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Reboot, says TRAI

Net policy and MTNL's cellular plans are stuck down

Just a month after the nation's first Internet policy was announced, the Telecom Regulatory Authority of India has struck it down, leading to further uncertainties and delays in the entry of private access providers.

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The TRAI, a quasi-judicial watchdog organisation in the telecom sector, also disallowed the State-owned Mahanagar Telephone Nigam Limited from entering the cellular and paging businesses in Bombay and Delhi.

The telecom regulator asserted yesterday that it is mandatory for the government to seek its recommendations while finalising the terms and conditions of a new policy or allowing the entry of a new service provider.

The Internet policy had scored well in breaking the monopoly of the Videsh Sanchar Nigam Limited over the commercial Internet access business and allowing the participation of private Internet service providers. Now that is in a limbo.

But some good may emerge out of this latest delay. The industry has been less than enthusiastic about the Internet policy. That's because though the policy leaves pricing open to market forces, porting charges to a bandwidth wholesaler are severely controlled. The biggest cost factor for an ISP is the porting charge.

Private ISPs are not allowed to have their own porting arrangements but can only lease a connection from either VSNL or the Department of Telecommunications, both owned by the government.

An industry expert told Rediff On The NeT that with this "duopoly" on the Internet gateway, he does not see any reason for VSNL or DoT to negotiate a fair price.

He was happy that the TRAI order gives a chance to avert the creation of a sick ISP industry.

On the MTNL front, private cellular operators in Bombay and Delhi have welcomed the order. But DoT and MTNL are likely to challenge it in the Delhi high court.

Cellular operators had argued that it would be difficult for them to survive if MTNL, with its obvious cost advantages as an existing fixed-line operator, was allowed to enter the business.

MTNL Chairman and Managing Director S Rajagopalan said immediately after the TRAI verdict, "The government has allowed me to file a petition tomorrow. I have also asked the government to remedy the situation. In the GDR issue (which closed last December), we promised the international community that we would start cellular services in 1998. We can't go back on that. Next time we go to them, they will send us back."

Delivering the order, TRAI Chairperson S S Sodhi ruled, "It is mandatory for the government to have before it TRAI's recommendation with regard to matters covered" by Section 11 of the TRAI Act, 1997.

According to the section, TRAI should be consulted over the 'need and timing of entry' of a new service provider.

Sodhi said the government's argument that MTNL should be allowed to provide GSM (global standard for mobile communications) mobile telephone services since it is already offering cordless telephone facilities "cannot be held to be valid". The MTNL service and the GSM 900 cellular standard are different technologies, he stressed.

The Cellular Operators Association of India had filed a petition against DoT, challenging MTNL's entry into the fast-growing cellular market. The cellular markets in Bombay and Delhi are expected to be worth a combined Rs 26 billion by 2001.

The operators argue that MTNL's proposed entry into cellular services would contravene the licence pacts, which they have signed with DoT.

The pact only allows two cellular operators in a service area, thereby precluding MTNL's entry, they point out.

COAI claims that under Section 11 of the TRAI Act, it is mandatory for the government to obtain the permission of the telecom regulator before allowing a new service provider into the market. This claim has been contested by DoT.

Anil Nayyar, CEO of Bharti Telecom, the promoter of Delhi cellular licensee Bharti Cellular, termed the TRAI order "fair". K Karunakaran, vice-president of BPL Cellular, the Bombay cellular licensee, said the order was "good for the industry".

Essar Cellphone and Hutchison Max Telecom are the second cellular licensees in Delhi and Bombay, respectively. Bharti Cellular and Essar Cellphone represented the cellular industry in challenging MTNL's cellular foray.

The domestic cellular industry has been claiming huge losses, with the total cash loss in the industry estimated at Rs 4 billion.

However, the Delhi and Bombay operators have fared comparatively better. The Delhi operators were recently reported to have made cash profits in the past few months, although they have accumulated losses between Rs 750 million and Rs 1.8 billion.

T H E   J I N X

• Reboot, says TRAI • VSNL can make hay • MTNL stock shocked • Policy & other stories

The TRAI order was also favourable to paging service providers. Sodhi ruled that, "The revocation of the licences of paging operators or the threat of it without seeking TRAI's recommendation (under Section 11) cannot be held valid."

DoT had tried to cash the bank guarantees of paging companies last year.

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