the indian telecom industry and the role of indian government agencies

7/28/2019 The Indian Telecom Industry and the role of Indian Government Agencies

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The Indian Telecom Industry and the role of

Indian Government Agencies

SECTION 2 - GROUP 7MEMBERS:

SHANTANU KUMAR DM14144

SINDHUJA DHANRAJ DM14147

SHIVEN SALUJA DM14248

TULSI CHOUDHARY DM14256

VIJAY KRISHNAN A DM14257

RAMYAA RAMESH DM14266


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The Indian Telecom Industry and the role of Indian Government Agencies

SECTION 2 | GROUP7 Page 2

Contents1. DEPARTMENT OF TELECOMMUNICATIONS: ..................................................................................... 3

2. TRAI ACT 1997 ................................................................................................................................. 5

2.1. RELEVANCE TO BUSINESS AND SOCIETY ................................................................................... 6

3. ANALYSIS OF POLICIES AND COORDINATION IN THE FIELD OF MOBILE TELEPHONY SPECTRUM

LICENSING ............................................................................................................................................... 9

3.1. PHASE I (2000-2008) ................................................................................................................ 9

3.2. TRAI REGULATIONS:......................................................................................................... 10

3.3. PHASE II (2008-PRESENT) ....................................................................................................... 123.3.1. SPECTRUM MANAGEMENT:..................................................................................... 12

3.3.2. LICENSING REFORMS:............................................................................................... 12

4. 2G - SECOND GENERATION UNIFIED ACCESS SERVICE: LICENSING .................................................. 13

4.1. ORGANISATIONAL ARRANGEMENT ........................................................................................ 14

4.2. SPECTRUM ALLOCATION ........................................................................................................ 15

4.3. ISSUE OF UAS LICENCES AND ALLOCATION OF 2G SPECTRUM ................................................ 16

5. DISCRIMINATION BY TELECOM MINISTRY TO PRIVATE TELECOM PLAYERS ..................................... 18

5.1. Undue Haste in Receiving and Processing Applications ........................................................... 19

5.2. Hon'ble Prime Minister's suggestion to reconsider the pricing was ignored ............................ 19

5.3. Multiple Activities on 10th January 2008 ................................................................................. 20

5.3.1. Sudden Change in the policy ........................................................................................... 20

5.3.2. Premium Rush ................................................................................................................ 20

5.3.3. Special 13 ....................................................................................................................... 20

6. ROLE OF INDEPENDENT REGULATORY BODY: CAGS AUDIT NOTE -19: MARCH 2010/11 ................. 22

7. BRIEFING ON CAG- THE AUDIT CONTROL OF THE GOVERNMENT OF INDIA .................................... 247.1. CORPORATE LOBBYING OR CRONY CAPITALISM AN ONGOING DEBATE ............................... 28


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1. DEPARTMENT OF TELECOMMUNICATIONS:India's telecommunication network is the second largest in the world based on the number of

telephone users (both fixed and mobile phone). It has the lowest call tariffs in the world enabled

by the mega telephone networks and hyper-competition among them. It has the world's third-

largest Internet user-base with over 137 million as of June 2012.Major sectors of the Indian

telecommunication industry are telephony, internet and television broadcasting.

Indian telecom industry underwent a high pace of market liberalization and growth since 1990s

and now It has successfully become the world's most competitive and one of the fastest growing

telecom markets.Indian Industry has grown over twenty times in just ten years, from under 37

million subscribers in the year 2001 to over 846 million subscribers in the year 2011.India has

the world's second-largest mobile phone user base with over 929.37 million users as of May

2012.It has the world's third-largest Internet user-base with over 137 million as of J une 2012.

Department of Telecom has been formulating developmental policies for the accelerated growth

of the telecommunication services .The telecom services have been recognized as an important

tool for socio-economic development for a nation and hence telecom infrastructure is treated as a

crucial factor to realize the socio-economic objectives in the country. The Department is also

responsible for grant of licenses for various telecom services like Unified Access ServiceInternet and VSAT services. The Department is also responsible for frequency management in

the field of radio communication in close coordination with the international bodies. It also

enforces wireless regulatory measures by monitoring wireless transmission of all users in the

country and world wide.

