COVER STORY:

Bureaucracy Today - - INSIDE INFORMATION - ◆By An­jana Das

In an ex­clu­sive in­ter­view to Bu­reau­cracy To­day, Tele­com Sec­re­tary JS Deepak speaks at length on var­ied is­sues con­cern­ing the TRAI and the pro­posed spec­trum auc­tion. He also re­flects on what is ail­ing the tele­com PSUs – the BSNL and the MTNL.

The In­dian Gov­ern­ment has put a huge 2,300 MHz of spec­trum on sale for which auc­tion will start on oc­to­ber 1, 2016. From the in­dus­try and an­a­lyst points of view there has been an is­sue of spec­trum pric­ing that can cause a muted re­sponse to the auc­tion. Some quar­ters feel that the oc­to­ber auc­tion is too soon since the last one and the sale of spec­trum of this mag­ni­tude could un­der­mine the de­mand. But Tele­com Sec­re­tary JS Deepak feels oth­er­wise. In an ex­clu­sive in­ter­view to Bu­reau­cracy To­day, the se­nior bu­reau­crat says that due to con­tin­u­ous net­work ex­pan­sion and tech­no­log­i­cal up­grad­ing and its of­fer­ing a bou­quet of ser­vices on both voice and data in an ever-evolv­ing sec­tor, the tele­com play­ers are al­ways starved of spec­trum. He also talks about the fac­tors due to which the two tele­com PSUs, BSNL and MTNL, are lag­ging in com­pe­ti­tion, the re­forms in­tro­duced by his Depart­ment to im­prove the “ease of do­ing busi­ness”, pol­icy is­sues that could re­move pos­si­ble grey ar­eas of rules like net­work test­ing guide­lines and giv­ing ex­tra pow­ers and an ac­tion plan on call drops to the TRAI which are un­der the Gov­ern­ment’s con­sid­er­a­tion. With­out get­ting into specifics on the on­go­ing tus­sle be­tween pri­vate tele­com com­pany Re­liance Jio and in­cum­bent op­er­a­tors Bharti Air­tel, Idea and Voda­fone, Sec­re­tary Deepak says their net­works should be con­nected to each other for the sake of mo­bile cus­tomers.

BT: Has the en­try of Re­liance Jio as a com­mer­cial tele­com op­er­a­tor now with its deep pock­ets and fu­ture tech­nol­ogy pipe­line im­proved the chances of a bet­ter off­take of 4G spec­trum at the Oc­to­ber auc­tion?

JS Deepak: All the spec­trum auc­tions that the Gov­ern­ment had held ear­lier wit­nessed good com­pe­ti­tion. Re­liance Jio was a bid­der in the past. Now that this com­pany has launched its mo­bile ser­vices, it would need more spec­trum. Re­liance Jio bought spec­trum ear­lier also in 2010 and 2015. We do ex­pect that there will be high de­mand for spec­trum in this auc­tion from all the op­er­a­tors, in­clud­ing Re­liance Jio.

BT: The high price of 700 MHz spec­trum could be a prob­lem given the heavy debt of the pri­vate tele­com

sec­tor. Most of these com­pa­nies are also in the process of ex­pan­sion in 3G spec­trum ar­eas.

JSD: The oc­to­ber spec­trum auc­tion could be the most ef­fi­cient one for LTE op­er­a­tions. The 700 MHz spec­trum can re­duce the cost of cap­i­tal ex­pen­di­ture by about 1/3 for sup­port­ing the same num­ber of cus­tomers. It has ad­van­tage for cov­er­ages, es­pe­cially in­door cov­er­age. There­fore, a high qual­ity spec­trum like this one is ex­pen­sive. In a free auc­tion there would be op­er­a­tors who will value this band and will bid for it.

BT: Which are the bands that could wit­ness max­i­mum de­mand?

