Cell Phone Nation: How Mobile Phones Have Revolutionized Business, Politics and Ordinary Life in India (12 page)

The BJP minority government
formed in March 1998 lasted thirteen months, during which time the impasse in telecom policy drove it to draft a new policy in the winter of 1998–9. The government accepted it in April 1999—and fell almost at once (though not because of telecom policy). During the period when he acted as a caretaker prior to elections in September 1999, Prime Minister Vajpayee replaced the telecommunications minister and took the ministry under his wing. Business campaigns to ‘do something about the telecom mess’ contributed to Vajpayee’s decision. The displaced telecom minister, who advocated forcing companies to meet their dues to the government or lose their licences, complained that the private telecom businesses were being let off the hook: ‘If a cricket match is going on, are the rules changed suddenly to benefit one team just because its five players get bowled out quickly?’ he asked a seminar.
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Why should they not pay the sums they had committed? Vajpayee, however, appears to have viewed the problem differently. Politically, there was pressure to accommodate businesses that were potential contributors to his party; and economically, he could see no advantage in driving the existing companies out of business—they would generate no revenue for government, nor put many phones into homes and offices, much less villages. The telecom companies thus used their ‘political means’, according to Desai, to ‘fend off’ penalisation by the government-controlled financial institutions to whom they were indebted.
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When the Bharatiya Janata Party formed a coalition government after the elections of September 1999, Vajpayee retained control of the telecommunications portfolio, and in October, the government began to implement the New Telecom Policy (NTP99). The latter aimed to break deadlocks, fix defects and get loss-making private companies back on the path to profit and growth. ‘The Government recognizes’, NTP-99 began, ‘that the result of the privatisation has so far not been entirely satisfactory’.
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NTP-99 forgave the old auction debts of 1995.
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In future, operators would be required to pay government a percentage of annual revenue, not a fixed fee. At the same time, government financial institutions gave concessions to indebted telecom companies that let them escape the bankruptcy that many claimed was imminent. ‘For political reasons’, political parties in power could not afford to have the companies of financial contributors fail. ‘Private operators learnt … that access to political rulers was essential for survival, and could be used to neutralize’ the DoT.
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NTP-99 aimed to make
the cell phone industry profitable. It provided a twenty-year licence period; it based annual fees to government on a percentage of revenue; it reduced the charges for calls to and from the government phone provider; and it allowed private operators to offer all the services that had previously been the monopoly of the government.
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It also called for the DoT to surrender its role as an installer of telephones to a government corporation which would do for the whole country what MTNL had been doing for New Delhi and Mumbai since 1986—install telephones, albeit in a leisurely way. This eventually happened with the creation of Bharat Sanchar Nigam Ltd (BSNL) in October 2000.
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The referee, TRAI, also came in for renovation. In 2000, the government gave it the unchallengeable right to make rulings about phone charges and about the terms under which one company’s callers could connect to subscribers of other phone companies.
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A new body was created to keep telecom disputes out of the courts—the Telecom Dispute Settlement and Appellate Tribunal (TDSAT). One view holds that the new telecom policy ‘shifted the balance of power in favour of TRAI’.
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In the sense that the powers of the dreaded DoT were curtailed, this is probably true. But another view holds that TRAI then fell victim to ‘systematic stacking … with retired civil servants’ and became a creature of the minister of the day.
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A number of developments flowed from NTP-99. However irregular some of them seemed in terms of principled public policy, they produced a revolutionary expansion of mobile telephony. In 1999, India had 23 million phones; by 2005, it had close to 100 million, and more than half the subscribers now were customers, not of the government telephone provider, but of private companies. By 2012, India had 900 million mobile-phone subscribers.
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In the three years after the endorsement of the NTP99, telecommunications in India were transformed:

• The government changed the licence fee from a fixed sum (which companies had bid in the auction of 1995 and then proved unable to pay) to a percentage of a company’s annual revenue. If you made money, you paid more; if you didn’t make money, you paid less.
  

• Licence holders were allowed to provide every kind of telephone service without having to obtain a new licence for each service.
  

• Licences were granted for twenty years and were to be extendable.
  

• The DoT’s function of installing telephones was split off into a separate government-owned corporation, Bharat Sanchar Nigam Ltd (BSNL)
  

In 2000, the same year that BSNL was created, the government did a deal that combined technology, politics and profit.
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It permitted companies that had acquired the right to provide landline or ‘basic’ services to become—in practice, though not precisely in law—providers of
mobile
phones. The two most important beneficiaries were the Tata organisation and the Reliance group of the Ambani family which had acquired the right to provide ‘basic services’ in a number of cities in the auction of 1995. Only a few companies had bid to provide ‘basic services’ because this involved laying (expensive) cable and competing with the DoT’s existing landline operation which had hitherto been the only service available. The companies that opted to provide such services were allowed to complete the ‘last mile’, or the connection from base stations to individual houses and businesses, using a wireless technology favoured in the US to operate mobile-phone networks.
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The Tata and Reliance companies laid cables that carried calls to base stations in the cities in which they operated. From there, calls were carried to homes and businesses—the ‘last mile’ in the jargon of telecom companies—by wireless, using CDMA technology, to handsets that were cordless. In theory, such a setup was meant to behave like a phone call to a household cordless phone: you took the call in your house or office. In practice, however, the service provider could—and did!—give you the capacity of a mobile phone: your calls could be made and connected anywhere in the urban area that the phone company had its base stations. It was the mobile phone you had when you did not, strictly speaking, have a mobile phone. Users got a cell phone much more cheaply than if they had subscribed to a properly licensed provider because their supplier had paid much less for a ‘basic service’ licence than companies that were providing fully licensed
mobile-phone
services.
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Stories abound of doctors, dentists and ordinary citizens carrying cordless phones the size of loaves of bread on their daily rounds in Kolkata, Mumbai and other cities.

