With key issues such as access deficit charge (ADC), spectrum and rural telephony still waiting to be resolved, TRAI Chairman Pradip Baijal talks at length about the regulator’s role in facilitating the next level of growth in the sector.Excerpts from a recent interview:
What are the outstanding issues that need to be addressed in order to push telecom growth in the country?
The telecom sector has witnessed rapid growth, primarily on account of two reasons: mobile technology and aggressive competition. It is because of this that we are in a position where we are seeing a near 2 per cent growth in teledensity each year for the past two years. This is a far cry from the overall 2 per cent growth in teledensity witnessed in 50 years, from 1948 to 1998, when there were monopoly service providers offering telecom services.The rapid growth has come about only after private players were allowed into the sector following liberalisation. We should round up this year with a 3 per cent growth in teledensity followed by 5 per cent the next year. Also, to nudge growth in the sector, the government has given a number of concessions to service providers. Earlier, the entry fee imposed was heavy, of the order of 15 to 20 per cent, which has been brought down drastically by the government through reduced taxation. However, despite all the efforts, last year our coverage was 20 per cent of the entire population. All the countries in the world, including the most backward countries, have a mobile coverage of 80 to 90 per cent. Unless mobile technology allows us to cover 80 to 90 per cent of the population, we cannot say that there has been substantial growth. It is TRAI’s effort now to see that the operators move into more areas. But they have their limits too and are therefore not moving as aggressively. So, the first unfinished agenda in my mind is to get TRAI’s rural recommendations accepted by the government. The recommendations are currently being examined and there is a very strong likelihood that they are going to be accepted. The recommendations are: extending USO Fund support beyond fixed lines to mobile phones as well. That cannot be done as long as the subsidy is on a per-telephone basis. For that, the rural mobile network should be subsidised. We have recommended a scaled-down subsidy amount. If the government agrees, within a Rs 90-Rs 100 billion infrastructure cost per operator, we should be in a position to cover 80 to 90 per cent of the country.This will increase the population coverage and result in an increase in subscribers, which I am imagining will become a reality. At present, the teledensity in the urban areas is 33 per cent; in Delhi it is 45 per cent and in Mumbai it is 55 per cent.In rural areas, it is 2 per cent.
Further, all over the world, telecom networks are becoming converged networks or next-generation networks to incorporate more than just voice. For instance, voice over internet has vastly improved and if a converged network is put in place, I can offer it at a cheaper price. Also, I can offer broadband and TV and several other value-added services at a cheaper price, at a single switch cost. If in a PSTN network I was to provide 20 services, I would require 20 switches. The entire world is replacing their network to provide more and more services. So, the next concern or unfinished task is a converged network. We have given recommendations to the government on the same. This will create a revolution in the country as operators will be able to deliver voice, internet and cable TV, all on the same network, especially in the villages. I see huge potential in allowing the cable operator to become a telecom operator.
How is the Indian telecom sector placed to achieve the 250 million subscriber target?
Without an iota of doubt, we are very well placed to achieve the targets. Last month, we did 4.5 million telephones and this month we have done 5 million. We have already achieved a similar subscriber growth as China. At the height of the Chinese telecom revolution, they are adding only about 5 million phones per month. So we have reached that absolute number. In fact, our rate of growth is higher than the Chinese rate of growth since we started from 0 in 1995. So, if we add 5 million every month, 60 million every year and 120 million in two years ?? and that’s only mobile ?? we are sure to hit the target.Moreover, the speed of coverage will increase when the total coverage goes up from 30 per cent to 80 per cent. There is an insatiable demand for mobile phones in villages today because the rates are so low. But the recommendations on rural telephony forwarded by TRAI should be accepted in order to achieve the target.
What is TRAI’s stand on resolving the ADC (access deficit charge) impasse?
The government has shown huge concern as far as ADC is concerned. At the moment, we are discussing the concerns as those must be valid concerns and I am sure we will work it out.
What is TRAI’s view on spectrum allocation?
Basically, we cannot differentiate between technologies when we give spectrum. In TRAI’s recommendations on spectrum allocation and related issues, we have pointed out that efforts should be made to gradually move in a direction wherein the spectrum allocation criterion is technology neutral. It is, therefore, recommended that the present spectrum allocation criterion is reviewed so that while retaining the subscriber base approach, the quantum and steps for additional spectrum allocation are technology neutral.
Further, my whole experience has been that when we gave 2G services free instead of levying huge entry fees and more recently FM frequencies, which were given free instead of huge entry fees, we have met with success. So, I am totally opposed to entry fees because an entry fee makes the service expensive, and if a service is expensive, there is no market for it in India. Besides, tomorrow if the operators start making huge profits, I can always increase the service tax.
Do you see a further fall in tariffs?
Positively. When the ADC order comes, there will be a further fall in tariffs. When the budget comes, if there is any relaxation for the sector, then obviously there will be a fall in tariffs. Our per capita income is half that of China’s, so our tariffs for a similar growth should be half of China’s.Today they are two-thirds of China’s.
What are the reasons for the falling quality of telecom services and what can be done to improve them?
The poor quality of service to my mind stems from poor interconnections.Operators have had problems applying for timely interconnection. I am in the Supreme Court as well as in the TDSAT on this issue and I will sort it out. Once I am able to force efficient interconnection, the quality of service will improve.Secondly, all the local authorities, like the MCD, the NDMC, the Bombay Metropolitan Authority and the Urban Development Commission must allow us more towers and more cells because in their absence, the quality of service is further hampered.
What, according to you, will be the thrust area for the telecom industry?
The thrust area is growth for the teledensity to increase from 12 per cent now.There is enormous space for growth. But the next round of growth has to come from convergence because India cannot do without an efficient broadband system.
What is the most feasible way to increase rural teledensity? Do you expect it to rise over the next one year?
Accepting the rural recommendations put forward by TRAI is the only way to ensure that rural teledensity increases over the next one year. Because when you grow through fixed line, the USO bills are very high. If I want to achieve 4 per cent rural teledensity by 2010 from the current 2 per cent, the USO bill comes to Rs 300 billion to Rs 400 billion. And it is a bill in perpetuity. Therefore we have to look at using mobile technology to spur growth.
What is the problem in allowing resellers in bandwidth?
All economies in the world have gone for resellers in bandwidth after the initial bandwidth providers have stabilised. So, in one of our recommendations, we have said that we should allow bandwidth resellers after 2007.
What future trends do you foresee in the telecom sector?
Growth and convergence are the two trends I foresee in the telecom sector in the coming years.
