FUTURE FLASHPOINTS Things are quiet now, but everything is not alright with Indian telecom.

LICENSING The government has raised the possibility of additional operators in an industry that may already be crowded 3G-READY NETWORKS Some networks in place are already 3g, but isn't the government supposed to be licensing them? SPECTRUM: The battle over interconnect is over. Now get ready for a long drawn war for spectrum A UNIFIED LICENCE The government's talk of a single licence regime has caused confusion among existing players and investors FUNDING: The need for money will almost certainly cause a clash between the pro-FDI faction and the domestic deep pockets who are anti-FDI

Indian telecom's best and worst were on display, at once and in all their glory, in the six days between January 20 and January 26. Even a tyro could have spotted the best. Such as the activism of Communications Minister Pramod Mahajan: on the morning of January 20, en route Mumbai on his way back to Delhi from an African jaunt, he flashed a message to public sector telco Mahanagar Telephone Nigam Limited to reconnect to the cellular networks in Delhi. For the previous 48 hours, the behemoth that boasts over 2 million basic-telephony subscribers in the city, had blanked out calls to and from 1.7 million cellphones, a response to the industry's decision not to connect to w-mobile (mobile telephony built around the Wireless in Local Loop platform and based on CDMA) networks.

Soon after landing, Mahajan inaugurated a communications exhibition where he chastised the cellular companies; later, he met with representatives from these companies. An hour later India's cellular industry agreed to interconnect its network with w-mobile ones. What the Telecom Regulatory Authority of India could not achieve through an executive order, Mahajan managed in his 60-minute meeting.

Four days later, on January 25, it was trai Chairman Maya Shanker Verma's turn to display his conflict-resolution abilities with elaborate IUC (Interconnect Usage Charge) regulations that, while still leaving some grey areas untouched, are largely fair. Within a week of Indian telecom's darkest moment-when subscribers of one service couldn't call subscribers to another on their phones-the minister and the regulator had sorted things out. Only, the seeds of such a conflict had been sown earlier by the government's dynamic approach to the business of policy-making and the regulator's effeteness.

The Cowboy And His Sidekick

For a sector that has seen over Rs 50,000 crore of investments over the past decade, telecom has a pretty poor rules-engine. The crisis that Messrs Mahajan and Verma staved off has its origins in the government's decision to allow basic telephony companies to provide mobile services on the will-CDMA platform and the lack of clear interconnect rules-for instance, under the old regime, pre-January 25, cellular companies would have had to pay an access charge of Rs 1.20 a call for calls made from a cellular phone to a w-mobile phone; there would have been no access charge for the reverse.

EVERYONE'S HAPPY AND EVERYONE'S UNHAPPY Basic, cellular, and long-distance players, all have issues with telecom policy.
THE MONOLITHS
Prithpal Singh, CMD, BSNL, and Narinder Sharma, CMD, MTNL
The two public sector monoliths should be concerned. With the regulator finally establishing terms of interconnect, they can no longer continue to wield it as an entry barrier. Here comes the competition.
THE W-MOBILE PLAYERS
S. Ramakrishnan, Managing Director, Tata Tele and Mukesh Ambani, Director, Reliance Infocomm
They have every reason to be happy, but the mobile termination charge that they have to pay to cellular companies is an irritant. Clearly, these companies want to have their cake and eat it too.
THE CELLULAR COMPANIES
Sunil Mittal, Chairman & Group MD, Bharti Enterprises, and Rajeev Chandrasekhar, CMD, BPL, Innovision, Business Group
They seem to have reconciled themselves to w-mobile services, although the matter is still before the telecom tribunal. However, they'd really like the newcomers to pay an entry fee too.
THE LONG-DISTANCE INDUSTRY
N. Srinath, Director (Operations), VSNL, and Siddhartha Ray, MD, Data Access
Terms of interconnect are finally here. But companies originating and terminating long-distance calls could still play handball. Net-net: expect several skirmishes in the future.

At a macro-level, though, the sector has been plagued by the minister's desire to have a say in anything to do with telecom and the regulator's unwillingness to upset either him or the two government-owned telcos. Mahajan-he couldn't meet with Business Today for this article and a faxed questionnaire to his office remained unanswered-is neither a businessman nor an expert in telecom technology, but he has always been willing to offer his assistance, and his opinion to anyone who is willing to listen. Since he is a minister, most do. Part of this stems from the government's traditional hands-on approach to the sector. "The Indian government has always taken a meddlesome approach to the telecom sector," says Mahesh Uppal, an independent telecom consultant. "The industry, which has repeatedly approached the government to rewrite policy, is partly to blame for that." As for the rest, that could just be fallout of Mahajan's preference to administer the sector from the front pages of the newspapers. Coupled with the muscle-power of the two telcos he controls, BSNL and MTNL, this makes Mahajan the most powerful person in Indian telecom.

Ministers are not supposed to take sides but whispers of Mahajan's soft spot for the w-mobile lobby have done the rounds ever since he took over as the country's thirteenth communications minister. MTNL's decision to blank out calls to and from cellphones may have been provoked by a similar act by the cellular industry, which blanked out calls from w-mobile phones that were piggybacking on its (MTNL's) network, but some industry watchers see it as an attempt to help Reliance Infocomm which is slated to launch (commercially) its w-mobile service in the next couple of months. (Reliance didn't respond to BT's queries)

The cellular industry's objections to w-mobile services-including the fact that companies providing these services have acquired de facto cellular licences without paying a licence fee-rest before the Telecom Disputes Settlement Appellate Tribunal, but the minister has taken it upon himself to point out difficulties in determining an equated licence fee for the likes of Reliance Infocomm since each existing player has paid a different entry fee. In Delhi, the country's largest cellular market, Airtel and Hutch (formerly Essar) paid an average of Rs 75 crore as entry-fee, MTNL got in gratis, and Idea Cellular shelled out Rs 171 crore.