Department of Telecommunication

Public Sector Units

Bharat Sanchar Nigam Limited(BSNL) Indian Telephone Industries Limited (ITI) Mahanagar Telephone Nigam Limited(MTNL) Telecommunications Consultants India Limited(TCIL)
http://www.bsnl.co.in/http://www.itiltd-india.com/http://www.mtnl.net.in/http://www.tcil-india.com/http://www.tcil-india.com/http://www.mtnl.net.in/http://www.itiltd-india.com/http://www.itiltd-india.com/http://www.bsnl.co.in/


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Other Units

Wireless Planning & Coordination Wing (WPC) Telecom Engineering Center (TEC) Vigilance Telecom Monitoring (V.T.M.) Cell

R & D Unit

Center for development of Telematics (C-DoT)

Controller Of Communication Accounts (CCA) Units(Details of CCA Offices)

National Institute of Communication Finance(NICF)

Telecom Regulators

TheTelecommunications Industry Association (TI A) is accredited by the American National

Standards Institute (ANSI) to develop voluntary, consensus-based industry standards for a wide

variety of Information and Communication Technologies (ICT) products, and currently

represents nearly 400 companies. TIA's Standards and Technology Department operates twelve

engineering committees, which develop guidelines for private radio equipment, cellular towers,

data terminals, satellites, telephone terminal equipment, accessibility, VoIP devices, structured

cabling, data centers, mobile device communications, multimedia multicast, vehicular telematics,

healthcare ICT, machine-to-machine communications, and smart utility networks.
http://10.25.105.4/http://www.tec.gov.in/http://www.dot.gov.in/vtm/vtm.htmhttp://www.cdot.in/http://www.dot.gov.in/cca/cca.htmhttp://www.nicf.gov.in/http://www.cdot.com/http://www.cdot.com/http://www.nicf.gov.in/http://www.dot.gov.in/cca/cca.htmhttp://www.cdot.in/http://www.cdot.in/http://www.cdot.in/http://www.cdot.in/http://www.dot.gov.in/vtm/vtm.htmhttp://www.tec.gov.in/http://10.25.105.4/


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2. TRAI ACT 1997The policy of liberalization in the 1990s helped the Indian Telecom sector to grow rapidly. The

government allowed private sectors into telecom equipment manufacturing; value added

services, radio paging and cellular mobile services. In 1994, the government formed the National

Telecom Policy (NTP) which helped to attract Foreign direct investments and as well as

domestic investments. The entry of private and international players resulted in need of

independent regulatory body. As a result, The Telecom Regulatory Authority of India was

established on 20 February 1997 by an act of parliament called "Telecom Regulatory Authority

of India Act 1997".

The mission of TRAI is to create and nurture an environment which will enable the quick growth

of the telecommunication sector in the country. One of the major objectives of TRAI is to

provide a transparent policy environment and smoothen the functioning of the telecom industry.

TRAI has regularly issued orders and directions on various subjects like tariff,

interconnections, Direct To Home (DTH) services and mobile number portability.

The TRAI (Amendment) Act, 2000 had led to reconstitution of the Authority. It consists of one

Chairperson, two full-time members and two part-time members. The present composition of the

Authority is as follows:

An Appellate Tribunal, known as Telecom Disputes Settlement and Appellate Tribunal

(TDSAT), was established by the Central Government in May, 2000 to adjudicate any dispute

between a licensor and a licensee; between two or more service providers; between a service

provider and a group of consumers; and to hear and dispose of appeal against any direction,

decision or order of the Telecom Regulatory Authority of India. The Tribunal, therefore, exercise

both original and appellate jurisdiction.

An appeal has been provided against the final order of the Appellate Tribunal to the SupremeCourt under Section 18 of the Act. However, there is no appeal against the interlocutory orders

of the Appellate Tribunal to the Supreme Court.


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Section 14-B (1) of the Act, 1997, lays down that the Appellate Tribunal shall consist of a

Chairperson and not more than two Members to be appointed, by Notification, by Central

Government.

Broadly, the issues involved in cases filed before the Appellate Tribunal relate to interconnection,

challenging the basis of computation of license fee by the licensor, wrongful levy and charge of

royalty and license fee for frequency allocation, blocking of calls by one group of service

providers, disputes relating to default traffic, challenges to tariff fixed by TRAI, encashment of

bank guarantees, disputes between broadcasters etc.

TRAI functions through a Secretariat headed by a Secretary. All proposals for considerations are

processed via Secretary, which organizes the agenda for Authority meetings (consulting with the

Chairman), organizes preparation of minutes and issues regulations etc. in accordance to the

meetings. The secretary is assisted by Advisors, namely Mobile Network, Interconnection &

Fixed Network, BroadBand and Policy Analysis, Quality of Service, Broadcasting & Cable

Services, Economic Regulation, Financial Analysis & IFA, Legal, Consumer Affairs &

International Relation and RE & Administration & Personnel.Officers are selected from the

premier Indian Administrative Service and Indian Revenue Service and also from the Indian

Telecom Service.

2.1. RELEVANCE TO BUSINESS AND SOCIETY Migration was one of the most groundbreaking and landmark decisions of the

Government withno parallel either in India or rest of the world.

In comparable situations in other telecom regimes, where licensees have bidextravagantly and have been unable to meet their contractual obligations, the reluctance

of Governments to renegotiate contracts has lead to the collapse of the sector.

But the timely and responsive intervention of the Indian Government showedtremendous vision and foresight and clearly demonstrated the commitment of the

Government to the reforms process.

