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"We ensure a level playing field" - An exclusive interview with Mr. Nripendra Misra, TRAI Chairman [22.05.07]

Andrey Gidaspov: What is the main purpose of TRAI? What have been the major milestones of TRAI from its inception in 1997 up to now?

Nripendra Misra:  The first thing is that the role of the regulator is to ensure a level playing field and to achieve some degree of moderation when there are competing objectives.  You have objectives that are not necessarily in par with each other.  So you have to find an optimum of what has to be done.  

Initially when the telecom monopoly existed in India, the sector was managed by the government. At that time obviously and evidently a regulator’s role was rather redundant, but when the modernization took place, then the issues of level playing field became significantly important. They all came up and so the need for a regulator.  So TRAI, the telecom regulator, was established in 1997 under the Act of Parliament, and then some amendments took place in the year 2000.

Talking about our achievements, you see, there are various events that happened in the telecom industry during these ten years.  First of all, we reached a good number of subscribers; secondly people could afford this due to low tariffs, and thirdly, this success story could happen because of the growing demand for mobile applications, which brought the costs down.  Eventually overall costs for mobile development fell.

Behind this story there are many directives and policies that played a very positive role. For example, the decision to implement a Calling Party Pays (CPP) principle made such a huge difference in the country’s telecom sector.  CPP was introduced in 2005 and soon the roaming charges also dropped 60%.  There is a gradual reduction of ADC (access deficit charge). These are the kind of changes that happened in the mobile industry during this period and they are rather exponential.

The market for long distance and international long distance telephony has been liberalized. More licenses were introduced, and this created more competition.  There are more gateways today than there were before.

Then, in the rural area there have been some significant changes in telecom developments.  As you know, the universal service fund has been now utilized – and it helped to create the structural change in these areas with less economic advantages.   You can clearly see the policy and the effect of the policy.  I would like to explain this success as joint efforts of telecom service providers, the telecom regulator and the Ministry.  The balance is very important -- if there is a mismatch among these three elements, or there is some sort of friction, you obviously won’t have any positive results.

Another area that the Indian Telecom Authority is also responsible for is broadcasting.  Today telecom analysts have come to realize that technologically we can’t make a clear distinction between telecom and broadcast anymore.  Hence, the regulator covers both, telecommunications and broadcast spheres.  Yet we don’t regulate the content, for content we have a separate entity. But for a smooth carriage purpose, there is one regulator, which is TRAI. 

One more interesting field that we are developing now is CAS, that is where the Indian digital TV is taking place now.  According to CAS plan, set top boxes (STB) are provided to the rural viewers, where they can choose any channels they want to watch and pay only for those they choose.  For example, if a viewer wants to pick 5 channels, he pays only for 5.

We have implemented these projects in Delhi, Kolkata and Mumbai. STB are provided on a lease basis.  Because if you sold it, then you are secured to receive services from only one operator, and if you move from you area and want to see the services from another operator, you can not. So the only way that you could do it commercially is to rent out.  You can also buy and rent – it is your option.

AG: I understand that DTH development is one of the priorities of the Indian government?

NM: Yes, we are planning to transfer from the analog to DTH by 2010.

AG:  Mr. Misra, our readers will be interested in the process of issuance of 3G licenses in India.  Russian operators who win the tender will hopefully have them in April 2007. Can you please elaborate on standard, price and number of licenses that will be issued?

NM: You see, in India we don’t make a distinction between 2G and 3G, as far as licensing is concerned.  If you are a licensee for 2G, you will be a licensee for 3G and for 4G, etc.  The distinction lies in spectrum, i.e. what kind of spectrum an operator will get.  And in India there is a lack of spectrum right now, and henceforth there will be an auction. That’s what TRAI proposed to Department of Telecommunications (DOT).

So we have sent this proposal to the government for consideration. You see, TRAI has certain powers, but we can only recommend to the government.  TRAI is authorized to make decisions on the following issues: compliance of license conditions, interconnection, tariff issues and determining tariffs.  These are clear powers of TRAI with no sharing.  And yet the government may disagree with us on something.  For example, the number portability – we recommended it and DOT has not yet accepted it, because that is their power.

There are two areas that we are providing our recommendations, one is spectrum and the second one is about licenses.  For example, we make recommendations that this will be the optimum amount of licenses that will be good competition, this is bad competition, etc.  But whether there will be 6, 7 or 8 licenses issued, DOT will decide.

The 3G standard in India will be based on IMT-2000 standard.  We’ve recommended that 2.1 Ghz spectrum be allocated. We’ve recommended that the block of 5 Mhz worth of spectrum should be auctioned.  And it should not be given like 2G, but must be auctioned, and the winner should get it.  Those operators who will not get it during the first phase, will have to wait until the next turn.  At any rate they will still have to pay the same amount for a license, even afterwards. Summarizing, everyone should get a license, subject to availability. The first 25 Mhz of spectrum is available, and sufficient for probably about 5 licenses. 

