Thursday, July 21, 2011

The Great Telecom Fudge

Thu Mar 10 2011, 18:01 hrs New Delhi:

‘Taan Shourie Saab, hun ki karn da irada hai?’ Giani Zail Singh asked. So, what do you plan to do now?

There had been another turn in my life. I had gone to call on Gianiji.

Sir, ki karana? Kitaabaan hi likhniyan. Kitaabaan likhanga’ — Sir, what is there to do? I will write books, I said.

Naeen, naeen,’ No, no, Gianiji said, ‘Tuseen samjhe hi naeen’ — You haven’t understood. ‘Siyaasat badi kutti cheez hai’ — Politics is a real bitch. ‘Jadon audaa hoye, taan yaar naeen chchadan dinde’ — When one has a post, one’s friends don’t let one leave it. ‘Jadon audaa hathon nikal jaave, taan dushman naeen chchadan dinde’ — And when one loses the post, one’s enemies don’t let you leave it!

I have been reminded of Gianiji’s prescience in the last few months. For the last year, I have been living far away from Delhi, immersed in religious scriptures for a book that I have completed. Telecom has been as far from my concerns as any other gutter in Delhi. It is the spate of lies which has been let loose that has compelled me to return to it. 

The falsehoods have been spread to divert attention from what are the two central issues. Who made the money? What were the heads and controllers of the Government doing when this loot was going on? Hence, ‘NDA’, ‘first come first served’, 2003, 1998... And, given the fact that media, etc. do not read documents, given that few would today remember what the condition of the sector was at that time, the Government has all but succeeded: ‘there has been no loss’; ‘in any case, it was only Raja who was doing something wrong, and we have already removed him’; ‘in any case, he was just following NDA policies’ ...

As fabrications have been put out, I will set out the facts that relate to the time that I was in charge of the Communications Ministry — from early 2003 to April 2004.

The sector at that time

When I was put in-charge of the Ministry, the sector was marred by the following features:

[A] The sector had all but collapsed after the excessive bids; the decision to shift to a Revenue Sharing Model had rescued it from collapse; but the sector was yet in a very precarious condition.

[B] Today, there is a rush for licenses; at that time few were coming forward to enter the sector or to extend the coverage of the services that they were providing. This is evident from the following table:

Hence, one of the principal objectives of Government was to steer the sector on to a growth path.

[C] Such services as were being provided were concentrated in the relatively well-to-do parts of the country. This had led to a lot of acrimony in the ill-served areas and to criticism in and out of Parliament — namely, that telephony was being converted into a service for the elite and the rich living in just some favoured parts of the country. It had also reinforced deep resentment in areas such as the Northeast and J&K — in these areas the lack of service was taken as further proof that the Centre did not care for them and was actively discriminating against them. In fact, apart from BSNL, no Operator had come forth to provide services in the J&K circle. In some circles (like Assam, Bihar, North East, Orissa, MP), there was only one licensee or the second Operator had taken the license but was providing next to no service. There was not much growth even in Kolkata. Circles like Bihar, Haryana, Rajasthan, Punjab, UP (East), were also suffering from slow growth.

One of the principal concerns of Government, therefore, was to extend communications services to these under-served areas.

It is in this context that the figure that is being touted about — that 28 licenses were given by the NDA in 2003-04 — should be seen: not one of these 28 licenses was for lucrative circles or metros. The distribution of the licenses was as follows:

[D] The sector was paralysed by litigation: the CDMA Operators and the GSM Operators were at each others’ throats. Almost nothing could be done and it would be challenged by one side or the other in TDSAT, the High Courts and the Supreme Court. The Operators would file cases not just against each other but also against the Government. Indeed, even the expectation that Government was considering a course of action would trigger one side or its rival to rush to the courts and obtain a stay. Two examples will suffice. A Group headed by the then Minister of External Affairs and Electronics, Mr. Jaswant Singh, had been constituted in the late 1990s to make recommendations for a New Telecom Policy. It had to get a special study done on ‘Possible Litigation Scenarios’. The exhaustive paper was considered by the entire Group in its sixth meeting held on 22 March 1999. Similarly, no sooner had the Cabinet decided to integrate the Limited Mobility and Full Mobility services, the GSM Operators had moved the Supreme Court to stay any order that the Government may issue in this regard.