Migration was not an easy decision, but the Government did not hesitate to take this boldstep. In fact, it can safely be stated that migration was one of the key factors that was

responsible for the complete transformation of the Indian telecom, especially the

cellular mobile sector, which is now widely looked up to as the flag bearer of the Indian

liberalization process.
http://en.wikipedia.org/wiki/Advisor,Telecom_Regulatory_Authority_of_Indiahttp://en.wikipedia.org/wiki/Advisor,Telecom_Regulatory_Authority_of_India


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Shortcomings

Delay in Initiation of Unified Licensing Regime UAS Licenses to be a complete unified license (including long distance) Full unification was supposed to be completed. by April 2004 Consultation process carried on for over 2 years Ultimate recommendations in January 2005 maintain (in fact increase) the high

entry barrier for acquiring long distance rights

Use of Fixed Wireless Terminals (FWT) to offer Mobility

In November 2004, erstwhile Fixed Operators start using the Fixed wirelessTerminals to offer mobile service

Mobile services priced anti-competitively at fixed line rates as operators classifiedthese services as fixed in order to evade payment of access deficit charges

Spectrum related issues of GSM & CDMA Operators From early 2003, CDMA operators start demanding introduction of US PCS Band

into India.

Move opposed by GSM operators as introduction of disruptive US PCS Band

Will curtail the evolution of GSM to 3G Result in interference in existing mobile services

1. Adaptability in Regulation:Slow adaptability Medium Pace Quick adaptability

2. Infrastructure sharingNo Sharing Passive Active Airtime Dynamic

Allocation of Spectrum

3. ServicesVoice Centric Data Centric Multiplay Centric


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4. RegulationNational Regional Harmonisation

5. LicencingTechnology Rigid Universal Delicencing No Licencing

6. TarriffFixing Ceiling Forbearance User preferred

7. SpectrumTechnology Services Harmonisation


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3.ANALYSIS OF POLICIES AND COORDINATION IN THE FIELD OF MOBILETELEPHONY SPECTRUM LICENSING

3.1.PHASE I (2000-2008)

The Telecom Regulatory Authority of India was established as a consequence of TRAI Act,

which was supposed to plan the telecom policy for mobile phone usage and service. This

planning was explained in the new telecom policy of 1999. The new telecom policy of 1999 says

the followinga on Cellular Mobile Service Providers (CMSP):

1. They shall be permitted to provide mobile telephony services including permission tocarry its own long distance traffic within their service area without seeking an additional

license. Direct Interconnectivity is permitted and sharing of infrastructure is alsopermitted in their areas of operation.

This point ensured that the business entity was allowed to float tenders on the region of their

choice. It also ensured that they could design a revenue model using the sharing of resources

clause. Thus, the business was made easy and profitable and at the same time, the service to

society is also ensured.

2. CMSP would be granted separate license, for each service area. Licenses would beawarded for an initial period of twenty years and would be extendible by additional

periods of ten years thereafter.

The twenty year initial period gave enough time for the business to gain return on investment on

the infrastructure it had to develop and also enough number of years to break even and gain

profit. This also enabled long term service plans for the customers.

3. CMSP operators would be required to pay a onetime entry fee. The basis for determiningthe entry fee and the basis for selection of additional operators would be recommended

by the TRAI

Although this point seems to seek extra revenue for the government, it has transformed into a

loophole for the businesses and the bureaucrats as well. This clause has led to the improper

sanctioning of licenses, which will be discussed in detail in the 2G Unified Access Service part.


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4. It is proposed to review the spectrum utilization from time to time keeping in view theemerging scenario of spectrum availability, optimal use of spectrum, requirements of

market, competition and other interest of public.

The last point ensured that the market conditions were not exploited by the business entities. Italso ensured that an oligopolistic sector was not formed by having a government based service

provider also providing mobile service.

The New Telecom policy of 1999 also included a separate chapter on spectrum management.

This chapter defined the new objectives of spectrum management as against the existing policies

which were a consequence of the National Frequency Allocation Plan (NFAP) of 1981. Since

Mobile Telephony would require the allotment of new band of spectrum, a revised NFAP -2000

was announced. This NFAP 2000 was to be reviewed every 2 years. Since Spectrum allocation

also involved defense services, it had to be re-allocated and this was done by the end of 2000.

The NFAP -2000 also adopted the following course of action:

1. Spectrum usage fee shall be charged.2. Setting up an empowered Inter-Ministerial Group to be called as Wireless Planning

Coordination Committee (WPCC) as part of the Ministry of Communications forperiodical review of spectrum availability and broad allocation policy.

3.Massive computerization in the WPC Wing will be started during the next three monthstime so as to achieve the objective of making all operations completely computerized by

the end of year 2000.

The role of TRAI was loosely defined as to ensure a level-playing field among the service

providers and play an important role in resolving disputes among service providers. TRAI

can recommend policy change to government. However, government need not necessarily

take up TRAIs recommendations.

