Need for a strong Government and Regulatory Affairs Department in Telcos

• IT Pana
• Sun,27 August 2023

Early 1990s marked the beginning of economic liberalization in manycountries around the world. The Nepali Congress government formed after the first popular movement in 1990 moved towards this direction in a strategic way as part of the economic reforms. The government formulated National Communication Policy in 1992 which paved the way for liberalization in the communication sectors including telecommunication sector. Telecommunications Act and Telecommunications Regulations were enacted in 1997. Nepal Telecommunications Authority (NTA) was established in 1998 under the provision of the same Act and Regulation. Telecommunications Policy was formulated in 1999. This policy guided a slow liberalization of the Telecommunications Sector particularly

–the fixed telephony and mobile telephony. This policy envisaged a duopoly market in both fixed and mobile services. But the so called value added services such as Internet, Network Service etc. were fully liberalized. It also in principle agreed to privatize the state owned telecom operator- Nepal Telecommunications Corporation (NTC), now a company under the Company Act- in a phase wise manner.

United Telecom Limited a joint venture company with 80% Indian investment and 20% Nepali investment was licensed to provide Fixed telephone service based on Wireless in the Local Loop (instead of copper wire-as provided by NTC). CDMA technology was chosen for wireless operation. NTC was given a mobile service license in 1999 with very unpredictable future conditions-that is NTC would pay the same license fees, royalty and renewal that

would be paid and committed by the party licensed through competitive bidding. The mobile service was technology based that is the GSM technology. Ncell (then Spice) was also licensed for GSM mobile operation in 2004. ISP and NSP licenses were given without restriction.

The licensing of NTC’s GSM mobile service, NCell’s GSM mobile service, UTL’s fixed telephone service based on CDMA-1900 WLL technology were not smooth. The problems ensued after licensing and the impacts are more visible now in the telecom sector. NTA also issued license to STM Telecom Sanchar Ltd to provide VSAT based fixed telephone service in the then Eastern Development Region (EDR), to Nepal Satellite Telecom Pvt. Ltd. to operate GSM based basic telephone service including limited mobility service throughout the country but in a phase wise manner starting from the Mid-Western Development Region, and to the Smart Telecom Pvt. Ltd. to provide fixed and limited mobility service to the rural areas of Nepal except the EDR. Everyone knows that all telcos are in problems and STM now owned by

CG Telecom, Nepal Satellite and UTL have no operations. The condition of Smart in known to everyone-its due to the government and NTA is beyond its capacity to pay. Nepal Telecom and NCell GSM mobile renewal case has been a headache for NTA and the Government since 2009 when NT’s mobile license was renewed for the first time and being renewed for the second time in 2014 and third time in 2019 on an ad-hoc basis. Spectrum assignment too were on an ad- hoc, first come first serve basis. Pricing was also ad-hoc meaning no economic considerations were made, supply and demand situation was ignored. Policy agreed in principle that all fees and prices will be to recover the administrative cost of the regulator and government. But this principle was not reflected in practice. Contrary to this policy principle, the government and the regulators were adamant to establish that the renewal fee commitment by Ncell was applicable not only for the first renewal but applies to the second and the third renewal. Now NTA orchestrated a nice drama of spectrum auction. The journalists wrote the auction as ‘historical’. But those who know the basics of supply and demand and the economic rationale of spectrum auction will laugh at such an auction. Under the Rural Telecommunications Development Fund- Billions of taxpayers’ money has been spent but the objectives being nowhere fulfilled rather it has been questioned. The major backbone project miserably failed. The Access Network project though claimed completed with great success-is not scalable to provide service as per the local demand except in places where FTTH has been used.

The government and regulator change their policies, laws and regulations on an ad-hoc basis sometimes without stakeholder consultations and sometimes even if a drama is orchestrated in the name of stakeholder consultations, the views of the stakeholders are not reflected when the policies, laws and regulations/regulatory instruments appear in final form. This has been the case in many instances-whether it is the

case of Interconnection Usage Charge (IUC) or numbering plan, or spectrum auction to cite examples.

It was believed that NT was ‘forced’ to take part in NTA’s 1800 MHz band spectrum auction. The reasons are conspicuous to those who know a little bit about telecom sector. NT too had to pay the auction price for the entire frequency including the one chunk acquired after the auction. It has been heard that NT has been forced to pay the auction price for the spectrum bands in which it was not a party to the auction.

