Sunday, April 12, 2009

Too Successful To Regulate?

Vasu Reddy from Chicago

Every wireless communications company in India is big. By big meaning they have already paid huge upfront costs for license and infrastructure even before they get started. Each wireless player have to pay hundreds of millions to get a UAS license and then pay for the area licenses, along with infrastructure and people costs. There is no small mobile services company in India; each and every one all of them are big investments.

There is constant squabble about the impending changes to regulations in the communications markets, and constant delays in implementation of changes and advances. The much delayed 3 G license auctions is an example of squandering a wonderful opportunity to help relieve the congestion in the mobile airwaves, and allowing for much needed high end mobiles services. 3 G services would help bring in more low ARP users who need basic services into the mobile population, while allowing the migration of high ARP users to move to the 3 G network, allowing new users in the 2 G network.

The constant discussion on the fund to support the development of rural telecommunications is simply a huge fund collected but unused to really fund the expansion of telecommunications in rural India. Hefty goals to include all parts of India into the network is easily possible if the money already collected and on hand is used to do this.

Awarding 3 G licenses to only the government owned networks is simply the slowest way to bring the services to the market, as these government owned networks while well funded and well endowed with spectrum, are the least efficient of all networks. There is nothing wrong with the networks, simply the way they are managed makes them lethargic compared to networks where the government has no ownership.

Termination calls to each other has also courted controversy. What mobile operators pay each other has been constant since early part of this decade, and has been subjected to modification this year. If it goes up it hurts the new operators, and if it goes down the incumbents have a grouse about losing revenue.

The private networks (even the smallest operating network) are loading tens of millions of users every month. Every market survey indicates that the user base will double fairly quickly. So, the lack of market opportunity is not a barrier to entry. It is really the availability of spectrum and transparency in handling the licensing process. The success of the market continues to attract global investment into India’s mobile markets. The combination of Indian market opportunity and semi transparent policies continues to attract global investors to keep evaluating the interest into India.

Regulators must choose implementation of guidelines to improve the quality and affordability of the services to the entire market. While making sure that neither the size of the company or investment it makes should allow for onerous disadvantages to any other company that wishes to compete in the same space, the regulators must continuously monitor and implement policies that are constantly in favor of fair competition and people oriented. India despite its massive telecommunications market is still behind in monitoring and implementing its own set of guidelines.

Simplification of the current guidelines, tax structure and tariff plans may not be as easy as a discussion or a panel. The delays with new services, the disparity in the size of enterprises, the political and economic clout enjoyed, the disassociation of laws from one service to the other, the unimagined growth, the market clout of the enterprises, and a whole set of cultural and traditional influences that are unique to India; are all the factors that drive the implementation of policy. Having said that, it is not impossible to simply use fair and unbiased market standards for communications markets, and it is not impossible to take the great Indian telecommunications market to adopt policies that are fair and unbiased to all competitors.

The big players are already in great strength with users, valuation and balance sheets. The regulators should start distancing themselves from the influence of individual companies or technologies, and start showing independence in formulation of future guidelines that fit the future needs of the market. Law, taxation and regulations must continue to seek answers for the future needs, and stop relying on the past. Barriers to entry should be competitive and global rather then protectionist.

April 9th 2009
Vasu Reddy
Optus Technologies, Inc.