We also recommended auctioning 200 MHz for broadband wireless access (BWA) and proposed a national frequency management board to oversee spectrum availability and its efficient use.

Again I don’t know when it will happen. DOT knows. 

AG: What radio frequencies were suggested for CDMA operators for 3G deployment in India? What is their recommended price? Are there differences for GSM and CDMA operators in terms of pricing?

NM: We recommended three sets of frequency bands, including: 450 Mhz, 800 Mhz and 2.1 Ghz. As far as CDMA operators are concerned (Reliance, Tata Teleservices, etc), they are offered 1.25 MHz each. We recommended a reserve price of Rs 10.50 billion (USD 243 million) to companies offering nation-wide high-speed Internet and streaming video.  Then, basic pricing for spectrum the Category A telecom circles, including Mumbai and Delhi will be Rs 800 million (USD 18 million); for the Category B circles (including Chennai and Kolkata) -- Rs 400 million (USD 9 million). Finally in all other cities of India Rs 150 million (USD 3.4 million).

Yet all Indian CDMA operators can also bid both for the 2.1 GHz and the 450 MHz bands, however they will be allocated spectrum only in one range.  We recommended that CDMA operators will have to pay a similar amount as the second-highest GSM bidder.  In addition, should there be more than one contender in the 450 MHz band, then, the reserve price will be 50% of the price at in the 2.1 GHz band.

AG: The Indian press mulled over the points of contention on 3G issues between DOT and the Defense Ministry.  According to the media, the Defense Ministry delayed transition of spectrum for 3G purposes, is this true?

NM: No, no, no, the first 25 Mhz of spectrum are available.  The Defense Ministry issues are related to the future spectrum allocation, there are discussions between DOT and the Defense Ministry on clearance of spectrum for the future. 

AG: What about participation of foreign companies in the 3G auction?

NM: We don’t make a distinction between foreign and Indian companies, anyone who has a license for mobile services in India can take part.  According to the regulations the share of a foreign partner in an Indian company may not exceed 74%.

However, I should make it clear again, it is not about a license. It is all about the spectrum, so the auction will be held between those that already have a license in India. Those players who are here already.  Because we also understand that 3G can not be a viable proposition or a stand-alone business. You can’t just have 3G in India. It is financially not prudent, and useless without an existing business and deployed network. 

Moreover, Indian subscribers are voice hungry, and there is only 15% telecom penetration in India! Only when we will reach 50%, then we can say that the VAS era is close by.  Now it’s still for elitists. Data consumption will certainly take time. To summarize the priorities, Indians will use telecom services for Voice – 1; for data -- 2; and entertainment – 3.  But yet the prospects are rather bright -- we shall have 500 million subscribers by 2010.

AG: You are probably aware that a number of large Russian telecom holdings are interested in buying telecom licenses in India? However, so far none was successful, do you know why?

NM: I cannot comment on that.

AG: What do you think of the future of WiMax in India? Is it posing a threat to 3G?

NM: I suppose that telecom service providers should value the capabilities of 3G and WiMax.  And as you know, rural areas are definitely good for WiMax.  Economically companies also should consider what is the price of the spectrum for WiMax and 3G. Indeed, the price for 3G is much higher than for WiMax.  There is a very clear financial advantage that Wimax has over 3G.  I think that WiMax provides a perfect solution for development in rural areas.  I also believe that WiMax deployment is some 7-8 months down the line.  And it is very important for India.  And telecom service providers must decide what is important for them.

AG: The Russian broadband market segment showed some incredible growth in 2006.  What is the broadband take-up in India?

NM: Yes, broadband is certainly a growing technology in India as well.  Again, as I said India is going to have 500 million subscribers by 2010, and then the major differentiator will be the broadband penetration.  I am confident that in 2010 onwards, broadband will largely determine who is the winner in the sector.  Currently, the internet, PC and broadband penetration is quite low in India.  There is not much content yet.

And as far as the fixed line developments, the total number of subscribers will be only 6 million even when we exhaust all the copper reserves!! And what is that figure for India? Nothing.

So, the future of broadband in India is wireless.

AG: Please comment on your vision for IP technology development in India.

NM: IP telephony is restricted now.  We have not yet recognized VoIP. We are looking at what IP services should be looked upon and made our recommendations for ISPs, and it‘s a hot topic now.

AG:  My final traditional question is what is the secret of your success?

NM: Technology is always ahead of me.

AG: Thank you very much for the interview!

March 2007, New Delhi