The Indian Techonomist: bulletin

Copyright (C) 1996, Rishab Aiyer Ghosh (
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Indian DoT fails to sign licences, extends deadline

July 31, 1996: Today was the last date for winners of the bids for basic telephony services to sign licence and interconnect agreements with India's Department of Telecommunications (DoT). As expected, nobody signed, and the DoT has extended the deadline by six weeks.

The licensees-in-waiting are all unhappy with the interconnect agreement, which is supposed to regulate the interaction between the DoT and private cellular and basic service operators, but instead is an entirely one-sided document which treats operators like ordinary consumers. The DoT's argument is that private operators will make extensive use of its network, reflecting its share of the market. But that share will obviously shrink considerably once private operators offer their services, bound - by the stringent quality-of-service terms of the tender - to be better than the DoT's. Besides, the greater dependence of private operations on the DoT, if any, will be adequately reflected with fair terms for call revenue sharing. The present heavy-handed insistence on unnecessarily one-sided terms is not called for. Nor is the DoT's reluctance to allow private operators to connect to one another directly, bypassing the DoT's network. Not only has the government monopoly reserved inter-circle long-distance traffic for itself, it also wants traffic between cellular and private networks within a circle to be routed through its own network - at a price, of course.

Technically, had the DoT not extended the deadline, it would have been free to encash the bidders' earnest money and reject their claim to licences. But even in these muddle-headed attempts to reform India's monopolised telecommunications market there is a line drawn somewhere, especially when huge licence revenues, already included in the Finance Minister's revenue projections for this year in last week's Budget - are at stake. So the DoT will try to hold out for a deal that benefits it most, while the private providers, beginning to worry about the commercial viability of their projects and the availability of financing, wait for more equitable terms.

They may get some help from the Delhi High Court, which is expect to rule in late August on the plea of one licensee - a consortium between India's HFCL, Israel's Bezeq and Thailand's Shinawatra - against the DoT's unreasonableness. Unless the ruling is very narrow, it is likely to affect the cases of other licensees too, particularly if it is favourable to HFCL's stand. In the meanwhile, the DoT has started holding "one-to-one" meetings with the prospective licensees - who have been notably divided on their approach towards the DoT. This is usually a codeword for under-the-table deals and the like, a far cry from the promise last year to have complete "transparency" in the telecom privatisation process.

Once again, in its quest for higher revenues - first licensing, now through the interconnect agreement - the DoT has ignored the pressing need of 400 million Indians who face phones that work intermittently if at all, leave alone the other 500 million who lack even access to a public telephone in their villages. In all the talk of high licence fees and a favourable interconnect agreement, the DoT has forgotten the further round - or rounds - of bidding required to find private operators for the remaining 10 circles, including the country's poorest regions. The same poor regions, and 400,000 villages across the country, which the DoT has proven singularly incapable of reaching.

For more on HFCL and the interconnect agreement, see