3.2.TRAI REGUL ATIONS:Right from its inception in 1999, TRAI has issued 49 regulations till October 2006. Out of the 49,

close to 20 regulations has been for the purpose of mobile telephony. These 20 regulations have


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primarily been directed towards interconnection usage charges between service providers, and

levy of fees and tariff plans. These regulations have paved the way for easy connectivity across

regions and service providers at an economical rate which was easily afforded by most

consumers. The Number of Mobile subscribers in India in March 2008 grew 10 times the number

of subscribers in March 2000. (Figure 3-1)

3-1 Mobile Subscriber Growth

The national numbering plan of 2003 carried an annexure which describes the numbering of

mobile phone subscribers in India. This annexure carried the instructions of subscriber number

allocation which was divided into 3 different parts: access code, mobile switching center code

and subscriber number. This remained the standard for 8 years until 20th January 2011 when

Mobile number portability (MNP) was introduced.


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3.3.PHASE II (2008-PRESENT)After 2008, the Department of Telecommunications experienced turmoil in the form of

allegations on 2G spectrum allocation to mobile service providers. This would be discussed in

the next part. However, the strategic plan on telecom policy was changed for the next 5 year plan

and a new plan was announced for the period of 2011-16. This new policy had improved

provisions for facilitating licensing and convergence of mobile networks in addition to value

added services. This would mean converging of broadcasting with mobile services which would

be enabled by the 3G/4G spectrum. Thus a new Spectrum management policy was also floated,

which would allot spectrum bandwidths for the operation of 3G/4G services. The key points

under Spectrum management and licensing reforms are as follows:

3.3.1. SPECTRUM MANAGEMENT:i. License free spectrum for low power devicesii. Framework for using white spacesiii. Vacation of Spectrumiv. Disclosure of Spectrum availabilityv. Biannual review of NFAPvi. Incentive mechanism for effective usage of Spectrum

The aforementioned policies try to ensure and promote low cost effective technologies, which do

not cause much harm to the environment. Also, the transparency clauses mentioned in disclosure

ensures a fair deal in transactions.

3.3.2. LICENSING REFORMS:i. De-linking License and Spectrumii.

License renewal terms

iii. Technology Neutralityiv. Rationalization of License Fee

The new Licensing reforms ensure that each of the mobile service providers gets a fair deal in all

his endeavors and is not lopsided to the ones who have an advanced technology.


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4. 2G - SECOND GENERATION UNIFIED ACCESS SERVICE: LICENSINGIn the last two decades the telecom sector witnessed rapid transformation with the

NationalTelecom Policy-94 setting the stage for opening up of the sector. With changes in the

sector, cellular mobile services outgrew the fixed line services. The most important change was

the shift to a revenue sharing regime in National Telecom Policy (NTP) 1999 where the

operatorsshared their revenue with the Government in the form of annual licence fee and

spectrumcharges. The Unified Access Services Licence (UASL) 2003 sought to frame the road

map for auniform licencing regime.

The implementation of UASL regime was to be carried out in two phases with first phase of six

months assigned for migration of already existing BasicService Operators (BSOs) and Cellular

Mobile Service Operators (CMSOs) to the newregime. The entry fee for migration of BSOs was

determined as the fee equal to what was paid by the fourth cellular operator introduced through

multi-stage bidding process in 2001. CMSOs were not required to pay any entry fee for

migrating as they had alreadyentered the market through a bidding process and thus paid a

market determined price.The second phase was to start after the first phase in which a Unified

Licencing regime,with a nominal entry fee for the licence with the spectrum being charged

separately, was envisaged.

4-1 Revenue on Account of Spectrum Charges and License Fee


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4-2 Policy Methodology

4.1.ORGANISATIONAL ARRANGEMENTThe work relating to formulation of policy, issue of licences for various telecom services

andspectrum allocation are under the overall control of Ministry of Communications &

IT.Secretary, DoT, reports to the Minister (Communications and IT) and is assisted by

theMember (Finance), the Member (Technology), Member (Services), Member (Production)and

Wireless Advisor.

The Secretary, DoT, is also the Chairman of the Telecom Commission which is a high

poweredcommission, established in 1989, consisting of four full time members

(Production,Services, Technology and Finance) and four part-time members (Secretaries of

theMinistries of Finance, Industrial Policy and Promotion, Information Technology and

PlanningCommission).

4-3 Organization Structure


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4.2.SPECTRUM ALLOCATIONIn India, Mobile services which use GSM technology work in the frequency bands of 900 &1800

MHz and those in CDMA technology work in the 800 MHz band. 800, 900 and 1800MHz bands

were earlier allotted to the defence services for their mobile communicationusage. Presently, 25

MHz spectrum in 900 MHz band (890 915 / 935 960 MHz) and 75MHz in the 1800 MHz

band (1710 1785 / 1805 1880 MHz) is earmarked for GSM services.