A major concern of the Government, therefore, was to lift the sector out of this quagmire of litigation. Telecom service providers should compete for the goodwill of the customers rather than trying to block each other in courts, or by suborning ministers and civil servants in Delhi — that was the objective.

[E] One of the reasons for this litigious and paralyzing situation was the complexity of the licensing system at the time. The plethora of licenses had grown as a coral reef over the decades. They differed by the date on which they had been obtained; the type of service the Operator provided; the location at which the service was provided; the distance over which the service was provided; the technology that was being used to provide the service; the type of customer to whom the service was being provided . . . This had two consequences: (1) It triggered litigation; (2) Every decision was seen by one side or the other as discriminating against it. [In a lecture that I delivered at the time, and which the Indian Express published, I described the situation in regard to the licensing system as I found it. The text can be easily accessed today as it is reprinted in my book, Governance, The sclerosis that has set in, ASA, Rupa, 2004, pp. 69-92.]

On the other hand, it was becoming clear by the day that the licensing system was being rendered obsolete by the advance of technology. This was specifically noted in the 1999 Telecom Policy. In its Paragraph 1.3, the Policy had stated, inter alia,

‘In addition to some of the objectives of NTP 1994 not being fulfilled, there have also been far reaching developments in the recent past in the telecom, IT, consumer electronics and media industries world-wide. Convergence of both markets and technologies is a reality that is forcing realignment of the industry. AT one level, telephone and broadcasting industries are entering each other’s markets, while at another level, technology is blurring the difference between different conduit systems such as wireline and wireless. As in the case of most countries, separate licenses have been issued in our country for basic, cellular, ISP, satellite and cable TV operators each with separate industry structure, terms of entry and varying requirement to create infrastructure. However, this convergence now allows operators to use their facilities to deliver some services reserved for other operators, necessitating a relook into the existing policy framework. The new telecom policy framework is also required the facilitate India’s vision of becoming an IT superpower and develop a world class telecom infrastructure in the country.’

This is why the Government set up the Group on Telecom and I.T. Convergence in 2001. The way that technological advance was cutting the rationale of the licensing system, and also the way that the licensing system, in turn, was holding back the adoption of newer technologies and thereby harming the interests of consumers and the country were the major themes of the TRAI report of October 2003. These were also among the principal reasons on account of which TRAI recommended that Government should replace the plethora of licenses with a Unified License.

Three further facts should be borne in mind.

[F] First, in those days, spectrum was given as a part of the license: the licensee got the license, and the Government in turn undertook to allow him use of a start-up quantum of spectrum to provide the services for which he had got the license. Subsequent tranches of spectrum were to be released when the subscriber base crossed certain specified limits.

[G] Second, while we had been able to establish the bidding route firmly in Disinvestment, and for which reason I was keen to introduce it in the Telecom sector also, the experience with bidding in the latter had not been altogether a happy one:

* When the sector had been first opened up and private Operators had been invited to bid, they had filed grossly excessive bids as a result of which the sector had all but collapsed, and had to be rescued by abandoning altogether the obligations that ensued as a result of the bids.

* The fourth Cellular Licenses were given as a result of multi-stage bidding process in 2001. By 2003, the teledensity had not changed much since the bids in 2001.

* As several areas of the country had not been taken up by any Operator when the bids were invited for the 4th Cellular Operator, in March 2003 bids were again invited for these areas. But it became evident that not a single bid was going to be received. At considerable discomfiture, the Government had to call off the entire exercise.

[H] Terrorism had become a major problem. Grave apprehensions had developed among intelligence agencies that the spread of mobile telephony will enable terrorists to carry out their plots even more readily.

Government’s strategy

In view of these circumstances, the Government’s strategy became:

* Accelerate growth;

* In particular, in the under-served areas;

* But at the same time, meet the concerns of the intelligence agencies;

* Once telephony grows, spectrum will become a scarce resource; for this purpose

* Take measures that will make more spectrum available for civilian use;

– Devise a fair and transparent modus for distributing spectrum for the time it would have become scarce;

– The modus adopted should also ensure optimal usage of the spectrum;

* Pull the sector out of the mire of litigation and allegations. Operators should compete in the market not in courts and government offices.

* The licensing system should be simplified. In particular, it must be service and technology neutral, and it should spur the adoption of the best and latest technologies that would benefit the consumer.