JSD: In ad­di­tion to the 700 MHz band, the Gov­ern­ment has also put spec­trum worth Rs 1.50 lakh crore at the oc­to­ber auc­tion. This in­cludes spec­trum val­ued at Rs 27,000 crore which

“The Gov­ern­ment does not ex­pect to sell all of its spec­trum though it sees de­mand for many bands. There could be huge de­mand for the 1,800, 800 and 2,300 MHz bands.”

has been ac­quired through har­mon­i­sa­tion in the 1800 and 800 MHz bands. There are a lot of air­waves in the 800, 1800, 2100 and 2300 bands. All of these bands could at­tract de­mand as they can be used for 2G, 3G and 4G pur­poses. Many op­er­a­tors need spec­trum for these ser­vices.

BT: Be­tween 3G and 4G which will be the driver of this auc­tion?

JSD: Spec­trum will be bought for all these ser­vices –2G, 3G and 4G. The op­er­a­tors have gaps in both voice and data spec­trum and they will buy spec­trum ac­cord­ingly. All com­pa­nies have a short­age of spec­trum. There are many prospec­tive bid­ders. They have a short­age in their present spec­trum hold­ings to cater to dif­fer­ent types of ser­vices. We are of­fer­ing 2,300 MHz of spec­trum for sale to meet the re­quire­ment of ev­ery op­er­a­tor in any band in value, vol­ume and va­ri­ety. An­other sig­nif­i­cant fea­ture of this auc­tion will be that it will once and for all re­move spec­trum scarcity from the In­dian tele­com sec­tor.

BT: But that’s a lot of spec­trum on sale...

JSD: The Gov­ern­ment does not ex--

pect to sell all of its spec­trum though it sees de­mand for many bands. There could be huge de­mand for the 1,800, 800 and 2,300 MHz bands. If some spec­trum re­mains un­sold, we will sell it at the next auc­tion. That is not a prob­lem for us at all.

BT: What is the re­al­is­tic es­ti­mate of rev­enue that the Gov­ern­ment could get from the Oc­to­ber 1 spec­trum sale? Is it closer to Rs 5.56 lakh crore?

JSD: It is not pos­si­ble to imag­ine a num­ber or the rev­enue that the Gov­ern­ment would get at the spec­trum sale. We have no fixed fig­ure. It all de­pends on the mar­ket.

BT: The Tele­com sec­tor is back to fac­ing dis­putes – In­ter-op­er­a­tor fights over in­ter­con­nec­tions where cus­tomer is the ul­ti­mate loser and is­sues re­lat­ing to the re­moval of In­ter­con­nect Us­age Charges (IUC) where the in­cum­bents and the TRAI have locked horns. Has the DoT any role to play for a healthy com­pe­ti­tion?

JSD: When a new op­er­a­tor en­ters the mar­ket, there is a cer­tain amount of up­heaval. These kinds of things will hap­pen. In­ter­con­nect is in the do­main of the Tele­com Reg­u­la­tory Author­ity of In­dia (TRAI). It will take steps. It has al­ready held a meet­ing with both sides to sort out their prob­lems. I agree that if there are dif­fer­ent net­works, they have to in­ter­con­nect with each other for pro­vid­ing good qual­ity of ser­vice.

BT :But it is not that sim­ple to solve the prob­lem. Re­liance Jio and the GSM op­er­a­tors are in bit­ter fight over the in­ter­con­nect points and net­work trial pe­riod is­sues and other re­lated mat­ters. What is the DoT’s view on these prob­lems?

JSD: There will be ar­gu­ments over this mat­ter from both the sides. The TRAI is look­ing into it and it will do its best to sort out the is­sue. TRAI should be given a chance to solve it. The mat­ter falls in its juris­dic­tion.

BT: Are any Gov­ern­ment guide­lines com­ing re­gard­ing the net­work test­ing sys­tem?

JSD: There may be a case for pre­scrib­ing a test pe­riod and other pa­ram­e­ters of a net­work for such trial pe­riod . The DoT has made a ref­er­ence to the TRAI on this is­sue and we will come out with rules. This is a grey area not well de­fined.

