Preventing competition

The term "no-worse off situation", used several times in the TRAI draft recommendations on the Unified Licensing Regime, is the key to the telecom regulator's basic philosophy since, at the end of the exercise, all that's happened is that the existing players in the long-distance telephony business (both national and international) are to be given increased protection for two to five more years.

While the draft is supposed to be about issuing just one licence for all telecom services, it's really about long-distance services since the fixed line and mobile licences were anyway merged through the Unified Access Service Licences last October.

TRAI has ensured a "no-worse off situation" in a novel manner. It argues that since the new players (like Bharti, Reliance, and Data Access) paid Rs 100 crore for their 20-year national long-distance licences (NLD) and Rs 25 crore for the international (ILD) ones, the licence fee is Rs 5 crore per year for NLD and Rs 1.25 crore for ILD. Therefore, since Bharti got its NLD licence in November 2001, the residual value of its licence is Rs 85 crore! A similar exercise, when done for ILD, shows the residual value is Rs 22 crore. Add the two and TRAI says a new unified licence will be given upon a payment of Rs 107 crore.

Interestingly, had TRAI used this concept last October when it allowed WiLL-mobile operators to become full-blown mobile operators, it would have had to charge them Rs 2,300 crore, since the first and second cellular players had paid a licence fee of Rs 3,850 crore in 1995""instead, these firms were charged Rs 1,633 crore.

Since it is already possible to get an NLD licence today for Rs 100 crore, and there are no takers, why would anyone want to pay Rs 107 crore? And since no one is rushing to get a Rs 25-crore ILD licence, surely there will be even less interest in one that costs Rs 107 crore? These numbers are to be reduced progressively, till January 2010""by which time it becomes mandatory for everyone to have a unified licence. What does make such a licence more attractive is that rollout obligations are to be scrapped for all NLD and ILD players, but you don't need a unified licence to do that.

TRAI has made interesting moves to allow internet telephony and to allow niche players, but the need to protect the NLD/ILD players has ruined this as well. Thus, genuine internet telephony using IP phones is to be allowed, but only after paying Rs 107 crore""since the existing ISPs are mostly bust, it's hard to see how they're going to pay this additional sum.

Similarly, niche operators are to be allowed without paying any entry fee in areas where tele-density is below 1 per cent, but they are to be allowed to provide only fixed telecom services. In areas that are too poor to have enough phones, TRAI says, niche players are to be allowed to provide "multimedia services using local content". Remember Marie Antoinette?