For CDMA services, 20 MHz spectrum in the 800 MHz band (824 844 / 869 889 MHz)

isavailable. Spectrum for the roll out of 3G services (voice, data and video) were allottedthrough

e-auction in the 2.1 GHz (1920 1980 / 2110 2170 MHz) band. All the above bandswere

historically allotted to the Defence sector for their mobile and point to pointcommunication

needs in India. Therefore, their cooperation was also required to makethem available forcommercial use. To facilitate the same, Government of India (GoI) has allocated funds from time

to time to provide optical fibre cables for use by the DefenceSector.

Based on the recommendations of Group of Ministers which agreed with theprinciples laid down

by TRAI in its Report, Cabinet (31 October 2003) approved theproposal for charting the course

for Universal Licensing Regime in the followingmanner:-

A two-stage process; the Unified Access Regime for basic and cellular operatorsallowinga migration path to existing BSPs and CMSPs in the first phase to beimplemented

immediately followed by a second phase of a fully UnifiedLicensing/Authorisation

Regime within six months, bringing all telecom servicesunder one licence, after a process

of detailed consultation by TRAI;

Fee paid by the fourth cellular operator to be used as benchmark for migrationof BSOs tothe new access regime and no fee to be paid by the existing CMSPs formigrating to new

regime;

The DoT to be authorised to finalise details of implementation of UAS and the fullyUnified Licence Regime with the approval of the Hon'ble Minister of Communication &

Information Technology (MoC&IT) based on the recommendations of TRAI.


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In pursuance to the Cabinet's approval, the DoT issued the guidelines on UASLicencing (11

November 2003), for moving towards UASL regime by giving theoption to all existing BSOs

and CMSPs to migrate to UASL regime. The guidelinesalso included a condition that All

applications for new Access Services Licence shallbe in the category of Unified Access Services

Licence.

4.3.ISSUE OF UAS LICENCES AND ALLOCATION OF 2G SPECTRUMGaps in implementation of policy led to a situation, when on the one hand allocation of spectrum

was not delinked from licences and on the other hand applications for newlicences continued to

be received by the DoT without framing guidelines for UASL. Theguidelines were finally issued

in December 2005 and at that time also spectrum was notdelinked from licence as intended

through the 2003 policy. Even the provisions of theseguidelines were not meticulously followed.

As per guidelines issued for UASL (2005), licences were to be issued on continuous

basiswithout any restriction on the number of entrants in a service area and applications were

tobe processed within 30 days of submission. Allocation of radio-spectrum and grant ofwireless

licence was subject to availability and in case UAS licensee was not allocatedspectrum due

tonon-availability, the Licensee was required to endeavour to roll out servicesusing wire-line

technology. However, applications for issue of UAS licence were notprocessed within stipulated

period and delayed inordinately by the DoT. In 2004-05, 14 outof 15 applications for grant of

UAS Licences were delayed by 608 to 969 days. In 2005-06, all9 applications were delayed by

232 to 421 days. All 29 applications for issue of new UASLicence received in 2006-07 were not

processed till October 2007 without assigning anyreason/justification on records and without

sending any communications to the applicants.


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The following issues were found by the CAG in its report on the 2G spectrum allocation.

Approval of Telecom Commission not taken Advice of the Hon'ble Minister of Law and Justice was ignored by DoT Hon'ble Prime Minister's suggestion to reconsider the pricing was ignored Concerns of the MoF and Finance Wing of the DoT on continuance of entryfee fixed in

2001 were overlooked.

Issue of UAS Licence to ineligible applicants. Value of spectrum allocated beyond the contracted quantity Non fulfilment of the Roll out obligations by the New Telecom Licensees. Under pricing of 2G and Consequent Loss

4-4 Loss statistics


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5. DISCRIMINATION BY TELECOM MINISTRY TO PRIVATE TELECOMPLAYERS

According to the Comptroller and Auditor General of India (CAG), an audit was

conducted during January 2010 to September 2010 covering the period from 2003-04 to 2009-10.

Based on the findings of the audit report (Chapter 4), the following is the actual procedure for

issue of licenses and allocation of spectrum:

5-1Procedures for Issue of License

According to the telecom policy of India, when a licence is allotted to an operator, some

start-up spectrum is bundled along with it [3]. And later if the companies want to further get

access to more bandwidth, they could do so by getting UASL by the said procedure.

However, Gaps in implementation of the policy led to a situation, where on the one hand

allocation of spectrum was not delinked from licences, while on the other hand applications for


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new licences continued to be received by the DoT without framing guidelines for UASL. Several

licenses were issued to firms with no prior experience in the telecom sector or were ineligible or

had suppressed relevant facts[1].