Means for implementing the strategy

We decided to use a series of instruments to achieve these objectives:

* Unleash and enable BSNL/MTNL to provide intense competition to private Operators: in particular, (i) to spur them to extend coverage to under-served areas; (ii) to offer new services; (iii) to lower the exorbitant tariffs they were charging;

* Lower the Revenue Share being taken by Government;

* Unify licenses, eventually instituting a single unified license:

– To ensure competition, this should be given quasi-automatically: TRAI came to use the expression ‘automatic authorization’;

– Keep the entry fee at a minimum;

* Anticipate the situation when spectrum will become scarce. Hence,

– Commence work that is required for eventually delinking licenses from spectrum, and auctioning the latter;

– Allocate Rs. 1400 crore to Defence Forces — this was their estimate of what they needed — so that they may modernize their signaling equipment, and thus free excess spectrum for civilian use;

– Devise incentives for optimal use of the spectrum and penalties for its inefficient use: existing inefficient use of what would become a scarce resource if the growth that it was projecting would materialize, was ‘of utmost concern’ TRAI observed, and hence it emphatically recommended that these incentives and penalties be devised. [See, for instance, Para 7.30 and Annexure IV of its Report of October 2003. These reports are all available on the website of TRAI.]

* Ensure that every thing is done so openly and with such manifest fairness that litigation ceases.

It is a matter of great pride that these steps indeed more than fulfilled the objectives that Government had sought to pursue:

a) From a situation of near collapse, the sector set on to a course of massive growth: this has made a major contribution to growth — could the IT sector have become what it is today without the growth that we have recorded in the telecom sector?; it has generated large employment; it has helped integrate the country further;

e) From being a rich man’s toy, the mobile has become an adjunct of everyman’s daily life. It has enabled the poorer craftsmen to improve their businesses. It has enabled migrant labour to keep in touch with their families. In a word, it has been a boon to the poor as much as to anyone else.

f) At that time, Operators used to charge Rs. 28 to 32 per call — both the caller and the person called had to pay. Today, our rates are the lowest in the world.

g) At that time, our teledensity was far below the world average. Today, the Indian telecom network is the second largest network in the world, and the fastest growing network in the entire world. In 2002, the mobile density was 1 per cent. Today it is 70 per cent. In 2002, the country was adding 2 lakh subscribers a month. Today, it adds close to 20 million subscribers every month. This is one sector in which targets set by Government have been exceeded manifold: the Plan target for 2010 was exceeded by 300 to 400 per cent; rural connectivity targets were exceeded by 400 to 500 per cent. This happened because of bold decisions of Government, the growth-oriented approach of the Regulator, the alacrity with which Indians adopt to new ways and things; most of all, it happened because of the entrepreneurship of several Operators, an entrepreneurship which the policy decisions of those days unleashed. Contrast the way the country has always fallen woefully short of targets in the power sector, a sector in which corresponding decisions have not been taken and implemented.

h) At that time, the sector was mired in a host of legal cases — with private Operators fighting each other, with all of them challenging every decision of the Government; litigation was brought to an end.

i) The Government used to spend an amount close to Rs. 20,000 crore every year for growth of telephone services in the country. Now, the telecom sector is contributing to the Exchequer more than Rs. 50,000 crore every year by way of licence fees, spectrum charges, service tax and other corporate taxes.

That this entire transformation is the result of policies adopted during the NDA period is evident from the repeated affirmation of the current Minister of Communications, and none other than the Prime Minister that the UPA has just followed policies of the NDA Government!

How people are sought to be misled

‘It is Arun Shourie who introduced the first-come-first-served principle. Raja merely followed it,’ Government spokesmen have been declaiming again and again.

Typical of the devices that these people specialize in deploying, it is a red-herring that has been thrown in the way to lead everyone away from the central fact: Raja followed no principle, no procedure, no policy. He certainly did not follow the first-come-first-served procedure:

* There were 167 pending applications. Under first-come-first-served norm, these are the ones that would have been dealt with first. He just discarded this norm, and called for new applications.

* On 24 September, 2007, he announced that the deadline for receiving the applications would be 1 October, 2007. There was a spurt of applications: 408 were received.

* Under Raja, the DoT announced that these would be considered on a first-come-first-served basis.

* Months later, he arbitrarily changed this to 25 September and thus eliminated a slew of competitors. This edict cut out the applications from 575 [the 167 that were pending and the 408 new ones that were received] to 232.

