DoT may not allow spectrum sharing by 3G operators

Spectrum sharing was expected to be part of the National Telecom Policy-2011 and the operators were looking forward to it, but the government’s decision not to allow this may impact their business plans

New Delhi: After their third generation (3G) roaming agreements being termed as ‘illegal’ by the Department of Telecom (DoT), telecom firms may be in for another shock now with the government deciding against allowing spectrum sharing in this segment, reports PTI.

Spectrum sharing was expected to be part of the National Telecom Policy-2011 and the operators were looking forward to it, but the government’s decision not to allow this may impact their business plans, sources in the know said.

Although no specific reason was given for not allowing sharing of spectrum, sources said this may be allowed in case of two operators having similar frequency bands.

“Spectrum sharing will not be permitted among licencees having 3G spectrum (in the same circle),” according to the sources.

The Department of Telecom (DoT) has already termed the 3G roaming agreements among various operators as ‘illegal’.

The Telecom Dispute Settlement and Appellate Tribunal (TDSAT) is already hearing the dispute on this.

Private operators—Bharti Airtel, Vodafone Essar, Idea Cellular, Aircel and Tata Teleservices—have also filed a caveat in both the Supreme Court as well as the high court apprehending that the government may appeal against the TDSAT order which dismissed DoT's plea that the telecom tribunal has no jurisdiction over the intra-circle 3G roaming pacts.

Earlier, the telecom tribunal TDSAT had dismissed the government’s plea challenging its jurisdiction to decide on 3G roaming dispute, but directed operators to submit copies of their agreements to DoT.

The tribunal also directed five operators to hand over copies of their 3G roaming agreements to the DoT. It also said that DoT, as per its earlier statement, would maintain confidentiality of the agreements.

DoT had questioned the jurisdiction of TDSAT saying that the tribunal has no power to look into the licence terms and conditions entered among the operators and the DoT.

The TDSAT had also given a lifeline to private telecom operators by extending its interim order that restrained DoT from taking any coercive action against them.

Last year, passing an order on 24th December, the tribunal had directed the DoT not to take any coercive action against telecom operators.

A day prior to that the government had asked the five telecom operators to stop their inter-circle roaming on 3G bandwidth within 24 hours and it was challenged by Airtel, Vodafone, Idea, Aircel and Tata Tele before TDSAT.

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Ponzi schemes: The fraudulent art of chain game

Even as India bans pyramid schemes under a statute called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, the country continues to be a happy hunting ground for pyramids because our legislation is deliberately unworkable

Each pyramid or a multi-level marketing (MLM) company has typical business plan. Get more into their scheme/plan and earn commission on it. The level of income, commission, attached to recruitment, rises as new members pour in. However, this technique, experts say is bound to collapse the plan, as it is mathematically unsustainable.

According to the Robert Fitzpatrick co-author of the book, False Profits, the first book-length analysis of pyramid schemes and multi-level marketing, such MLM enrolment technique is the root cause of the failure of these schemes.
On his blog, titled, “This is Not a Pyramid”, (http://www.falseprofits.com/files/6b364baa6fc2093ce159e272bbc423e5-34.html) he has presented a satirical explanation on the typical MLM enrolment plan. “Each one, just like you, gets the right to recruit as many as they can, and every time the person they sign up as a salesperson makes a purchase, they get paid, just like you do, on your recruits’ purchases. But, here’s the kicker! You’ll get a payment on the purchases of their recruits? Think about that! If you sign up five new salespeople and they each do the same, you have 25 more salespeople working for you, a total of 30.

Remember, you didn’t get money from the sign-up fees, only on the purchases made after the sign up fees are paid, and you didn’t get paid to recruit, but you got paid because you recruited. Is that perfectly clear?”

He adds, “When their recruits (the 25 additional salespeople) each recruit five more, you’ll get paid on their purchases to! That’s 125 more! Now, you’ve got155 salespeople, each one making purchases and you’re getting a commission from every one of them. How’s that sound? All you need to do is find five new salespeople.”

However, Mr FitzPatrick explains that, “it is obvious no one will actually make the promised profits, unless they recruit others to invest as ‘salespeople’ and the newly recruited salespeople, in turn, would have to do the same, ad infinitum. The presenter makes it obvious that it's all about recruiting, even as he insists it all about sales.  (No one is ever paid to recruit!)  Compounding rewards from recruiting are promoted as the main attraction of the scheme's ‘unique’ compensation plan.”  

Generally, such plans are divided in two categories—pyramid and MLM schemes.

