reason out a case for either reducing or scrapping the levy. All this plus the row over the FDI policy on telecom need quick resolving for the sustained growth of this vibrant sector.

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