BT: The TRAI’s long­stand­ing de­mand is to get more pow­ers, specif­i­cally that of im­pos­ing a penalty. Has it made the DoT think about it? JSD: I don’t agree with the view that the TRAI does not have ad­e­quate pow­ers to ful­fil its func­tional re­quire­ments. Un­der the Act, they have all the author­ity on in­ter­con­nect and tar­iff mat­ters. The TRAI has made a rec­om­men­da­tion to the DoT seek­ing cer­tain amend­ments to the TRAI Act which is un­der the DoT’s con­sid­er­a­tion. We are pro­cess­ing it. We should have a de­ci­sion soon on it.

BT: The call drops is­sue is high on the agenda of the DoT? What is your depart­ment’s ac­tion ahead?

JSD: The call drops prob­lem may arise be­cause of the scarcity of spec­trum, sub-op­ti­mi­sa­tion of the net­work, in­ad­e­quate in­fra­struc­ture and tow­ers and tech­ni­cal is­sues. The oc­to­ber 1 auc­tion will take care of the spec­trum is­sues. The op­er­a­tors have to make more in­vest­ments in the net­work sphere. We have been mon­i­tor­ing their ef­forts and they have given us a 100-day plan to im­prove the call drop sit­u­a­tion in Delhi and Mum­bai.

“When a new op­er­a­tor en­ters the mar­ket, there is a cer­tain amount of up­heaval. These kinds of things will hap­pen. In­ter­con­nect is in the do­main of the TRAI. It will take steps. It has al­ready held a meet­ing with both sides to sort out their prob­lems. I agree that if there are dif­fer­ent net­works, they have to in­ter­con­nect with each other for pro­vid­ing good qual­ity of ser­vice. “”

I don’t agree with the view that the TRAI does not have ad­e­quate pow­ers to ful­fil its func­tional re­quire­ments. Un­der the Act, they have all the author­ity on in­ter­con­nect and tar­iff mat­ters. The TRAI has made a rec­om­men­da­tion to the DoT seek­ing cer­tain amend­ments to the TRAI Act which is un­der the DoT’s con­sid­er­a­tion. We are pro­cess­ing it. We should ” have a de­ci­sion soon on it.

Though the sit­u­a­tion has im­proved in these two met­ros, it is still not sat­is­fac­tory. We have made the DDA re­verse its by­laws to al­low the tel­cos to set up their tow­ers in Delhi res­i­den­tial ar­eas. In ad­di­tion, we are fa­cil­i­tat­ing the set­ting up of tow­ers in the Lu­tyens’ Zone of New Delhi, NDMC ar­eas, post of­fices and other Gov­ern­ment build­ings to of­fer good con­nec­tiv­ity.

BT: Why are the two tele­com PSUs lag­ging in com­pe­ti­tion?

JSD: Both BSNL and MTNL are suf­fer­ing losses. There is much scope for im­prove­ment and we are work­ing on it. The ba­sic prob­lem is their huge staff cost. For Ma­hana­gar Tele­phone Nigam Limited the staff cost is 67 per cent of its rev­enue and for the Bharat San­char Nigam Limited it is 50 per cent. The staff cost of pri­vate op­er­a­tors is be­tween 3 per cent and 5 per cent of their rev­enues. So these PSUs are un­able to com­pete due to the large bur­den of their staff. But in the case of the BSNL most of its staff mem­bers who were ab­sorbed into it due to its cor­po­rati­sa­tion are re­tir­ing in the next five years and the cost is likely to come down. In the case of the MTNL, it is a big­ger prob­lem. The BSNL has im­proved its per­for­mance. In 2014-15, it posted op­er­at­ing profit and in 2015-16 also, it is likely to post higher op­er­at­ing prof­its. It too is im­prov­ing its per­for­mance.

