Can Digital India Be Used To Encourage Network Neutrality ?

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The Government’s latest initiative of “Digital India” has been heavily propaganded throughout the country as a game changer initiative to modernise bureaucratic services and enable the growth and development of the Country through universal digital access to every corner of every state. The programme has received its share of praise and dismissive snorts of derision alike, with the opposition considering it another overhyped un-implementable scheme of the present political dispensation.

Parallel to the debate on Digital India is another debate presently in progress on Network Neutrality. The Government has on multiple occasions emphasised its support for Network Neutrality and Shri. Ravi Shanker Prasad, Minister for Communications and Information Technology, has on a number of occasions stated both inside and outside Parliament that under no circumstances will the government allow the violation of the principles of Network Neutrality. To this end, the Ministry constituted a Committee under its supervision (commonly referred to as the DoT Committee) to look into the issue and come out with recommendations to implement the same. The merits of the recommendations notwithstanding, what became evident on a perusal of the Report was that the one of the foremost concerns of the government was to ensure that any enforcement mechanism for Network Neutrality did not compromise on “Digital India”, and it is perhaps safe to assume that if the executive was forced to choose between ensuring Network Neutrality and Digital India a success, it would in all probability choose to encourage the latter at the cost of the former.

Which brings us to certain significant questions: Does Network Neutrality need to be sacrificed as the cost for Digital India? Is it possible for both to not only be enforced and developed together, but also complement each other?

Some of the major pillars of the Digital India Programme are creating broadband highways, public internet access programmes and universal access to mobile connectivity. To this extent, Digital India is merely a merger (with an expanded outlook and ambition) of previous government initiatives of National Optical Fibre Network (N.O.F.N.) and the National Knowledge Network (N.K.N.). The major (and the most obvious) problem with achieving these goals is the lack of infrastructure prevalent not only in rural areas but also in the metropolitan cities of the Country. This glaring weakness is openly expressed by many for what will be the programme’s ultimate downfall.

At the same time, coming to Network Neutrality, one of the primary arguments against Network Neutrality has been that Telecom Service Providers have had to spend a financial bomb on developing infrastructure, and will have to continue to do so in the future, and disruptive OTT services significantly eat into their revenue, thus making the business and investment unviable.

Both concerns raised by their respective parties can together provide the perfect complementary solution to each other, provided the Digital India Programme is tweaked a bit. Digital India can in fact become the perfect platform for developing broadband and mobile connectivity infrastructure, while at the same time be used to lower the cost of development of the said infrastructure by providing various incentives under the Digital India Programme to develop the same. Reducing cost, thus consequently reducing the return on investment required, can burn a gaping hole in the shroud that has been developed against Network Neutrality.

Take for example the erstwhile NOFN scheme. It was and still is far behind its schedule and in its present format there is very little chance of this changing. A report has even gone so far as to state that sixty seven percent of the NOFN points are not functional. One of the main reasons for this has been the over reliance on the recurring loss making and inept public sector enterprise B.S.N.L., which has allowed a lot of fibre laid at excessive cost to go waste and render them unusable today. But by allowing the private sector to invest, the government can aid in boosting the speed of laying down of fibre by providing long term tax exemptions to these companies, and also exempt Right of Way (RoW) charges raised by Municipal bodies, which are excessive, while at the same time also fast track clearances and set aside encumbrances which have been seriously detrimental to telecom growth by bringing the same under the umbrella of the Digital India programme. According to some estimates, RoW charges are five to twenty times of the cost of the fibre being laid!

True, there would still be a lot of work to be done. For starters, the spectrum issue is the metaphorical white elephant in the room and needs to be addressed on an immediate basis. It is well documented that Indian telecom service providers need to provide their ever growing and ever in demand services with only forty percent of the spectrum available to foreign telecom service providers, and spectrum sharing has been universally panned as being too insignificant and too economically unattractive. At the same time, the private sector will have to bite the bullet on its presently substantial debt and be willing to invest at the above mentioned favourable terms and conditions.  But allowing the private sector to do what it is willing to do at a reasonable cost would be a major long lasting solution to ensure network neutrality for the consumer and financial benefit to the service provider to the consumer.

(First published here)

Why the Communications Sector Should not be Exempted From the Competition Act.

Communications Today reported on 19th March, 2012 that the Telecom Department will ask the Union Cabinet to exempt the communications sector from the country’s Competition Act. According to the article, “the move comes after the competition watchdog-Competition Commission of India (CCI)-recently raised the red flag over the telecom ministry’s plans to allow mergers and acquisitions (M&As) if the combined market share of merged mobile phone companies was less than 60 percent.”

We shall not comment upon the logic or exigencies which compel the Telecom Department to make such a demand but shall only list below point by point reasons the reason why we feel the Telecommunications sector should not be exempted under the Competition Act, irrespective of the complaints which support the request. They are as follows:

1. As of December, 2011. there were exactly fifteen different players in the Sector (Bharti Airtel, Reliance Comm., Vodafone India, Idea Cellular, BSNL, Tata Teleservices, Aircel, Uninor, Sistema Shyam Teleservices, Videocon Tele, MTNL, S Tel, Loop Telecom, Etisalat DB, HFCL). Granted, there are maybe players one too many in the sector, but the fact remains that six of the above are extremely small players, with atleast two of them confirmed to be losing subscribers as per TRAI. Only the first eight are predicted by analysts to be major market players in the sector, and it is expected that these players shall in all probability fade away on their own.   This is exactly what is envisaged in a competitive sector. The players in the relevant market which fail to grow and develop themselves in the relevant market should leave.

2. Continuing from the above, talking from the consumers perspective, tariff rates in the telecom sector in India can hardly be considered as an issue as frankly, they are one of the lowest in the world and even if assuming that they are raised in the near future, users can well afford the market rates, despite the recent cease fire in price wars. Admittedly, quality of service is a problem,  but the reason for that is primarily lack of infrastructure rather than excess of competition, and merging companies shall certainly not help improve the same. What is required is some seriously heavy investment in infrastructure, rather than simply buying out smaller players in the market, and additionally maybe even some corporate restructuring.

3. The Supreme Court has recently cancelled all 2G licenses issued during A. Raja’s tenure as Minister of Telecommunications. With the Judgement it self being questionable as regards its ratio and till a certain extent, its reasoning, and at the same time a Presidential reference also having been filed asking for clarifications to the same, it is best to follow a wait and watch policy and act only after receiving the Supreme Court’s reply on the Reference.

4. As per the Economic Times, there is a new round of Spectrum wars that’s about to begin with the upcoming re-auctioning of spectrum. Again, it is best to wait till the conclusion of the auction before deciding on such issues.

5. Clause 5(3) of the The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 provides that form may be filed preferably where “the parties to the combination are engaged in production, supply, distribution, storage, sale or trade of similar or identical or substitutable goods or provision of similar or identical or substitutable services and the combined market share of the parties to the combination after such combination is more than fifteen percent (15%) in the relevant market”. In light of this sub-clause, it is best to maintain harmony between various government policies  and the Act and regulations made under it in order to prevent unnecessary conflicts and confusion between the CCI, the Government and the Industry. In fact, the government, in its National Competition Policy, has sought to bring about harmony between the Act and policies and has suggested an elaborate mechanism to achieve the same.

6. Finally, if such an exemption is allowed, it will set a bad precedent in general and may encourage industries to lobby for exemptions in their favour.

The source of all data and statistics is The Economic Times