Line is clear for a just transition

Licensing has played a critical role in regulating telecommunications in India by drawing private capital into the industry and ensuring it delivers expected services to consumers. Yet, this is not the most sophisticated method of regulation, which should ideally be through enacted rules and their enforcement. In such a scenario, a licence serves as an authorisation while the law addresses detailed contractual obligations. In the absence of such law, licences spelling out entitlements and obligations of service providers and GoI lends a degree of comfort to both. GoI would be reluctant to bring private capital on board without explicit obligations. Without entitlements, private capital would hesitate to commit to service delivery. Ideally, it should be fine if these are listed in contracts or the law, but telcos are concerned business rules could change in the transition from the former to the latter.

Telecom licences have served to control market entry in India, thereby shaping competitive intensity in the industry that incumbents will seek to preserve. Licences have been their assurance of due process as policy underwent changes since the sector was opened to private players. Telcos have gone to court over many issues and have been able to shape the regulatory framework on matters such as the allocation of spectrum and sharing revenue with GoI. They see a loss of agency if GoI unilaterally sets the rules and reduces their contractual licences to mere authorisation. GoI, in turn, insists the switch will create the regulatory framework that restores licences to their original limited purpose. It will ease doing business. Besides, rules will be drafted in consultation with the industry.

India’s new telecom legislation is an attempt to modernise the regulatory framework from a patchwork of 19th-century laws and the rules are a corollary to this. The industry would benefit from forward-looking oversight, but GoI should address its concerns over the transition.