Friday, September 27, 2013

The Don Fanucci Regime



Don Fanucci represents a milestone in the metamorphosis of Vito Corleone in The Godfather. He wants to “wet his beak” (a phrase he uses), as the young blood in his neighborhood - Vito, Tessio and Clemenza, - are doing business in his area without seeking his blessings. Income earning in his area is Don Fanucci's divine right and those who want a piece of it must pay. This roughly was the approach of colonial governments and kings till the mid-20th century, resulting in a permit and licence raj for almost anything. The movie "Lagaan" was about such a matter. Don Fanucci was deemed a criminal, colonial governments and kings have never been deemed criminals.

The Comptroller and Auditor-General's office, an institution of high integrity, reports on what it is asked to report on, as per the prevailing rules. That’s what auditors do. They don't make the rules.

Their report says that telecom services operators shared spectrum across circles to offer roaming without paying the licence fee, that cost an estimated Rs 200 crore loss of licence fees to government.. For 3 G services - 3rd generation mobile services that makes Internet on phone a service with respectable speeds. That’s the rule.

http://www.livemint.com/Industry/NNq1KYz134wJgdiRr0O4mM/Bharti-Airtels-3G-spectrum-pacts-caused-200-crore-loss-CA.html?ref=newsletter

An objective of such policy is gain efficiencies, especially resource efficiencies. The operators in question have used the available resources (spectrum) to increase service availability to customers. If they make profits they will pay taxes on such profits. If they still make losses, they have to work harder to turn that around. Meanwhile, customers get wider availability of a service and possibly better prices - as all smarter operators realize that this is a win-win for their own customer base and reach

The concept of a “circle” is antediluvian. Its related more to the administrative convenience of telecom services by the arms of government. Hence, when you travel an hour from Bangalore city centre, you are in Tamil Nadu. A further hour or more takes you into Andhra Pradesh (Chittoor). These are trips made daily by a very large number of people. All three places are in different circles.

Many will go to town about corruption in government and the Rs 200 crore loss mentioned in the report and add, “God knows how much they are concealing”.

Contrast this with the recent announcement by govt effectively delicencing bank branch office expansion. Its only restricted by the overall quality of the bank - a factor that prevents citizens from being exploited. Not different from a person passing an MBBS to be allowed to practice as a doctor.

66 years on, its more than the 3rd generation of continuing such an approach in rule making in India. An approach that says, “you have no permission” and "wet my beak", rather than compliment itself on creating an environment that’s caused competition to benefit users. Rules need to be made to prevent exploitation of citizens by services and products - not deny them access or make it more expensive to provide the access.

It’s time to reject the Don Fanucci approach in public policy.