Interview with Manish Tewari: “Bailouts are the antithesis of a liberalised economy”

Despite being one of the biggest success stories of liberalisation, the telecom sector is one of the most litigated sectors, observes Manish Tewari, former minister of information and broadcasting. In an interview with tele.net, Tewari, one of the most outspoken and articulate leaders of the Congress party, speaks candidly about the biggest mistakes made by policymakers ever since the sector was liberalised, the ongoing industry consolidation, cybersecurity risks and the way forward for the sector. Excerpts….

How would you rate the performance of the telecom sector so far? How has it transformed over the years?

Since 1994, when the telecom policy was announced, opening the sector to private players, telecom has undoubtedly been one of the greatest success stories in the infrastructure sector. Unfortunately, it has also been one of the most litigated sectors of the Indian economy.

I do not think that the problems with the sector started in the past few years. As a part of the joint parliamentary committee, which analysed the progress of the telecom sector from 1994 to 2009, I had the rare opportunity of looking at the sector in a holistic manner. The fact remains that mistakes were made early on in the evolution of the sector.

The first mistake was the migration package. In fact, the switch from a licence fee-based regime to a revenue sharing regime was possibly the greatest “crooked fix” in the history of telecom because there were all these players who had a first mover advantage. These players had bid outlandishly and after three years, when it came to paying the fee, they appealed to the government against it saying that they were highly leveraged and would go bankrupt if the rules of the game were not changed.

The second mistake was making telecom licences technology neutral in 2003, which blurred the distinction between GSM and CDMA. Given the manner in which the sector’s trajectory had developed, this again was an ill-thought-out decision. The third mistake, made in 2007, was allowing a single player to hold crossover spectrum. The fourth and the biggest blow to the sector came with the presumptive loss figures determined by the then comptroller and auditor general of India. This completely and absolutely derailed the trajectory of the sector because ultimately, had it not been for the administered price of spectrum, the kind of technological expansion, innovation and penetration that took place between 1994 and 2010 wo­uld not have been possible.

What, according to you, are the biggest issues facing the sector today?

The biggest issue facing the sector is with regard to providing bailouts. In my opinion, the government should not get involved in bailouts, as it is absolutely the antithesis of a liberalised economy. Com­pa­­nies, whose business models are not wor­­king, should be allowed to perish. That is the logic of laissez-faire.

The telecom companies do not have anyone but themselves to blame for the consequences they are facing. It is their intra-telecom wars that have brought them to this state and now, if they are complaining that they have paid heavy prices in the spectrum auctions, well then, when you live by the sword, you die by the sword. If you are not able to make two ends meet, surrender your licence and make way for somebody else. Ultimately, if one company is able to provide optimum services to consumers at zero tariffs and still makes money, that company possibly needs to win.

What is your view on the entry of Reliance Jio in light of the recent consolidation, rock-bottom tariffs and low operator profitability?

This is not the first time it has happened. All the legacy telecom players that are com­plaining today were charging Rs 16.80 per minute for outgoing and Rs 8.40 per minute for incoming calls in early days of telecom. These were the players that began complaining when Reliance Info­comm entered the sector in 2001. In fact, when it introduced the Re 1 per minute tariff, it changed the rules of the game and exposed all these players who were fleecing customers and making supernormal profits. Therefore, if it has been done again, then the company that has done it needs to be applauded. If you can make money by almost giving everything for free, that is a revenue model worth emulating.

What are your views on net neutrality?

The difficulty with this entire net neutrality debate is that people do not really understand or are deliberately incognizant of the global reality. The fact remains that the internet is monopolised by five global majors. In fact, 90 per cent of the traffic is actually monopolised by the “big five” and their share is only growing. Therefore, when one talks about net neutrality, one also has to put anti-trust measures into place, whereby the monopoly of the big five in the international telecom industry is actually broken.

The greatest challenge to the internet today is that like we saw the rise of the internet in our lifetimes, we may witness the demise of the internet as we know it. The Chinese have very successfully de­mon­­s­­­­trated that they can convert the internet into an intranet and run it without any interference from the outside world. So one thing that all the advocates of a free internet completely forget is that while the flora and fauna of the net may be free, the hardware is actually regulated by western entities. Until the time these rules of engagement are not there, my apprehension is that in the next 10 years, we will actually see the internet splitting into a shared value civilisational entity.

Already, in the US, there is a raging debate about the Russian intervention in the US elections using cyberspace. In countries around Russia such as Estonia and Ukraine, there has been repeated articulation over cyber warfare. Terrorist organisations too have become tech savvy. Some of them have actually been able to build infrastructure that has the capacity to send out 500-700 tweets per second. At what point in time would a cyberattack, if it happens on critical and vital infrastructure, be classified as an act of war, which would then invite retaliation in the conventional space, is something that people have not applied their minds to. There­fore, there are very serious questions around the entire cyber civilisation, which the advocates of net neutrality need to understand.

“BharatNet is an extremely good idea but the government needs to step back and ponder on the private infrastructure that is already there. Why not map out the existing fibre and see how BharatNet can complement that rather than reinvent the entire wheel?”

What do you think can be done to address the issue of cybersecurity?

I think cybersecurity is a mindset. It is about sensitising people and policymakers. The prevailing mindset is that people invest in the most expensive software but compromise on investing in a good anti-virus solution. The same mindset is prevalent in the government too. It is like telling or reminding people to lock the house before stepping out, or putting valuables in the safe. The main reason for this kind of mindset is that policies are being administered by people who have spent the first 40 years of their lives in a pre-internet era. Since the entire infrastructure is now interconnected, everyone has to be sensitised – the private sector, corporate players, defence establishments, governments, etc. For example, if those inimical to India’s interest were to hit the goods and services tax network, it would result in an unprecedented situation. Therefore, cybersecurity means awareness, sensitisation and changing the current mindset about security.

