Policy makers in India faced a tremendous challenge of keeping up with the realities of new technology. While the opening up of the telecommunications sector was good news, some government policy guidelines were creating restrictions which can only serve to stifle innovation and prevent the provision of new and better services. The case of email operators is presented here. The issue is not of businesses flourishing or floundering, but of anticipating and addressing issues and complications that new technology generates.
The pace of technological change in the telecommunication and Information Technology (IT) sectors and the convergence of services make it imperative that policy and regulation keep up with new technology. When this fails to happen, things can go very wrong. Deregulation of the Indian telecommunications sector is viewed by many as an example of how some harsh lessons can be learnt. Unforeseen Complexities of Emerging New Services In 1992, the Government of India decided to deregulate the telecommunications sector, almost in tandem with the rest of the world. In the same year, the Ministry for Communications, which is represented in its policy making by the Department of Telecommunications (DoT), decided to license private companies to provide value-added communications services restricted to non-voice services, like data. While the opening up of this sector was good news, the government's policy guidelines were not very clear. The period was characterised by the preoccupation with licensing and levying exorbitant fees for it. This matter was dealt with in the Telegraph Act of 1885 (Part II, section 4) which says: "the government may grant licenses, on such conditions and in consideration of such payments as it thinks fit." However what has been distinctly/missing is a policy direction that would make it worthwhile for people to pay those fees. The 1992 opening up of the sector was preceded by a set of rules and guidelines for Value Added Services (VAS). VAS is an umbrella term used to cover services like cellular mobile telephony, paging, radio trunking, electronic mail (email), data networks and Very Small Aperture Terminal (VSAT) networks for Closed User Groups (CUGs). The Indian Telegraph Act did not foresee the complexities of policy and regulation that these emerging new services threw up. Case of Email Operators The case of email operators is particularly poignant. Among the first of the VAS services to be licensed, there were some 11 licenses given out by the government allowing private operators to set up and operate email services. For starters, the email operators had to pay the government huge license fees, US$120,000 (Rs 5 million) for the first year and US$60,000 (Rs 2.5 million) for the next two years. The licenses were valid for five years. However the license fee was only the beginning of their troubles. Email operators, and all other data networks, were decreed by a policy that prevented them from interconnecting with each other. The logic behind this was that interconnected networks could bypass the monopoly operator's network and hence take away revenues. This created a situation whereby whenever the subscriber of one email operator had to send mail to the subscriber of another email operator, the operator had two choices: Ÿ Not to allow it at all, i.e. restrict communications to only its own subscribers; Ÿ Lease a line from India to the US. This could be done in a couple of ways: lease some space on a server in the US or use another service provider's services or send the mail all the way there and route it back to the second email operator in India. Email operators had to incur enormous costs because of this restriction, which from many people's point of view has served no practical purpose, apart from making email operators unviable. VAS extended to Other Areas The majority of operators had to lease telecommunication lines from the DoT to set up their networks. However, they were required to pay double the existing commercial rates and these were already close to five times the prevailing international rates. Although using VSATs would have been much cheaper to connect different locations, the VAS policy did not allow email operators to use them. VSATS were meant only for CUG for internal communications. VSAT networks could not connect to the Public Switched Telephone Network (PSTN) which meant that islands of communications could thrive without any benefit to the larger section of the population. At one stage policy makers in DoT imposed a draconian license fee on Bulletin Board Services (BBS) mostly used by enthusiasts and young people to chat, share views, do homework etc. Though this was withdrawn after much pressure from those concerned, it had effectively served to dampen a lot of the enthusiasm and creativity and limit the spread of electronic communications. Despite the various obstacles described, the email operators went ahead. Among the first networks were ICNET and Access Networks. ICNET no longer exists while Access Networks has failed to attract new subscribers in the last two years. By the end of 1994, there were at least 10 email networks of varying sizes offering competitive and fairly reliable services to their clients. Sprint, the third largest long distance carrier in the US, was one of those who had set up an email network. It was estimated that there were about 35,000 email users in the country. Accounts were held mainly by corporate houses and by a substantial number of individuals. However, in the following year, there was a dramatic decrease in users. The reason for this was simple. A new service was now available and there was no move by the government to modify the existing policy to address the issue. The Internet comes to India By August 1995 the Internet washed up on Indian shores. The government-owned Videsh Sanchar Nigam Ltd (VSNL) became the first Internet Service Provider (ISP). The introduction of the Internet led to the downfall of email operators who had by now paid a fairly large amount to the government in license fees. Email operators were up in arms. Every Internet connection came with a free email address. Existing subscribers switched to the Internet along with new subscribers who found that it was pointless to pay separately just to send email. For the past two-and-half years, the government has tried to finalise a policy for private ISPs. In spite of numerous consultations and several drafts, nothing is yet final (as of 25 October 1998). As for the few surviving email operators that hope to make it to becoming an ISP, the future looks bleak, for the policy draft does not allow this. They have to get fresh new 'licenses' for ISP services. Competition in the Local Loop This story of deregulating telecommunications without a well-defined policy from many peoples point of view, does not end with the struggling email operators. The same VAS policy had envisaged 'licensing' Public Mobile Radio Trunking Services (PMRTS). Although, the license fee was not an issue in this case, other technical and commercial issues were. PMRTS operators were prevented from connecting their systems to the PSTN. This was once again dictated by policy. Many believed PMRTS, which uses simplex mode of communication, was never a threat to either mobile or the PSTN services. However, this was a great cause of concern among the policy makers. There where fears that PMRTS could eat into DoT revenues, This view was backed by the mobile cellular operators. Today, just a dozen cities have radio trunking services available, though licenses were given out for 120 locations. In 1995, following the formulation of the National Telecommunication Policy (NTP) of 1994, the Government invited tenders for privatising the basic telephony sector. This was meant to usher in competition in the local loop. Through the DoT's licensing policy, the Government managed to raise a huge amount of revenue. Out of 21 telecom circles (each representing roughly the boundaries of a single state) that were open for bidding, just six could be finalised by 1997. These six were auctioned for nearly US$6.5 billion in license fees. The license period was for 15 years. The license conditions for basic telephony allowed PSTN services for a minimum of 15 years and exclusivity to the licensee for 10 years. In other words, no third operator would be allowed in the local loop or access network for 10 years. In July 1998, the Prime Minister's Taskforce on Information Technology recommended that ISPs should be allowed to set up their own access networks (last mile), without having to pay the licence. Some policy makers believe that regulations should prevent voice as an ISP asset but is it possible to control the various IP packets on the market? They also argue that private operators were licensed to set up networks for PSTN services, whereas ISPs are being allowed to set up their access networks for data and IP-based services Conclusion The issue is not of businesses flourishing or floundering. It is about anticipating and addressing issues and complications that new technology brings. Critics call for a mechanism which can effectively rectify the anomalies in the policies. Unreasonable restrictions serve only to stifle innovation and give subscribers no access to new, better services. Policy makers in India are thus faced with a tremendous challenge of keeping up with the realities of new technology.