* Next, he changed the basis of adjudging the order in which applications would be considered: the basis was to be the date and time of receipt of application; he now ruled that it shall be the date and time of fulfilling the conditions that were being specified in the Letter of Intent. Among these conditions, as the CAG has pointed out, was the condition that the applicants bring a banker’s draft of Rs. 1650 crore within 41 minutes. The favoured companies had prior knowledge that this would be one of the conditions, and hence had come with the drafts. Others were physically assaulted and prevented by musclemen from accessing the office.

* As even these manipulations did not secure for Swan and other favourites the quantum of spectrum which had been agreed upon, Raja changed the priority list in circles like Punjab and Maharashtra.

Is this the way the first-come-first-served principle is adhered to? Indeed, does this sequence betray that he and the UPA Government were adhering to any principle at all?

The first-come-first-served principle has been in vogue for long, certainly before the time when the Ministry was put in my charge — in fact, I would be surprised if the Prime Minister with his intimate acquaintance with the license-permit raj does not remember that there was a time when such norms were used to allocate licenses for a host of things: from railway rakes to imports. Here are just three examples of documents in the telecom sector that refer to it:

* Guidelines for Issue of Licence for Basic Service [No. 10-2/2000-BS-II, Ministry of Communications, Department of Telecommunications , Licensing Cell (Basic Service Group), Sanchar Bhavan, New Delhi, dated 25th January, 2001.] Clause 26 of this document reads in part: ‘. For Wireless Access Systems in local area, not more than 5+5 MHz in 824-844 MHz paired with 869-889 MHz band shall be allocated to any Basic Service Operator including the existing ones on first come first served basis. The same principle shall be followed for allocation of frequency in 1880-1900 MHz band for Micro cellular architect based system.

The title of the next document itself is Procedure for Allocation of Spectrum on First Come First Served Basis, [No: 10-2/2000-BS-II, Ministry of Communications, Department of Telecommunications, Licensing Cell (Basic Service Group), Sanchar Bhavan, New Delhi, dated 23rd March, 2001]. Apart from the title itself, Para 1 of this document states, ‘As per Guidelines issued for Basic Telephone Service providers, the spectrum for WLL service in the frequency of 824-844 MHz paired with 869-889 MHz is to be allocated on first come first served basis.

And, remember that, at that time licenses and spectrum were joint-twins: so it is not that this principle was confined to spectrum and had nothing to do with licenses.

Later that year, The Group on Telecom and IT Convergence submitted its 'Report on Limited Mobility'. The Group was headed by the then Finance Minister, Mr. Yashwant Sinha, It elucidated the meaning of the principle ‘first come first served’ in regard to allocation of spectrum. Para 25 of this Report stated as follows:

‘25. The Group noted that the description of “first-come-first-served” used in the Guidelines of January 2001 was not an accurate description of the content of policy as announced and as implemented with reference to existing Fixed Service Operators. It does give the impression that immediately on application the applicant would become eligible for a spectrum license, whereas in fact the Guidelines — especially when read with the spectrum allocation procedure of 23rd March 2001, which stipulates the conditions under which the spectrum would be allocated — clearly require that the Operator seeking spectrum must have established a Point of Presence (POP) in an SDCA in order to be eligible for the first tranche of spectrum; further installments of spectrum being given subject to fulfillment of roll out obligations which would include the obligation now mentioned in this advice, and to ensure that the spectrum already given has been optimally utilized. The 23rd of March, 2001 Procedure also stipulates that in the event of roll out obligations not being fulfilled the spectrum allocated would revert back to the Government. Hence, “first-come-first-served” on a true interpretation only means that allocation of spectrum is and must be considered inextricably linked to performance. The Group noted that the quantum of spectrum to be allocated to the fixed service providers for WLL with limited mobility is in accordance with the recommendations of TRAI.’

Each of these documents is from 2001 — two years before I was given charge of the Ministry. In a word, ‘first come first served’ was a well-established and recognized method of processing applications.

Here is another example — this one from TRAI whose recommendations everyone are always holding up as if we violated them. In the Report, Recommendations on Unified Licensing, that TRAI submitted in October 2003, in Para 7.29, it stated, inter alia, ‘... The allotted spectrum varies from 4.4+4.4 MHz to 10+10 MHZ depending upon the number of subscribers in each service area. Existing BSOs [Basic Service Operators] shall be allocated 5+5 MHz in 824-844 MHz paired with 869-889 MHz bands on a first come first served basis. The same principle shall be followed for allocation of frequency in the 1800-1900 MHz band.’