The progress of BharatNet has been slow but once completed, how can the in­dus­­try gain from this fibre network?

This is not the first time that such a project is being attempted. Back in 1997-98, there was a similar project called Sankhya Vahini, which was supposed to be implemented in collaboration with foreign university, but the project did not eventually take off.

Creating a BharatNet is an extremely good idea but the government needs to step back and ponder on the private infrastructure that is already there. There have been a number of private operators that already have sunk fibre, so there is a backbone exis­ting. Why not map that out and see how BharatNet can complement that rath­er than reinvent the entire wheel? The government just needs to get passage rights on these platforms, which should be easy considering that the government has free right of way. Since these networks are interconnected, they can be easily leveraged. In fact, it can become one of the most successful private-public partnerships.

The BharatNet project is being set up using the Universal Service Obligation Fund, which was primarily again another sop to private operators. It is one of those big fixes that happened as the telecom industry evolved. Operators, who were not able to fulfil their rural obligations, freed themselves from those obligations by paying a sum to the government, in turn, passing on their responsibility to the government. Creating this fund was a mistake. Instead, the licensing conditions should have been rigorously enforced. Those who had undertaken obligations at the time of taking the licence should have been held accountable.

“The role of the government is to put policies in place and implement the same strictly. I believe the shift from NTP, 1994 to NTP, 1999 was a big mistake. U-CAS was a big mistake. Crossover spectrum was a big mistake.”

How was your experience as the minister for information and broadcasting? What challenges did you face at that time? 

In the first month in office, I came to the conclusion that India does not need a minister or Ministry of Information and Br­o­a­d­­­­­­­casting. The ministry belongs to an en­tirely different generation or era. To reiterate what I said when I was in office and when I demitted office, the government requires a full-scale communication paradigm that goes across print, broadcasting, radio and the cyber world. As the largest disseminator of information, the government needs an enterprise that is manned by a set of professionals who understand com­muni­­­cations. Although the Indian Information Service has extremely bright and talented officers, efforts have not been made to provide them with the skill-sets or the infrastructure to be on the cutting edge of government communications.

The current paradigm is completely and absolutely ossified and outdated. Pra­sar Bharati is a classic example. I call it the conflicted child because Prasar Bharati is supposed to be autonomous but it is fully funded by the Ministry of Informa­­­­tion and Broadcasting. The original concept was that Prasar Bharti would be accountable to a parliamentary committee, but that never happened.

The point is that the entire canvas of government communications has to be reimagined. Disband the Ministry of In­fo­r­mation and Broadcasting and create a broadcasting regulator, which looks at both techno-economic issues as well as content.

There is a major thrust being given to Make in India and Digital India. Telecom equipment manufacturers are being asked to put up factories and replicate the kind of ecosystem that exists in China. Can we come close to the Chinese model?

In the last days of the UPA government, it had received in-principle approval for setting up foundries to manufacture chips at an investment of Rs 1 trillion. The current government does not seem to have followed up on that. For India to become an IT hub, we have to get into hardware but private players do not have the capacity to do so. The government needs to step in and undertake this through public-private partnership. We need to manufacture chips and other critical elements.

Certain decisions have to be taken to incentivise domestic manufacturing. Take the digitalisation of 180 million television homes, implemented by my predecessor. Set-top boxes, which were used for the digitalisation drive, are not an engineering marvel. Incentivising manufacturers to make the set-top boxes in India should have been the first step. Ultimately, the beneficiaries of the digitisation of India’s broadcasting sector were China, South Korea, Taiwan and other countries, which got a $4 billion bonanza. So, huge policy programmes or agendas should be thought through before implementation to make India a manufacturing hub.

“If you have to build media and entertainment into a global enterprise, you cannot have artificial gaps between content and distribution.”

If you were today handling the two ministries, the Ministry of Information and Bro­ad­­­­­casting and the Ministry of Com­­muni­cations and IT, what would have been your top priorities?

First, the artificial distinction between con­­tent and dissemination companies nee­ds to be done away with. The government thinks that a vertical or horizontal gap should exist between content and distribution players. However, if you look at the combined net worth of the media and entertainment industry, India does not even rank twentieth among global companies. If you have to build media and entertainment into a global enterprise, you cannot have these artificial gaps between content and distribution.

Extrapolate that and we see that a telecom company is also a content creation company. Not only are they providing the platforms for people to communicate, they also have the ability to create content. Wh­­en technology allows that convergen­ce, it is absolutely unwise to try and prohibit it through an artificial regulatory mechanism. Therefore, the reality of convergence has to be recognised by policymakers and extrapolate that to a 20-year paradigm ahead.

I am not against operators or pro-operators. However, I am against one thing. After espousing the cause of liberalisation or market economics, when the market economics starts biting, do not run crying to the government and the Depart­ment of Telecommunications, asking for bailouts and concessions. Telecom has been the greatest success story of India’s liberalisation. As a sector evolves, litigation or disputes are natural, but successive governments should keep their hands off. The government should put policies in place and implement those policies strictly. For example, the shift from NTP, 1994 to NTP, 1999 was a big mistake. U-CAS was a big mistake. Crossover spectrum was a big mistake.

But if the migration from NTP, 1994 to NTP, 1999 had not taken place, would telecom have taken off the way it did?

It would have survived. There would have been a re-auction. If you go back to 1994 when the initial bidding took place, the situation was evolving and the government was as clueless as the players were. More­over, the highest bids had to ultimately be capped.