Why all these anomalies are seen repeatedly happening in the telecom sector? Why the telcos who provide the ‘lifeline’ services even under difficult times and also expanding their services to the areas where there is no commercial viability subjected to the whims and fancies of the decision makers who are least aware of or concerned with the implications of their decisions to the sectorial development?

Everyone who has some interest in this sector   knows   the   competence,   integrity and credibility of the decision makers in the government, regulator and NT as well.

This article is based on the hypothesis that all these are happening because the telcos do not have ‘a strong Government and Regulatory Affairs Department’. This   absence   resulted in the acceptance of the ‘force’ or ‘pressure’ to make decisions which are not good for the company and the sector as a whole. The lobby if at all made- were not convincing to the decision maker because the lobbyists did not have evidence-based arguments.

Concept of a Government and Regulatory Affairs Department

The fundamental concepts behind this department is obvious by the name of the department itself. Some would name it simply Regulatory Affairs, some others would name it Government Affairs or Policy Affairs. Still some

others name it Government Relations. It is also called Government Relations & Regulatory Affairs. Still some other name it Government Affairs and Public Policy. Whatever is the name given-it simply means that it is a department who on behalf of the company ‘deals’ with the Government-the policy maker, the legislature- the law maker, and the regulator-an enforcement agency. It also deals with the concerned other non-governmental stakeholders to get support from them.

What does this Department do?

Basically it should     always be vigilant on the policy, legal and regulatory matters which the government and regulators bring into effect that impacts the operation and the business model of the company and the overall Telecommunications/ICTs/Broadband sector. In fact the impact is more pervasive because Telecommunications/ICT/Broadband is not only an industry alone but also an enabler for all other sectors of the economy. To make things clear, Nepal Telecom in partnership with the Rastriya Banijya Bank has entered into digital financial operation. Any policy on telecom/ICT/ Broadband has obvious impact not only on the telecom sector but also on the finance sector that depend on telecom/ICT/broadband services. This applies to all other sectors of the economy as well. Looking differently, any changes in the policy, legal and regulatory framework on the operation of the finance sector, will affect the digital finance service providers too. IT giants like Google, Facebook, and Microsoft etc. Will also be impacted by the government’s policy, law and regulations on Telecom/ICT/Broadband sector. Policies, laws and regulations also affect the stakeholders in the entire ecosystem. No company wants to be negatively impacted by the policy, legal and regulatory action of the government and regulators. Therefore this department is primarily responsible including but not limited to the following tasks-

-      It should act as the repository of the

policy, legal and regulatory knowledge and practices adopted in Nepal and around the world. Its entire actions should be evidence based-based on the global best practices custom tailored in the Nepali context.

• For all activities, the company undertakes, it ensures that the company complies with the existing policy, legal and regulatory provisions existing in Nepal and pertaining to their It keeps track of the changing legislation and ensures regulatory compliance by the company - takes all the permission from the Government and regulator for the company before launching any product or service to avoid any hassles that may arise after the launch of the service or goods. The compliance is mandatory and not optional. Ignorance of law is no excuse. The department knows it well.

• When the government plans to bring a new policy, law or regulatory framework or amend the existing one that has tremendous impact on the operation and business model of the company, it is this department which provides inputs to the government and regulators on the content of the policy, law and regulation that ensures an enabling environment for the sector growth. If the department has established its credibility in its knowledge and experience, the governments and regulators take their advice and inputs seriously and incorporate

• It plays the influential role in shaping the public policy and strategy of the

• It continuously engages with regulators and policymakers so that the commercial goals of the company is not thwarted by the policy, legal and regulatory changes, it helps manage the political risks and crisis that is likely to arise in the company’s

• It develops and leads the public policy campaigns across the full range of

policy areas that impact the company’s operations-areas where the company produces goods and services in the given geographical regions.

• It engages directly with politicians, policy- makers and regulators and thought leaders and lobbies on behalf of the company for company’s benefit. It establishes and enhances a sophisticated political contact network to promote company’s interests and relationships with them.

• It identifies and builds a network of stakeholders that can be grouped together to better lobby with the government, regulator and lawmakers for   creating an enabling environment in which the company not only survives but also

• It builds, maintains and expands relationships with key government and relevant non- governmental stakeholders who matter in achieving company policy

• It proactively identifies the important policy issues and trends that affect the company operation, communicate the same to the company management and board through memoranda, and relevant briefing It advises the senior leadership team and board members on policy, regulatory and legislative matters. It also keeps track of the global best practices applicable to the company business and advise the management and the board.