[E] In contrast to what happened during Raja’s time — when the Finance Ministry repeatedly objected to what he was proposing to do — during the time that the Ministry was under my charge, no objection was ever raised by the Finance Ministry. In particular, the record on file establishes that the Member (Finance) — who represents the Finance Ministry on Telecom affairs — specifically approved the decision that the first-come-first-served principle shall be observed. By contrast, during the UPA tenure, the then Member (Finance) was so outraged by what Raja was doing that she sought premature retirement and left Government service all together.

And it was a perfectly reasonable principle. Two points are noteworthy. As will be obvious, for instance from the extract given above from the Group headed by Yashwant Sinha, it was never the sole criterion: the applicant was to have fulfilled a number of other requirements. Only after the competitors had fulfilled these criteria, would the first-come-first-served criterion come into play. And these requirements were known to all at the time they submitted the applications. They were not injected ex post facto as in Raja’s tenure. Second, it was a necessary and entirely open and fair criterion: consider a situation in which two operators have fulfilled the requirements — for instance, regarding establishing Points of Presence, and getting the specified number of subscribers; but Government has at that moment spectrum that is sufficient to meet the operational requirements of just one of them. How would it choose between the two? On the basis of which of them came to it with evidence of having fulfilled the other criteria first. What could be fairer? What could be more open?

Cabinet decision and what DoT did

One of the fabrications that has been put out is that during the time the Ministry was in my charge, it exceeded what Cabinet had authorized us to do. Forget my personal temperament, the fools who put out such a lie should remember that that was not the Cabinet of Manmohan Singh. It was the Cabinet of Atal Behari Vajpayee — the slightest excess would land one out of the Government. And he had as his Principal Secretary, Mr. Brajesh Mishra, one of the most powerful and most effective Principal Secretaries that any Prime Minister of India has had. He kept a hawk’s eye over whatever was happening in departments of Government. It is beyond imagining that a decision of Cabinet would be violated — and that too in such a contentious sector — and the contenders — the private Operators who were always rushing to court — would not raise Cain; that Mr. Mishra would not know; and that Mr Vajpayee would condone the transgression.

The Cabinet decision is clear as can be. In its meeting on 31 October 2003, the Cabinet had decided as follows:

‘The recommendations of TRAI with regard to implementation of the Unified Access Licensing Regime for basic and cellular services be accepted.

‘DOT be authorized to finalise the details of implementation with the approval of the Minister of Communications & IT in this regard including the calculation of the entry fee depending upon the date of payment based on the principles given by TRAI in its recommendations.

‘The recommendations of TRAI in regard to the course of action to be adopted subsequently in regard to the implementation of the fully Unified Licensing-Authorization Regime be approved.

‘DoT be authorized to finalize the details of implementation with the approval of the Minister of Communications and IT on receipt of recommendations of TRAI in this behalf.’

The Cabinet decision clearly recognized that, as recommended by TRAI and by the Group of Ministers, the process of implementation would be in two phases. In the first phase, the Unified Access Licensing Regime would be introduced: that is, the licenses that had been differentiated by technology — CDMA vs. GSM — and range of service — limited or full mobility — would be unified. In the second phase, after recommendations of TRAI in regard to a fully Unified Licensing Regime had been received and approved by Cabinet, that Regime would be introduced. In both phases, the details of implementation of the UASL regime and of the fully Unified Licensing Regime were to be worked out by the Department of Telecommunications with the approval of the Minister of Communications and IT.

