The Telecom Minister's policy announcements increase uncertainty; raise more questions than they answer
Telecom Minister Kapil Sibal's policy announcements this week in the aftermath of the Supreme Court judgment cancelling 122 licences raise more questions than they answer, further deepening uncertainties about the future of the telecom sector.
Rather than addressing industry concerns arising out of the Supreme Court verdict, Mr. Sibal continued his build-up to the new National Telecom Policy (NTP), a project that was announced on January 1, 2011, with a 100-day deadline for closure. What was intended to be NTP 2011 is now expected to be unveiled in April as NTP 2012.
Yet, after 14 months, Mr. Sibal is still falling short on detail. For example, he has delinked licences from spectrum. Hardly breathtaking stuff, considering that after the Supreme Court directed the government to auction spectrum, no licence can ever be given with linked spectrum again.
Mr. Sibal has also raised the revenue share from a slab-wise rate for different services to a uniform 8% of adjusted gross revenue, or AGR. This decision is based on an internal committee report of the DoT, prepared without any public consultation, dating back to 2009. Telecom regulator TRAI has recommended twice over that the levy should remain at 6%, based on public consultation, in the interest of revenue neutrality, but the government has chosen to reject this rationale without offering any explanation.
Ironically, the same government, which insisted that charging a revenue share made up for the revenue shortfall from not holding auctions, is now insisting on auctions as well as a hike in the revenue share. Are its earlier arguments pleading affordability and public interest now in the bin? Unlike auction fees, which are amortised across the life of the licences, insulating tariffs, revenue share hikes hit customers on a monthly basis. Worse, consumers in ‘C' category circles — the ones with the least purchasing power and lowest teledensities — are impacted the most. So, in essence, Mr. Sibal's move specifically injures these, and the 400 million rural consumers who are yet to join the mobile revolution.
Mr. Sibal says, “All future licences will be unified,” but cannot answer when they will get spectrum. He announces, “Companies can be issued Unified Access Licences now without spectrum. They can then move into Unified Licences,” but cannot specify the terms for migration.
When will the levy of licence fee at 8% of AGR kick in? Is it April 1, 2012? If yes, can it be done before the Unified Licence regime is in place? Why open this to speculation?
Mr. Sibal has decided to extend Unified Access Licences for 10 years but doesn't specify the terms and conditions for this extension. How will the spectrum be allocated when such extension takes place — through auction or a fixed price mechanism? Not known. What quantum of spectrum will be allowed to continue with the renewal? Find out later.
Re-farming of spectrum is acceptable to the government in principle, but no future steps can be described till the TRAI's recommendations are received. So why announce it now?
And this is the showstopper: The prescribed limit on “spectrum assigned to a service provider” will be 8 MHz for GSM. But “the licensee can acquire additional spectrum beyond prescribed limit in an open market should there be an auction of spectrum subject to the limits prescribed for merger of licences.” This limit has been set at 25% of the spectrum assigned. This means that the actual limit — depending on the spectrum available — is between 20-25 MHz (spectrum bands have approximately 100 MHz). So what is the sanctity of the 8 MHz spectrum cap? Besides, how was the cap raised from 4.4 MHz to 6.2 MHz to now 8 MHz? Has Mr. Sibal sought the TRAI's recommendations on this?
Spectrum trading will not be allowed at this stage. This will be reexamined at a later date — again opening the door for negotiations and subjective decision making. What is the “later date” — next year or the next 5 years?
Mr. Sibal's ill-timed and open-ended announcements make DoT and TRAI officials vulnerable to corporate lobbying. These announcements could have waited till most, if not all, answers were in place, especially in an environment which desperately needs to curtail uncertainty. Sometimes, it's best to slow down in order to hurry up.