The regulator-its Chairman M.S. Verma claims it is an autonomous body-has been content to let the minister make its decisions for it and had, until it finally delivered on January 25 (seven years after the government allowed private companies into the sector), focussed on industries such as paging and radio-trunking, going slow on the most crucial issue before it, interconnect.

The one paper it produced after several years of work, the Reference Interconnect Offer-the industry calls this an interconnect menu without prices-has been challenged by BSNL before TDSAT. The existing interconnect regime is responsible for the cellular operators paying Rs 1,600 crore in access charges to basic telephony companies (including w-mobile service providers) last year. "We are subsidising our competitors. Nowhere else does it work like this," says Virat Bhatia, Country Manager, AT&T India.

The IUC itself is likely to be the subject of controversy. Basic telephony companies had shot off a protest note to TRAI much before the IUC was finalised. Basic and w-mobile telephony companies won't be too happy with the 30-40 paisa per minute access charge they now have to pay their cellular brethren. ''This brings in the Calling Party Pays (CPP) regime, which the country has rejected earlier, through the back door,'' says an official of the Association of Basic Telephone Operators (ABTO). ''The cellular operators' revenues could be down by as much as 20-25 per cent as a result of the TRAI order,'' says Rothin Bhattacharya, Executive Director, KPMG.

The IUC could also run into some legal and political obstacles. It warrants an increase in basic and w-mobile tariffs and may lead to a fall in cellular tariffs (incoming calls will be free), something that won't go down well with populist-minded bleeding hearts. When it's done and over though, Indian Telecom will just lurch to its next flashpoint. Unlimited cellular players, a unified licence, 3g licences-minister Mahajan has several more decisions to make.

THUS SPAKE MAHAJAN The Communications Minister is never at a loss for words.

Pramod Mahajan: Mr Telecom, he is I did not oppose MTNL's action The minister was defending the telco's non-justifiable action of blanking out calls from cellular networks If any one has a problem, come to me. Mahajan encourages companies to use his good offices to resolve intra-industry problems and industry-government ones. I think there is scope for aditional cellular operators. Why not licence the 5th, 6th... This is a subject on which the regulator has to decide I would like to see the country move towards a single licence regime Single licence, multiple services-that would involve a migration for existing licencees, a messy task bound to spark a load of litigation. I will not protect BSNL and MTNL from competition but I will support them Mahajan proposes to merge the two companies. And he gains by making political appointments to the board of NYSE-listed MTNL or encouraging it to subscribe to the bond-issue of the ailing Maharashtra Krishna Valley Development Corp.

THE TARIFF PRIMER What you should know about TRAI's interconnect document.

What does the TRAI order mean for basic call charges? Local call charges go up to Rs O.60 a minute for most calls against Rs 0.40 now. Monthly rental will also be hiked and the number of free calls reduced from April 1. What would the fixed line-to-cellphone charge be in the new regime? The charge would be higher than that of a local call: Rs 1.20 for 90 seconds in the metros; and Rs 1.20 a minute elsewhere. What would be the rate for a call from a w-mobile to fixed phone? It will be the regular local call charge. What about cellular call charges? Incoming calls will be free. Market forces will decide the rate of outgoing calls. What is the rate fixed for long distance calls? For calls within a 50-kilometre radius, the local call rate of Rs 1.20 for 2 minutes will apply Beyond this, the ceiling rate is Rs 8.40 per minute. What is the intent of TRAI's IUC regulation? Fixed telephony tariffs are currently below what it costs to provide the service. This gap will be made up by the hike in call charges, rentals, and (most significantly), an Access Deficit Charge (ADC) which the fixed operator will get for originating or terminating long distance calls.

TRAI-SPEAK TRAI Chairman M.S. Verma defends the role of the regulator in unravelling the great Indian telecom tangle.

TRAI's M.S. Verma: Problem or solutions? Fixing the Interconnect terms is the single most important responsibility of the regulator. Hasn't the regulator failed in its primary task? No. We have led interconnect forward and have even brokered the interconnect agreements signed between the basic and cellular companies. Was it not the delay in finalising the interconnect regime which led to the black (out) days of Indian telecom ? That was a totally provocative, arbitrary, anti-consumer, anti-industry move. The industry got away with ignoring the order of the regulator. Is there a case for empowering the body? We must have the powers to enforce our orders. Who would worry about the police if they do not have the power to put you behind bars. If licensing and spectrum allocation was within the TRAI purview, do you think things would have been the same? It is alleged that you are partial to the basic operators and W-mobile companies. Your comment? I can only laugh at these warped-mind statements. Do you consider TRAI a government body? No. We are an autonomous institution. But you are funded by the government? That does restrict us. There is a total mismatch between the task at hand and the resources. Does the minister's role of super-regulator interfere with your regulatory work? He does not play the role. The operators are in the wrong because they tend to go to him. Every order of the TRAI has been challenged by one party or the other. How would you have litigation minimised in the telecom sector? The only way out is self-regulation by the industry, as is done in the financial sector. There should be one umbrella association for telecom which should function as the first level of dispute settlement.