2. The implementation action was taken in the background of the following aspects of the TRAI recommendations which had also been accepted by the Cabinet [Para numbers in the following refer to the TRAI Report of October 2003, which can be readily accessed on its website]:

(i) Within six months ‘Unified Licensing’ regime should be initiated for all services covering all geographical areas using any technology. (Para 7.1)

(ii) Unification of access services at circle level [a ‘circle’ roughly coincided with a state] should be taken up forthwith: for this consultations with various stakeholders had already been completed. This should be without delay followed up with steps to set out the guidelines and rules for Fully Unified Licensing/Authorization Regime by gathering details of international practices and through the consultation process. (Para 7.6)

(iii) To determine the benchmark of the entry fee for the UASL regime — that is, the interim period before the fully unified licensing regime is ushered in — TRAI had considered the option of inviting bids from existing as well as new prospective players. It had concluded explicitly and emphatically that this option should not be adopted. TRAI had advised that this option would be time consuming and that it would delay the implementation of Unified Licensing. TRAI recommended that instead the existing entry fee of the Fourth Cellular Operator be accepted as the basis for fixing the entry fee for migration to Unified Access Licensing regime for Basic and Cellular services at the Circle level. (Paras 7.16 to 7.20) This was an eminently logical proposition: the mobile density in 2003 was just about the same — a miserable 1 per cent — as it was in 2001 when that price had discovered through multistage auctioning.

(iv) TRAI had stated that it would give its recommendations on efficient utilization of Spectrum, its pricing and Spectrum allocation procedure in the near future. DoT was to issue spectrum related guidelines based on the recommendations of TRAI after receiving those recommendations. (Paras 7.28 & 7.29)

(v) TRAI had stated that it was not in favour of high spectrum pricing since such a regime would make the services more expensive and the desired growth would not take place in telecommunications. (Para 7.33)

(vi) It had advised that the formulation of an appropriate environment for growth, regulation and strategy had to be based on the single priority of the moment, viz. increasing the availability of phone connections at affordable costs and tariffs and ensuring a rapid roll out of services. Growth of teledensity, it said, revolved around developing access networks and making access to them available at low cost. (Para 6.2)

(vii) To achieve 100 million wireless subscribers, TRAI estimated that an investment of the order of Rs. 50.000 crores would be required. It said that for investment of this order to come forth, the prerequisite was that the sector be freed from litigation. (Para 6.5)

(viii) TRAI recommended that induction of new cellular mobile operators should preferably be done under the ‘Unified Licensing Regime’ which it expected to come into being soon after it finalized its recommendations on the matter. (Para 7.37)

(ix) Yet two paragraphs later, TRAI recommended that, if adequate spectrum was available, then in the existing Licensing Regime, Government may introduce additional players through a multi-stage bidding process as was followed for the Fourth Cellular Operator. (Para 7.39)

The words ‘existing regime’ referred to the pre-UASL regime — for that was the regime that was existing at the time that the Report was submitted in October 2003.

3. Thus, as will be evident from both — the recommendations of TRAI and the decision of the Cabinet — the UASL regime was a transitional phase. It was to be the first step towards putting in place a fully Unified License Regime.

4. During this transitional phase, the DoT was to proceed with its usual duties using the price paid by the Fourth Cellular Operator as the benchmark.

5. The Cabinet never intended that the Department should halt all expansion of services and, to take one instance, leave the under-served and unserved areas of the country in a state of neglect. Nor did the Cabinet, to take another instance, put any bar on giving Basic Service licenses. What happened as a consequence of its decision was that an addendum was added — nothing was subtracted from the NTP of 1999 — and two additional categories were introduced: henceforth, the DoT could issue licenses not just for Basic Services, NLD, ILD, etc. It could in addition issue UASL and Unified Licenses.

6. Subsequent events showed the wisdom of this decision — for, in the event, TRAI took not six months but one and a half years to finalize its recommendations regarding a fully Unified Licensing Regime: by that time the NDA Government had long gone. And in the Report that TRAI eventually gave in 2005, there was no recommendation for multi-stage bidding at all. Had the Cabinet directed the DoT to stop all further steps for extending services, the sector would have been per force frozen for over a year and a half — and that on the basis of an imagined recommendation that TRAI itself did not reiterate in its subsequent Report on the matter.

7. No sooner had the Cabinet decided to introduce unification of licenses, the Cellular Operators filed an application in the Supreme Court seeking a stay on the implementation of UASL regime. This application became part of the Appeal that had been filed earlier by the Cellular Operators against the TDSAT order of August 2003 in the Limited Mobility Case. Implementation of the Cabinet decision therefore required careful handling of the litigation before the Supreme Court. DoT accordingly proceeded with the following objectives in mind: (a) ensure that the decision of the Cabinet regarding the UASL Regime is not stayed as a result of the petition of the Cellular Operators; and (b) implement the UASL Regime in so transparent and fair a manner that the sector indeed becomes litigation-free. Through the Law Ministry, the services of the then Solicitor General were availed of by the DoT for handling this matter.