BT: The tele­com in­dus­try is con­sol­i­dated. Do you think more merg­ers and ac­qui­si­tions will be com­ing?

JSD: Con­sol­i­da­tion is be­gin­ning to hap­pen in this sec­tor. It is good for the sec­tor. The ideal num­ber of op­er­a­tors is four to five. In most coun­tries there are less than four op­er­a­tors. In In­dia there are about eight op­er­a­tors. There is a need for con­sol­i­da­tion.

BT: What more the Gov­ern­ment is do­ing to take the tele­com suc­cess story for­ward?

JSD: The fo­cus of the DoT is to im­prove the “ease-of-do­ing busi­ness” with a se­ries of re­forms. We have done har­mon­i­sa­tions of spec­trum which was a long­stand­ing de­mand of the in­dus­try. This re­sulted in the sep­a­ra­tion of de­fence spec­trum from com­mer­cial spec­trum. Con­sumers now get a bet­ter qual­ity of ser­vices and through the process of har­mon­i­sa­tion we have been able to get out spec­trum which was oth­er­wise used for fil­ters and guard bands. Ad­di­tional spec­trum worth Rs 27,000 crore gen­er­ated through har­mon­i­sa­tion is also be­ing put for auc­tion. This is a ma­jor step in our re­forms agenda.

The sec­ond big re­form we have in­tro­duced the vir­tual op­er­a­tors net­work li­cences. This is a re­seller’s li­cence which was ab­sent in In­dia. For the first time, we have a pro­vi­sion ac­cord­ing to which the net­work and the ser­vice pro­vi­sion can be sep­a­rated. It is a fran­chise model where vir­tual net­work op­er­a­tors can buy bulk band­width and data or voice and sell it for niche cus­tomers in spe­cial pack­ages. An air­port can sell its own SIM card, not only voice and data but also other in­for­ma­tion needed by air trav­ellers.

The third big step is that now Aad­haar-based e-KYC which is avail­able for cus­tomer ac­qui­si­tion. It sim­pli­fies the process and makes it pa­per­less. Now a cus­tomer get a SIM card ac­ti­vated by ver­i­fy­ing them­selves on­line through their bio­met­ric. Apart from ben­e­fit­ting cus­tomers and op­er­a­tors, this has helped se­cu­rity agen­cies as they now have on­line proof of the iden­tity of the SIM card holder.

The DoT has plans to im­prove tele­com in­fra­struc­ture in dif­fer­ent parts of In­dia. In the North-East we have launched a project for pro­vid­ing con­nec­tiv­ity to ev­ery vil­lage in that re­gion. In the Left-wing ex­trem­ist ar­eas of 10 States, the DoT has set up 2,200 tow­ers to pro­vide mo­bile con­nec­tiv­ity to vil­lages not con­nected ear­lier. We are do­ing the same thing in An­daman and Ni­co­bar is­lands through ca­bles.

BT: What is the next course of ac­tion by the DoT?

JSD: In the up­com­ing days, there will be more DoT ac­tion on re­forms. our tar­get is to have one ma­jor re­form each month. We are work­ing on right-of-way rules to fa­cil­i­tate the rolling out of fi­bre in­fra­struc­ture and tow­ers, sim­pli­fy­ing the li­cens­ing process and mak­ing SACFA clear­ances au­to­mated and on­line. ■

send your feed­back to: an­jana.das@bu­reau­cra­cy­to­day.com

JS Deepak, Tele­com Sec­re­tary

Both BSNL and MTNL are suf­fer­ing losses. There is much scope for im­prove­ment and we are work­ing on it. The ba­sic prob­lem is their huge staff cost. For Ma­hana­gar Tele­phone Nigam Limited the staff cost is 67 per cent of its rev­enue and for the Bharat San­char Nigam Limited it is 50 per cent. The staff cost of pri­vate op­er­a­tors is be­tween 3 per cent and 5 per cent of their rev­enues. So these PSUs are un­able to com­pete due to the large bur­den of their staff.

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