Applications for issue of UAS licence were not processed within stipulated period and

delayed inordinately by the DoT. In 2004-05, 14 out of 15 applications for grant of UAS

Licences were delayed by 608 to 969 days. In 2005-06, all 9 applications were delayed by 232 to

421 days. All 29 applications for issue of new UAS Licence received in 2006-07 were not

processed till October 2007 without assigning any reason/justification on records and without

sending any communications to the applicants.

5.1.Undue Haste in Receiving and Processing Applications

The Honble DoT issued a Press Release on 24th September 2007, stating that

applications for issue of licences would be accepted only up to 01.10.2007[5]. Till issue of this

press release, 167 applications had been received including those remaining unprocessed since

March 2006. After introduction of this artificial cap by the DoT, there was a sudden spurt in

applications and 408 more applications were received in next 8 days resulting in accumulation of

575 applications till the declared cut-off date of 01.10.2007. Now with such a situation it became

clear that if all the applicants are allocated a spectrum, there wouldnt be any left for future

allocations. Clearly, Spectrum surprisingly became a scare resource in a week.

5.2.Hon'ble Prime Minister's suggestion to reconsider the pricing was

ignored

On 2 November 2007, Hon'ble Prime Minister wrote to Hon'bleMoC&IT that given the

back drop of inadequate spectrum and large number of applications received for fresh licences,

DoT should consider

(i) introduction of a transparent methodology of auction, wherever legally andtechnically feasible and

(ii) revision of entry fee, which is currently bench marked on an old figure.


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Clearly, Hon'ble Prime Minister directed A. Raja to ensure allotment of 2G spectrums in a

fair and transparent manner and to ensure license fee was properly revised. Raja wrote back to

the prime minister rejecting many of his recommendations[2].

However, it is to be noted that teledensity had already reached 18.22 per cent (2007) (as

against a target of 15 by 2010, as envisaged in NTP-1999).

5.3.Multiple Activities on 10th January 20085.3.1. Sudden Change in the policy

On 10 January 2008 afternoon, the DoT through the Press Information Bureau informed

that all eligible applicants who applied for UAS licences up to 25 September 2007 would be

issued LoIs[5]

. It was provision in Annexure I that the DoT implements apolicy of FCFSfor thegrant of UAS licences under which initially an application which is received first will be

processed first and thereafter if found eligible will be granted LoI. However, that day the rule

was changed to whosoever complies with the condition of L oIs first, will be granted UASL

first.

5.3.2. Premium RushOn the very same day, at 2.45pm DoT posted an announcement stating those who apply

between 3.30 and 4.30 pm on that very day would be issued licences in accordance with the saidpolicy [5]. Because of such a sudden change in the method for applying FCFS criteria from

receipt of application to compliance of LoI made the applicants rush to comply with the LoI

conditions within a few hours and in as less as an hour in respect of 24 service areas. I t would

therefore be evident that though the DoT took 100-550 days to process the applications as

against prescribed 30 days under its so-called FCFS policy, it gave not even an hour to the

applicants to assemble at the DoT premises to collect Letter of Intents and less than half a

day to comply with the LOI conditions. This was done clearly to favour a few companies

against others.

5.3.3. Special 13Later it was found that 13 applicants were even ready with Demand Drafts (DDs) drawn on

dates prior to the notification of cut-off date. Evidently, these applicants, had advance

information about the issue of this notification by the DoT which enabled them to take


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appropriate advance action to draw the DDs and prepare other relevant documents for complying

with the LoI conditions in spite of the changed time limit for compliance from 15 days to about

half a day.

The entire process of allotment of UAS licenses in January 2008 lacked transparency and

appeared to have been done with the objective of favouring a few firms over others. As a result

thereof, Swan Telecom Pvt Ltd, which had submitted the application on 2 March 2007, was

given the spectrum for the Delhi service area on 28 August 2008 itself while Spice

Communications Ltd which had submitted their application in August 2006 has not yet been

given (March 2010), spectrum for Delhi service area.

Companies like Unitech and Swan Telecom got licenses without any telecom experience or

meeting the eligibility criteria[2].A total of 122 licenses issued were ineligible. Swan got license

for 15.37 billion (US$280 million) and then it sold 45% stake to UAE-based company Etisalat

for 42 billion (US$770 million) [2]. Unitech Wireless, a subsidiary of the Unitech Group, got

license for 16.61 billion (US$310 million) and later sold 60% stake for 62 billion

(US$1.1 billion) to Norway-based company Telenor [2].

This favouritism and abuse of power was listed by Time magazine at number two on their

"Top 10 Abuses of Power" list in 2011[4].


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6. ROLE OF INDEPENDENT REGULATORY BODY: CAGS AUDIT NOTE -19: MARCH 2010/11

The Comptroller and Auditor General of India (CAG) conducted the audit during January

2010 to September 2010 covering the period from 2003-04 to 2009-10. The audit covered the

implementation of policy for Unified Access Licensing Regime and allocation procedure for 2G

spectrum to new as well as existing operators under the Unified Access Services (UAS). In

January 2008, Department of Telecommunications issued 120 new licences for unified access

services on the same day. These licences were issued at price which had been discovered in2001.

