Month: December 2005

Just a thought:

Both Pune’s and Mumbai’s citizens blame their elected representatives from not caring a damn for the city. It’s true – in both cities, the elected representatives – policymakers – have little incentive to work for the betterment of the city’s residents. The reasons for this, in the two cities, however, are exactly the opposite:

In Pune, since a significant percentage of the population – more so the educated/”influential” population – are not registered voters in Pune, the elected representatives of areas within the city are not accountable to this section of people – they are not the ones who get them (the legislators) elected. A majority of those that are indeed registered voters, (especially in the fringe areas of Kothrud, Aundh, Vimannagar, Wanawadi, Kondhwa) are low-income natives, people who have lived in these areas since they were little more than villages, who are usually swayed by populist policies, or can simply be bought. In central areas of Pune (what used to consitute the “old Pune” city), the infrastructure is typically better, and “quality of life” is significantly higher, than in these fringe areas.

Summary – elected representatives are natives, citizens are not.

In Mumbai, most of the population (that is, excluding the natives from up North) are locals. However, those that frame policies for the incredibly complex web that is Mumbai, are usually not elected from Mumbai. Hence the demand from the citizens for Mumbai to be made a separate administrative region, where representatives would be accountable to the local populace, and hence also the vociferous opposition from the administrators to grant that stauts (given their propensity to treat the city as a cash cow). Indeed, why would the Chief Minister of Maharashtra care a damn about investing so much time and money into efforts to dig the city out of the morass it is in? After all, he is elected from Latur. (We have had, as far as I can remember, only one CM – Manohar Joshi – whose constituency was Mumbai – and only during his Government’s reign did we see any noticable work in Mumbai in terms of infrastructure development – overlooking all of that Government’s other failures).

Summary – elected representatives are not natives, although citizens are.

You don’t hear of these places often, but Estonia, a small East European nation with a population of between 1 and 1.5 million, is showing the world a thing or two about rapid adoption of technology, says the New York Times (free registration required).

The article describes Estonia’s success with technology in the light of Skype which (although registered in Luxemborg) has it chief developers in the capital Tallinn. From the article:

Estonia is developing an efficient technology industry that generates ingenious products – often dreamed up by a few friends – able to mutate via the Internet into major businesses.

These entrepreneurs grow out of an energetic, youthful society, which has embraced technology as the fastest way to catch up with the West. Eight of 10 Estonians carry cellphones, and even gas stations in Tallinn are equipped with Wi-Fi connections, allowing motorists to visit the Internet after they fill up.

and

Internet penetration is estimated by the telecommunications industry to be 49 percent of the population.

Estonians use mobile phones to pay for parking, among other things. Most conduct their banking online, and more than 70 percent file their taxes on the Internet. The state issues a digital identification card, which allows citizens to vote from their laptops.

Estonia is also home that (in?)famous peer-to-peer file sharing revolution, Kazaa, as also Playtech, which “designs software for online gambling services”.

However, being new to the world of capitalism (it is a former Soviet Socialist Republic) also brings a few problems:

Part of the problem for Estonia’s entrepreneurs is the nation’s inexperience in capital markets. It regained its independence only in 1991, after the collapse of the Soviet Union. Estonia’s entrepreneurs do not yet have the Rolodexes of their Scandinavian counterparts. Recently, Tallinn got its first high-tech venture capital firm.

I wonder if India’s corresponding success in IT services (which is more manpower-intensive than niche-market product companies) is due in part to the fact that we face the exact opposite situation – an abundance of labour. How much of the country’s success is because we were able to supply the large number of workers that the market needed? Put another way, if we did not have this large population, would we have attained a similar amount of success with products? Is our success based on the fact that we were able to supply quantity for a market that did not place a huge premium on quality?

Negative questions, no doubt, but which will nevertheless yield interesting answers.

India’s biggest problem today…
… is an interventionist State. Despite a brief start at reforms between 1991-93, the Government continues to be in the business of running businesses. Inevitably, when it is also the policy-maker, protectionist policies are bound to arise, and private players are bound to be put at a perennial disadvantage. Consider the Government’s decision on the 30th of November to deny private operators use of BSNL’s and MTNL’s “last mile” copper wire infrastructure. From the Economic Times:

On unbundling of last mile access of BSNL and MTNL Mr. Maran said the government wants private operators to build their own networks.