8. Implementation of the Cabinet decision then proceeded as follows:

(i) Since there were pending applications for Basic Service Licenses, these were dealt with in accordance with the usual procedure. Tata Teleservices had applied for providing Basic Service in four service areas in early September 2003. Letters of Intent were issued against these applications in the normal course for Basic Services on 7 November 2003.

(ii) On legal advice, including that of the Solicitor General, in the Guidelines for issue of UASL’s resulting from migration, it was provided that all new applications for Access Services would be in the UASL Category. The rationale for this was manifest: issuing of Service based licenses, as was the practice till then, would have perpetuated the very aberrations which were sought to be corrected by the UASL Regime that the Cabinet had directed the DoT to implement. These Guidelines were issued on 11/11/2003. This meant that henceforth neither applications for Basic Services nor from new cellular mobile Operators would be entertained. The new operators for access services could only be of the UASL category. Going in for bidding for the new UASL’s would have required determination of slots for auction in each service area in the CDMA technology and separately for those involving GSM technology. The bidding process would have been time consuming. Government also had before it the fate of the bidding process that it had initiated as recently as March 2003 when bids had been invited for the vacant slots for the Fourth Cellular Operator, based on GSM technology, no bids had been received and the process had to be cancelled at the last moment. The main reason for this lack of response was evident to Government: the Telecom Sector had got entangled in litigation and, except for the existing lot of Service Providers, new entrants were not forthcoming.

(iii) There was another very important aspect which could not be ignored. Had all further permissions been stopped, and Reliance had proceeded to migrate on the basis of the Cabinet decision of 31/10/2003, Government would have been opened to the charge that it had favoured Reliance by blocking its competitors. Apart from being manifestly unfair, such an outcome would have definitely resulted in the Courts staying the UASL Regime.

(iv) Para 7.39 of the TRAI Report regarding multi-stage bidding process related to the introduction of additional cellular operators under the pre-UASL regime. If it had been intended for new UASL operators, it would have been worded differently and the words ‘existing regime’ would not have been used. Thus there was no violation of the Cabinet decision in this regard.

It is in this background that clarification was sought from TRAI by the then Secretary DoT about how pending applications, applications from existing Operators who may opt to migrate, and new applications for UASL’s were to be dealt with. Chairman TRAI and the Regulatory Authority as a whole put the position beyond doubt.

The entry fee recommendation which was benchmarked to that paid by the Fourth Cellular Operator and which had been adopted for the purpose of migration in November itself, had to be used for others also — otherwise the latter would at once get a ground for charging the Government with tilting the playing field in favour of one or some Operators. This was a very important consideration. Even the majority of TDSAT in its judgment delivered as recently as August 2003 had held that, while the introduction of limited mobility had been legal, it had upset the level playing field. Tata-Teleservices were the major competitor of Reliance, and the Cellular Operators, namely Bharti and Hutch, who had applied for new UASL’s. Neither set would, and with eminent justification, have reconciled to anything which would have put them at a disadvantage vis-a-vis Reliance. On this basis, in accordance with the recommendations of TRAI, a procedure was adopted for dealing with applications for new UASL’s, and the new applications, which were few in any case and which were from Operators with great experience in the sector. TRAI had made it clear that this procedure was to be followed for an interim phase, till Guidelines for spectrum were finalized in the future.

That TRAI recommendations covered applications from both existing limited mobility Operators who were migrating as well as new applications is evident from the repeated references in the communications of TRAI to both categories. Similalrly, consider the last exchange on this subject — about the application for West Bengal and Andaman and Nicobar Islands: this was to be a new license. TRAI reiterated its recommendation.

And the communications were from the Authority as a whole. By no stretch of imagination can they be dubbed as private letters from the Chairman in his individual capacity. This is evident from the Agenda item dated the 17th November 2003 for the meeting of TRAI. It is evident from the communication of the Secretary and Principal Advisor of TRAI dated 19 November 2003. And it is evident from the communication of TRAI dated 5 December 2003 in regard to West Bengal and Andaman and Nicobar Islands. I have just not been able to fathom how responsible persons — who have had access to these communications — have suppressed them from public knowledge and made out that the Chairman of TRAI and the Secretary of Telecom Department entered into some surreptitious, private conspiracy to grant licenses to TATAs or Bharti or someone else.