This had drawn attention of Media, Parliament and informed members of the civil society.

Questions have been raised regarding the transparency in the allocation process and the failure in

maximization of revenue generation from the allocation of spectrum, which is a national asset.

And so a Parliamentary watchdog felt the need to review the entire process of issuance of 122

licences, award of spectrum and the implementation of the UAS regime. The audit was

conducted on the basis of records/information to the extent made available by the DoT or the

Department of Telecom, and the related files of the DoT seized by the CBI in October 2009

made available to Audit.

Audit was taken up with the objectives of ascertaining as to;

Whether the policy for issue of licence under the Unified Access Services (UAS) wasimplemented efficiently;

Whether the UAS licenses were issued and radio frequency spectrum was allocated in afair, transparent and efficient manner and

Whether the potential for revenue generation to Government was optimally managed.

The CAG highlighted that the entire process of allocation of Unified Access Service licences

"lacked transparency" and was undertaken in an "arbitrary, unfair and inequitable manner," in the

process "flouting every canon of financial propriety, rules and procedures."


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The 77-page report of the CAG tabled in Parliament said due diligence was not followed and

even the recommendations of the telecom regulator TRAI were "not followed in spirit".

The report said the "presumptive" loss caused to the exchequer through spectrum allocation to

122 licensees and 35 dual technology licences in 2007-08 was Rs 1,76,645 crore. It pegged the

figures on the basis of 3G auction held earlier this year in which the government mopped up over

Rs 67,000 crore (Rs 670 billion).

Further the CAG concluded that despite having themselves sought the opinion of the Ministry

of Law and Justice, the Department of Telecommunications decided to ignore the advice

received. The role of Telecom Regulatory Authority of India would also appear to have been

reduced to that of hapless spectator as its recommendations were either ignored or applied

selectively. The entire process of allocation of 2G spectrum raises serious concern about the

systems of governance in the Department of Telecommunications which need to be thoroughly

reviewed and revamped.

Through this fair and just report of the CAG led to scrutiny and filling of charge sheet by CBI

against the accused - politicians and bureaucrats who had the authority to sell licenses,

corporations who were buying the licenses and media professionals who mediated between the

politicians and the corporations.

This report by CAG was played a significant role is bringing people to justice. On 2 February

2012 Supreme Court of India delivered judgement on petitions filed by Subramanian Swamy and

Centre for Public Interest Litigation (CPIL) which had challenged allotment of 2G licenses

granted in 2008.[a] The Supreme Court quashed all 122 spectrum licences granted during the

tenure of former communications minister A Raja.[a] and described the allocation of 2G

spectrum as "unconstitutional and arbitrary".[b]

This led to cancellation of all the 122 licenses issued then.


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7. BRIEFING ON CAG- THE AUDIT CONTROL OF THE GOVERNMENT OFINDIA

The Comptroller and Auditor General (CAG) of India was established by the Constitution

of India. The department is officially responsible by the Constitution to be a whistle blower andscrutinizer on government finances.

This process facilitates governance to be more transparent and makes the legislation more

accountable. The audit framework is performed at different levels.

Roles and functions of the CAG:

Audits all transactions and expenditure of the Government of India and also the state

govts which includes authorities that have been financially supported by GoI.

CAG acts as the external auditor of state-owned companies.

Present CAG of I ndia: Vinod Rai

Audit J urisdiction

The organizations that come under the umbrella of scrutiny of the Comptroller andAuditor General of India are:-

Union departments and State Government departments which includes Indian Railwaysand Posts and Telecommunications.

A number of commercial enterprises that are controlled by the government, i.e.government companies and corporations.

Different types of audits are performed wherein the Nature of Audit varies depending onthe programmes.

One such audit that was performed on the DoT was a performance audit that brought tolight the 2G scam where the ineffective utilization of ex-chequers money has occurred.


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Role of CAG in the Telecommunication sector:

The telecommunication sector has in the recent years seen great transition in its growth.

Hence the CAG had implemented an audit and presented a report to the Parliament called

Package of Concessions Given to Cellular Mobile Operators in May 2000. A further analysis

was done on 2004-05 by CAG on the Revenue Management in the Department of

Telecommunications.

The review consisted on the following:

Operations on how the framework exists in the license fee and accounting of spectrumcharges from the holders i.e the licensees.

It was in January 2008 that the Department of Telecommunications had done the issuanceof unified access services to a count of 120 new and this happened on the same day.

The fact is that the issuance of these 120 licenses has taken place at a price which wasframed in 2001. This issuance strategy when realized and exposed was drew the Media

and stakeholders of the civil society about this.

Spectrum-a national asset and its allocation:

The transparency of the complete process has been inefficient. Since then, a number of

questions had come to the DoT about the process and the price fixing strategy for the allocation.