“If the state is not in the business of telecom, then their infrastructure can be shared and given to private players but in this case, the state is in the business and they are not in a social service segment,” said Mr. Maran at the Indian Economic Summit.

He also said both MTNL and BSNL are doing very well and there is no necessity to unbundle. “BSNL has done 2.5 lakh and MTNL one lakh in terms of broadband connections and from the peak price of Rs 5,000, today BSNL and MTNL’s connections are available at Rs 250 and Rs 199 respectively,” said Mr. Maran.

Reliance, Bharti and Tata Teleservices want DoT to allow them to use BSNL and MTNL’s last mile network for providing broadband services. BSNL and MTNL account for more than 90% of India’s fixed line subscriber base.

Maran’s quote says it all. If the state is not running telecom companies for “social service”, or it put it more correctly, “social benefit”, then what are they running it for? If profit is the only motive, then the company should be privatized, fully, and right away. Think about it: If there is no “larger good” for running BSNL and MTNL, their motives are just like any other private company. Why, then, should they be at such a huge advantage compared to a private player? First, they have access to tremendous funds (taxpayers’ money) which are not the result of revenue earned by the company. That’s what’s enabled them to build up this vast copper wire “last mile” network in the first place. Second, the parent ministry frames policy for the sector. This is almost always designed to protect the state-owned enterprises in the sector, which is but natural. But is it fair?

For instance, consider the Access Deficit Charge. This is a levy that private telecom operators have to pay when their subscribers make long-distance calls either to fixed-line telephones or to other mobile phones – basically, for any traffic that makes use of fixed-line long-distance infrastructure – and 95% of these revenues go to BSNL**, since it has a near-monopoly on fixed-line infrastructure in the country. Private operators have often suspected that the Access Deficit Charge is used to subsidize BSNL’s own cellular business. Or its International calls – just before TRAI ruled in late 2003 that all telecom operators would have to pay ADC (as opposed to only basic service providers earlier), BSNL cut its ILD (International Long Distance) call rates from Rs. 24 to Rs. 7.20 per minute***.

There is only one reason for the state to be present in any sector – for reasons of “National Security” or “Strategic Importance”. Examples of this include education and defence. The other reason offered by the Indian Government frequently is for “social benefit”. The implication here is that if the state was to exit that sector (from the business point of view), private enterprise would not run services in unprofitable (usually rural) areas, and that this would lead to unequal development.

I do not buy this argument. There are ways for the Government to ensure equal development, or at least prevent creation of a yawning gap between urban and rural areas. One of those ways is for the Government to focus exclusively on running services in non-profitable areas. The funding for such ventures would be generated using, most ironically, the Access Deficit Charge! Of course, it would be called something else!

A Solution:

Here’s how it could work: First and foremost, the Government must privatize both BSNL and MTNL, so that all telecom operations in the country are privately-owned, and there is a level playing field. It must then set up a fresh, fully autonomous company to provide services only to clearly demarcated “unviable areas”. As long as private operators and the State do not encroach into each others’ territories, there is no problem with levying a charge on private operators to fund the state’s efforts to improve connectivity in such rural or unviable areas. This “ADC” ought to be a fixed charge imposed upon every operator, regardless of their size or revenue. Since this ADC is now not based on the access of the fixed-line infrastructure owned by the state, by private operators, it would be unfair to charge the larger player more. (How the now-privatized BSNL charges other operators for use of its network is a completely different matter, and is out of the scope of this article). The only revenue for this company ought to be from the charges imposed on private operators, and 100% of the revenue from these operations must be pooled back into the company’s operations. No profits. In addition, if a private operator wishes to provide operations in a particular “unviable area”, it is free to do so, provided it satisfies certain minimum criteria for connectivity in that area.