The procedure adopted and the decisions taken were so manifestly fair and transparent that there was no controversy or allegation by anyone of any discrimination. No one challenged the approach or decisions in any Court. There was no criticism in the media.

All this in a sector that had been marred by acrimonious allegations and litigation.

And who got the licenses and for which areas? Some Swan? Some real estate racketeer?

The licenses

The procedure adopted for grant of new UASL’s was simple and straightforward. The entry fee payable was based on the same principles as were followed for migrating from Basic Services to a UASL. In November itself, Reliance migrated in 18 Service Areas; Tata-Teleservices in 6 areas; Bharti, HFCL and Shyam in one area each.

Tata-Teleservcies surrendered the Letters of Intent for Basic Service Licenses that had been issued to them on 7/11/2003. They applied for UASL’s for providing services in Haryana, Kerala, Punjab, and UP (West).

Tata-Teleservices applied for UASLs in 8 service areas on 12/11/2003. These were Bihar, Orissa, Rajasthan, Madhya Pradesh, Himachal Pradesh, Kolkatta and UP (East). These were all underserved and unpopular areas with very low tele-density.

Bharti applied for UASLs 6 service area — namely Bihar, Orissa, Rajasthan, UP(East), West Bengal including Andaman and Nicobar Islands, and J&K. Once again, all these were underserved and unpopular areas with very low tele-density. Out of these service areas:

* In the Jammu & Kashmir circle, apart from BSNL no other Operator had ventured forth to provide services.

* While, Bihar, Orissa & West Bengal circles were offered during 2001 auction, no bidder had expressed any interest.

* In March 2003, DoT had again tried to auction these service areas. As it became evident that there would be close to nil response from possible Operators, the auction process was abandoned at the last moment.

* A glance at the teledensity in the circles for which licenses were given will show how the situation that prevailed then compares to 2010:

As noted above, it is a matter of pride that the decisions of Government were implemented with such fairness and transparency, and the migration and other licences were given with such fairness and transparency that not a single objection was raised by any party — and this in a sector in which every step of Government had hitherto been challenged and denounced by one side or the other. When they saw the fairness and openness with which Cabinet decisions were being implemented and licences being granted, the petitioners who had filed a petition in the Supreme Court to stay the implementation of the UASL licensing regime withdrew the petition.

There are several other fabrications that the spokesmen of this Government have put out to deflect people from the issues at hand: who got the money? What were the seniors doing when this loot was going on? But they are at par with the fabrications that I have listed above.

In addition to attending to the routine tasks that had to be implemented during the interim period, as directed by the Cabinet, we began exchanging views about elements of the Unified Licensing regime. Should the bids be single-shot bids — as was the case in disinvestment? Or should the bidding be multi-stage — as had been the case, for instance, in selecting the Fourth Cellular Operator? Should the bidding process be conducted by the DoT — a Department that had itself been dragged into much litigation, and was the object of strident allegations — or should they be conducted by an independent agency? How should incentives be built into the bidding process to induce optimal use of the spectrum, and penalties for hoarding or inefficient use? What should be the stance of Government if, once again, the competitors overbid and then cannot sustain their operations at the high prices they have paid? Should they be rescued as had to be done when the sector was first opened up? Or had the sector become mature enough by now so that firms that overbid should be allowed to go under?

These were the sorts of questions on which we had begun work in the wake of the six-month framework suggested by TRAI.

The Government changed.

No one could have imagined that the advance towards the Unified Licensing regime would be halted. And that what had been the procedures to be followed for the interim period of six months would be made permanent. And that without any authorization from the Cabinet.

That is one reason on account of which the current problems have arisen. Another one is that in UPA-I lines were slipped into the Guidelines without recommendations of the Regulator, without any reference to Cabinet. In UPA-II, the terms of reference of the Group of Ministers were altered without reason or authority. On matters on which the Government is bound by law to seek TRAI’s recommendations, TRAI was specifically told that it had no business to seek to advise Government . . . But the main reason, as stated above, is that in Raja’s case, he followed no procedure, he followed no policy, he adhered to no norm at all. And, even though his misdeeds were known publicly, he was allowed to continue to make a business of his office. In what way does this represent a continuation of anything done during the Government led by Mr. Vajpayee?

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