• It also gives strategic and technical advice at the highest level in their companies, making an important contribution both commercially and technically to the successful implementation of the

• It works with federal, provincial, and local governments on matters affecting their business-for example Right of Way issues, Environmental issues

• It contributes actively to the Company’s strategic and business plans by providing

strategic input and proactively addresses challenges that comes as a result of policy, legal and regulatory actions and changes.

• It engages in policy advocacy to drive growth and innovation in the digital

• It is not only for the company it works- it also helps governments and regulators seize new opportunities through appropriate policy, legal and regulatory changes in a rapidly-changing world of technology and business model. This function is very It helps build capacities of the policy makers, law makers and regulators alike.

Based on the company needs, other functions can be added.

Relevance to NT’s work

We know how the leadership at NT is appointed by the government. We also know who it prefers to appoint. We have seen how the qualifications and other criteria have been changed time and again to pick someone and disqualify some others. In such a volatile and dynamic political situation, it is imperative for NT to have a strong Government and Regulatory Affairs Department that engages evidence- based policy lobbying with the Government, Legislature and the Regulator. It will be difficult for the NT management and Board to make ad-hoc decisions under the ‘pressure’ and ‘influence’ of political or bureaucratic or interest group influence which is against the interest of the company and its shareholders in contrary to the recommendations of the Department. It will be a key department to save NT from heading towards a failure. Had there been a strong Government and Regulatory Affairs Department in NT, mobile license renewal conundrum would not have arisen at first because this Department would not agree to take a license that is contingent upon a set of unknown conditions. There would have been a different compromise. Even if license had been taken as it is now, the

problem would have been foreseen during the competitive bidding for the second mobile license in 2002 and the subsequent events and final license award to then Spice. NT had issues with spectrum fees of 3G spectrum assigned to it. When the spectrum was assigned, the fees was not determined. When the Spectrum Policy was formulated in 2069BS, NT and Ncell both had to pay from the beginning. Had there been a strong Government and Regulatory Affairs Department, they would have managed to decide the frequency fees when it was assigned. Let us take a recent case of spectrum auction of 1800-MHz and 2100-MHz bands by NTA. Those who have read the Spectrum Policy of 2069 and 2073BS, they would have never allowed NTA to assign these spectrum based on auction. Even if NTA auctioned, NT would have never participated in auction. Now NT and Ncell taking part in auctions have artificially raised the spectrum price. This will be reflected in the cost of service. The sector is heading towards a doomsday. NTA would be inspired to auction spectrum for 5G as well. Recent case of NTA’s decision to change numbering format is also a problem for telcos. NT has a number of non performing development projects. All these would not have arisen and if they had arisen would have been addressed by the Government and the regulator long back. Such a department brings the knowledge from around the world, customizes to the local context and help all the stakeholders in making appropriate decision that is win-win for all. Just consider the composition of the Board of Directors at NT. Do you see anyone who knows the issues surrounding the telecom sector? Do they know what is the technology NT should adopt and what is the technology NT should phase-out? For such a Board, this department would have provided the right information on what should be done.

In the presence of such a Department company ensures a right business model thereby making enough profit to further invest in the new technology and provide dividend to its shareholders, the government and the regulator gets right kind of inputs while making new policies, laws and regulatory instrument which are implementable. The government gets the tax benefit. The sector development is ensured thereby and the policy objectives are met. The customers get the quality service at the competitive price. This holistic development attracts the investors both domestic and international. Other sectors   will   leverage the quality service and provide efficient and effective service.

Conclusion

If any telco including NT wants to influence the government, legislators and regulator in the formulation of a policy, law or regulatory instrument that creates an enabling environment for the telcos to operate, it should have a strong Government and Regulatory Affairs Department. The Department’s proactive engagement with the policy makers, legislators and regulators will help create a policy, legal and regulatory framework for the sector that is fair, transparent, productive and efficient which will ensure a sustainable business operation for the telcos.

- Ananda Raj Khanal, the Author is a former Senior Director of Nepal Telecommunications Authority and the Chairman of ICT Development Committee of Nepal Engineers Association. He is a Vice Chairman of the ITU-D Study Group 2 (2014- 2021) and member of the Multistakeholder Advisory Group (MAG) of the UN Internet Governance Forum (IGF)(2019-2021).