However, there has to be a clear maximum time in which the Government must bring rural areas up to speed with urban areas in terms of communication infrastructure, hand over operations to the highest bidder among private operators. If, within this time, a private operator wishes to bid for the Government’s operations in an unviable area, it is free to do so. The more “unviable areas” a private operator takes over, lower is the ADC it has to pay. This is in line with the outcome that the Government-owned company now has that much of a smaller area to run.

Alternatively, and perhaps a more efficient scheme, would be for the autonomous Government enterprise to maintain each unviable area by forming a Joint Venture with a private operator. This would ensure that the Government enterprise yields results up to the mark, and prevents trade unionism from strangling performance. There would be a bidding process right at the start for selecting the private operator for forming a Joint Venture. As mentioned above, the Government must give up its equity after some prescribed maximum time frame to the private operator. In this Joint Venture, the role of the Government is to make sure that connectivity standards are met by the private operator, and that of the latter is to see that performance does not go down the drain.

The idea is for this Government enterprise to undertake upgrading rural telecom infrastructure in the maximum number of areas in the minimum amount of time, and then exit. At the end of that maximum time, regardless of whether or not the Government-owned company met its own targets, the ADC will be eliminated, and the whole country will be free for private players to start operations in. This will ensure performance.

This is a model that could be applied to every single sector – telecom, public transport – including railways, petroleum, electricity, and the like – where the Government is in the business ostensibly so that the poor can also avail those services. Summing up, any model for Government-private partnership in any sector has to be centered around the following tenets:

1. The Government has to get out of “the business of running businesses”.
2. The Government must chalk out clear policies for the sector under consideration and appoint a fully autonomous body to oversee the enforcement of these policies.
3. Private enterprises are free to offer services in whatever areas they deem fit to.
4. Private enterprises must fund, for a fixed amount of time, a Government programme to develop infrastructure in presently unviable areas.

At the end of the day, no model is going to be fool-proof, and cannot guarantee complete success. However, the one outlined in this article (or any one that incorporates the tenets above) has the best chance of eliminating distortionary pricing, ensuring a level playing field, and bridging the gap between urban and rural India. And that, surely, is what even the State wants.

** The Hindu Business Line, September 3, 2005.
*** Businessworld India, December 15, 2003.

Mark Carson has an excellent article on how the Mozilla Sunbird logo reached its current form.

Another addition to the list of my cannot-do-without Firefox extensions: Adblock. Now I don’t know why I hadn’t used this before, given that it’s the in the Top 5 most popular extensions on the Firefox extensions page. Here’s how i’m going to save time while reading the New York Times:

From eWeek, a wide-ranging, exhaustive interview with Lotus’ new General Manager, Mike Rhodin. (Exhaustive, sure – it’s four pages long!). Definitely worth a read.

Mike answers a lot of questions on some pretty prickly issues:

• Clearing the mist around Hannover,
• Supposed declining market share vis-a-vis Outlook/Exchange.
• The awkward Workplace/Notes duality, and…
• Google as a competitor!

I am SO glad that someone is asking these guys about Google/Yahoo. Both the Lotus guys and the Microsoft Outlook/Exchange teams, I mean. How long will it be before either of Google/Yahoo muscle into the corporate messaging and collaboration space? Here’s what Mike had to say:

How do you view Google, friend or foe?

Google is an interesting phenomenon. It’s an advertising company, an advertising company that made money because it had a good search engine. So it’s an advertising company based on a technology, which is a very interesting model in and of itself, and they’re using the capital they’re accumulating with that to branch into new areas. It’s really a fascinating area to watch from an innovation viewpoint because they’re coming out with a lot of cool stuff. But that cool stuff isn’t really new business models yet. It’s really cool stuff funded by capital they’ve built up through their core business, so I’m not sure where it’s going to end up yet.

We recently announced integration with Notes and Google on the desktop, and it’s a great capability. I have it on my desktop. It allows me to find stuff, that’s what Google’s always been good at. Do I view them as a competitor today in my business? Do I view them as a future possible competitor? Probably, depending on where they decide to go.

Oh, and I don’t think the former GM, Ambuj Goyal, is going to be too happy with this question, though: As GM, what are you going to do that’s different from your predecessors, Al Zollar and Ambush Goyal?

Ambush Goyal? :-)