An important objective of maximizing the revenue by spectrum allocation to both domestic and

international companies has been underplayed in this process.

Allegations was that applicants for the spectrum had been given licenses at prices lower

to than the existing market prices thus granting licenses to ineligible companies.

This gave the CAG enough justification to revisit the spectrum allocation process and uncover

the actual auction process that happened.


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The UAS regime implemented in 2003 had been followed in 2008 with no change in

policies.

Audit Approach:

Duration: January 2010 to September 2010

Years Audited: 2003-04 to 2009-10.

Objectives planned:

Intended to discover the process about how the policy of Unified Access LicensingRegime was implemented.

The policy for the procedure on how 2G spectrum has been allocated to both newapplicants as well as the existing holders.

Reports utilized:

Records of Department of telecommunications Files acquired by CBI investigation in Oct 2009 Files handed over by the Ministry of Finance (MoF) Documents that were available on the Ministry of Corporate

Financial Impact

Repercussions of CAG audit report and the making of the Lokpall bill


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India has been a nation that has repetitively come under the lights of scams and high level

corruption. But the figure that was published by the CAG audit report by the 2G scam was

incredible for a developing country like India.

Arbitrary allocation of licenses:

It was in 2008 that the Union Government of India has performed licensing of 2G

generation spectrum waves to nine corporations for running their mobile telephony service

companies in 122 circles.

The revenue obtained was only Rs. 1,658 crore (US$370 million). The estimates reported

by The Comptroller and Auditor General of India which was based on another auction of

spectrum for 3G services stated that the exchequer of India has been defrauded to about Rs.

176,000 crores (US$40 billion) in the sale of 2G spectrum.

Allegations on A. Raja the Former minister in charge of telecommunications:

Allegations on the former minister drew the attention of the media when allocation has

been done on first-come, first-served manner instead of competitive bidding. It was appalling to

the civil society when grants have been given to companies who did not have a telecom

experience.

The Cost of Corruption and the economic cost to the country:

A nations telecommunications infrastructure is the biggest asset for an economy. An

efficient telecommunication department is required for the competitiveness in this "information

age." The major unearthing of the corruption in the licensing of spectrum has made significant

impact on h all other sectors of the economy.

Transparency International (TI )

This telecommunication scam has been an example of one of the biggest public sector

corruption which Transparency International (TI) defines as "the abuse of entrusted power for

private gain."


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The uprising of the civil society:

The Jan Lokpal Bill which is also mentioned as Citizen's Ombudsman Bill has been a

long pending act to be passed. It is an anti-corruption bill which was exclusively drafted by a

number of civil society activists in India who wanted the bill to be passed. It mandated anindependent body to monitor the corruption cases.

The Jan Lokpal Bill mainly aims to moderate corruption activities and safeguard the

rights of whistle-blowers. An earlier version of Lokpal bill drafted by UPA was claimed to be

weak and thus brought in mass protests to pass the Jan Lokpal bill. Headed by the civil activist,

Anna Hazare, India saw unprecedented civil uprising in 2010 and 2011.

7.1.CORPORATE LOBBYING OR CRONY CAPITALISM AN ONGOING DEBATEMeaning

Corporate lobbying is the influence done by big corporations in a country for making

government decisions in their favor.

Background

Stimulus packages for such acts is high which adds momentum to the activity. Millions ofdollars and rupees are spent to ensure legislation and policies are drafted for the companys

KPA.

It has been proven that companies consider that lobbying is directly related to the financialperformance of the company. This makes companies tailor economic policies for their

gratification.

Indian scenario

Corporate lobbying in India is in the form of even formal presentations to authorities andsenior civil servants.

Corporate lobbying has done mainly to maximize gains from policies and the extent to whichit has done is been immense that it is now turning into a form of corruption which is seen in

the 2G scam.


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With the 2G scam unearthed the strong crony capitalism network existing between corporatehouses and politicians was also discovered.

The media exposed tapes which taped conversations between Nira Radia, a corporate lobbyistand other big profile people involving politicians, business men and media person.

Conclusion:

Corporate Lobbying is advisable at certain regulatory limits . Solid laws are required to

regulate corporate lobbying and should also be brought under the purview of RTI(Right to

Information).


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References

Communication Convergence Bill:

a. Excerpts from Communications Convergence BillInputs from CAG report.

a. Supreme Court quashes 122 2G licences awarded in 2008". 3rd Feb, 2012, DNA.b. "Five crore fine for Unitech, Swan and Tata Teleservices". 2nd Feb., 2012, NDTV.

Inputs from CAG report

1. "Here's how CAG report on 2G scam blasts Raja". Rediff News.2. What is 2G scam"? NDTV.3. What is 2G? MSN News.4. "Time Specials: Top 10 Abuses of Power". TIME magazine. 17 May 2011. Retrieved 23 February

2012.5. Chronology of 2G scam". May 20 th, 2011. Economic Times.