India To Cap Binding Offer On Telecom At 25% Foreign Stake

They scotched rumours that India's offer would include any timeframe for phasing out Videsh Sanchar Nigam Ltd's monopoly licence. Sources also indicated that India would not agree to the proposal -- endorsed by the US and Apec countries recently -- that IT-related tariffs be brought down to zero by 2000. "We are looking at a longer timeframe," one senior government official said. The government had earlier indicated that it would view the Information Technology Agreement favourably provided that its coverage was limited to components for the IT industry rather than finished products.

A top official of the FCC had told the Business Standard earlier this week: "India could improve its offer in a limited manner -- allow private networks for businesses, raise (and bind) foreign ownership limits to at least 49 per cent."

 

India's already allows 49 per cent -- up to 74 per cent if the holding company route is adopted -- foreign ownership in telecom services, but does not want to bind itself on more than 25 per cent foreign ownership. A binding agreement means that India cannot reverse the decision in

future without the risk of inviting hefty sanctions.

According to a Reuter report, Malaysia yesterday said it was not ready to fully open its telecom market even as the US sought support for a pact to liberalise the industry. The US expects India, Malaysia and Indonesia to improve their offers.

Coinciding with these developments, the US has decided it will insist on binding "competitive safeguards" along with its offer despite proposing 100 per cent foreign ownership of basic telecom companies in its home market.

These safeguards, which have been clubbed together under what US negotiators want to bind as "regulatory principles", are likely to render its offer of barrier-free entry meaningless. Besides regulations to ensure competition, they include an effective interconnect regime and independent regulators.

The competitive safeguards will primarily comprise: protection against cross-subsidisation of resources and misuse of customer information and network technology in an anti-competitive manner.

Coming a few days before the WTO meeting, these developments dash hopes of a tentative agreement among the participating nations on opening up their telecom networks.

A Reuter report quoted Reed Hundt, chairman of the US Federal Communications Commission, as saying that a meeting of around 30 nations would be held on Monday to gauge response to the US plan for a Global Information Initiative pact.

The pact aims to drop limits on foreign ownership of telecommunications and enable access to global telecom markets. It also aims to have independent regulatory agencies in different countries with transparent operations that follow the rule of law and allow networks to interconnect at reasonable prices.