Companies that had paid for the
privilege of providing ‘legitimate’ mobile phone connections shrieked of foul play and went to the newly created Telecom Dispute Settlement and Appellate Tribunal (TDSAT). Two years of legal pass-the-parcel followed: decisions of TDSAT were appealed to the Supreme Court, which sent cases back to TDSAT which returned them to TRAI. The outcome in November 2003 was that that every private company with any sort of telecom licence was given the chance to provide all telecom services. Those that had bought only ‘basic service’ licences had to pay a premium to put them on a more level footing with those that had paid heavily for ‘genuine’ mobile licences. The Ambani family’s Reliance group was fined for having offered mobile-phone services without having a mobile-phone licence.
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The scandals and mismanagement that characterise the expansion of telecommunications were not unique to India, though they often had a distinctively Indian flavour. In the US, the auctions and lotteries of the 1980s meant that ‘any chancer [speculative investor] could land a ten-year licence, then hawk it around [to] more competent operators’. The result was an ‘extremely disjointed’ system in which ‘roaming’—using a phone in different regions—was ‘extremely difficult’, and the US by the mid-1990s had ‘a crazy-paving of licences covering the country’.
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Europe did better, and by 1995, the year mobile phones were first sold in India, ‘European coverage was nearly complete’.
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Later, some European countries made policy blunders similar to India’s. When they moved to a higher level of mobile communications—so-called 3G or third generation technology—they auctioned small chunks of spectrum for huge sums. But the amounts ‘placed the winning bidders in financial difficulty so that investments …have been delayed’ and the licensed frequencies were used ‘very inefficiently’,
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a result similar to the outcome of Indian auctions in the 1990s.

Management of radio frequency was intensely political. It involved governments and private enterprise, huge investments and technical judgements—some would say, gambles. Private, public and national interests confronted each other. India was not alone in tying itself in knots over telecom policy. But India brought unique features to complex problems of policy-making, as the telecom scandals of the twenty-first century made clear.

Act III: Bread, clothing, shelter—and a mobile

Act III of this story began in 2003
as the telecom industry settled down to the business of selling phones and making money. In one version, the Wicked Witch of government bureaucracy lost most of her powers, her subjects were able to speak and a few handsome princes, otherwise known as private telecom companies, gave the people miraculous ways of communicating. In another version, an impotent old King (read: a decaying pretence of socialism) lost his ability to care for his people, and self-interested young princes plotted to carve up the kingdom for private gain. More mundanely, telecommunications came to be dominated by some of the great names of Indian capitalism and influenced by some of India’s most notable figures of politics and government.

There were no rags-to-riches stories at this top level of telecommunications. In 2010, as a landmark scandal matured, eight major entities, two of them government-owned, had emerged as the controllers of the cell-phone industry. It needed too much investment and influence with governments for any but India’s biggest players and their foreign partners to start up and survive as providers of telecom services.

Bharti Airtel held the largest share of the business with about 22 per cent of all telephones in the country using its services.
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One source noted that Sunil Mittal (b. 1957), the founder of the company, started it with US $900 in 1995. But Mittal came from a Marwari commercial tradition that had exercised immense influence on India’s economy. From his family’s base in Punjab, his father had been well enough connected to be installed in the upper house of the Indian parliament by the Congress Party. Mittal was in business from the age of eighteen, first overseeing the manufacture of bicycle parts in his hometown of Ludhiana, whose commercial middle class has been celebrated and sent up in Pankaj Misra’s
Butter Chicken in Ludhiana
and Anand Giridharadas’
India Calling
.
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Mittal moved into the import of electric generators in the early 1980s, and when such imports got stifled by government bans in India’s bad old, licence-permit days, he switched to making telephones, once the government allowed private companies into that business in 1984.
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‘The romance of Bharti [the company] with telecom started during [Rajiv Gandhi’s] leadership’, Sunil Mittal told a US audience twenty years later.
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The company worked with foreign firms, attracted foreign investment, including from Singapore’s Singtel, and floated on the Mumbai Stock Exchange in 2002 to raise funds for a capital-hungry industry, particularly in its starting stages.
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In 2010, Airtel went into Africa when it took over a Kuwaiti company, Zain, and expanded its investments in Bangladesh and Sri Lanka.
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The families behind the
second and third largest telecom providers in 2011 had remarkable similarities with Sunil Mittal’s family. Reliance Telecom, one of the companies of Anil Ambani, was the biggest of the cell-phone providers that used CDMA technology and fifth among those who used GSM. The Ambani brothers, Mukesh and Anil, were heirs of a buccaneering father, Dhirubhai Ambani. He came out of a small town called Chorwad (‘thievesden’, according to some translators’ version) on the Gujarat coast and built the biggest industrial house in India by the time he died in 2002. Reliance’s success in the mobile-phone business was, its critics would say, completely in character: the circumstances were murky. Reliance acquired ‘basic service’ licences in the auctions of 1995. Basic licences were much cheaper than licences to provide mobile phones. Reliance adopted CDMA, an efficient but less widespread US-based technology, to provide its subcribers with the ‘last mile’ connection between Reliance exchanges and individual households and businesses, thus eliminating the expensive need to run a wire to every telephone. Reliance then began, illegally, to enable its subscribers to use their cordless household and office phones as mobile phones: they could send and receive calls anywhere within reach of Reliance base stations. Reliance developed a further imaginative technique: it routed incoming international calls through domestic phone numbers to eliminate the need to pay fees to India’s international call company.
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