Both have certain difference with pyramids being pure fraud. Their business is unsustainable—they promise payment for goods or services of dubious value. Often the products are notional, something like SpeakAsia, which claimed to sell e-zines (online magazines). MLMs claim to be serious businesses and have a product to sell. For instance, Amway, Tupperware, Herbalife, etc.

In case of MLMs, often people give up on selling the product. According to False Profits, 50-70% of the ‘distributors’ (members) quit in the first year and less than 1% of make money.

Take the case of Vivek Kumar (name changed) an engineering student, who in the lure of earning extra money invested in one such MLM scheme selling personal care products. Soon, he was unable to convince anyone to buy or invest. He eventually stopped chasing people and neither was his principal recovered, nor were the products sold.

More importantly, since most sensible countries have placed outright bans on pyramid marketing schemes, they tend to disguise their true nature by pretending to sell a product or a service, often of doubtful value. Most MLMs have attracted lawsuits due to high start-up costs, tiered sales and exploitation of personal relationships and cult-like sales techniques.

According to False Profits, the US courts often use the 70% test to analyze if the plan, based on building a downline, is legal or illegal. The test says that all the MLM must derive at least 70% of its income from retail sales to non-distributors. “If less than 70% of income comes from sales to these non-distributors, the courts have concluded the MLM company is in the business of endlessly recruiting distributors who recruit distributors. In short, they are pyramid schemes, not sales and distribution companies.”

But Mr Fitzpatrick says that even if the plans pass 70%, which also used by the Federal State Commission (FTC) test, the salespersons would still lose their money. “This is because a pyramid scheme is inherently deceptive and harmful. The fraud is in the design and the pay plan. Regardless of the minimal retailing that occurs per salesperson, under the scheme's compensation plan, recruiting a downline is still needed to recoup expenses.”

He adds, “By a pyramid's design, only a small minority can be in the upper ranks and have an adequate downline to achieve profitability. All the others are that downline! Like all MLMs, this scheme pays the recruiters more in commission, per sales of the entire downline, as their downline grows through recruiting.”

Interestingly, even as India bans pyramid schemes under a statute called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, the country continues to be a happy hunting ground for pyramids because our legislation is deliberately unworkable.

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COMMENTS

AntiPonzi

5 years ago

It is greatly surprising why the union Government is not coming out with any legislation against Multi level racketeers!!! The opposition is also silent on MLM scams.

Vikas Gupta

5 years ago

Yes, u r very right that due to the favourable conditions in our country, these ponzi schemes grow like INSTANT FOREX. Our Govt. must look into that seriously.

Plan panel defends govt’s decision to go slow on disinvestment

“Disinvestment will be decided by market conditions. So if market conditions are not normal, it is sensible for the government to hold back,” Planning Commission deputy chairman Montek Singh Ahluwalia said in an interview to a business news channel

New Delhi: Defending the government’s decision to hold back disinvestment due to bad stock market conditions, the Planning Commission today said the process of stake sale in state-owned companies could begin after the improvement in market situation, reports PTI.

“Disinvestment will be decided by market conditions. So if market conditions are not normal, it is sensible for the government to hold back,” Planning Commission deputy chairman Montek Singh Ahluwalia said in an interview to business news channel CNBC TV18.

He further said: “I don't think there is any change in the government’s plans that we can realise the value of these assets over time. If the government decides not to disinvest in the certain period because it feels the stock prices are unduly low, that's not only understandable but it is actually quite a sensible decision.”

The Department of Disinvestment (DoD) is running against time to meet its ambitious disinvestment target of Rs40,000 crore for the current fiscal. Till date it has been able to raise only Rs1,145 crore through disinvestment in PFC.

In order to fast track the disinvestment programme, the DoD had sought opinion of concerned ministries for buyback of shares and prepared a list of cash-rich PSUs in this regard.

Several ministries like oil, power, steel, coal and mines are believed to have opposed the proposal as it could impact the business expansion plans of the PSUs.

Market regulator Securities and Exchange Board of India (SEBI) has relaxed norms for buyback of shares and dilution of equity by companies.

The new norms would help the companies to complete the process of selling shares within days against the normal process which can take months, a move that will facilitate offloading of government shares in central PSUs.

Mr Ahluwalia said that timing of the disinvestment will be decided by market conditions.

“I think we will continue with the disinvestment and the timing of the disinvestment will be decided by market conditions. Which means that whenever we put a number in for disinvestment, it assumes normal market conditions,” he said.

He also brushed aside concerns about the impact of failure in disinvestment front and its impact on the government’s fiscal deficit target of 4.6% of gross domestic product (GDP) in 2011-12.

“If, for example, a certain amount of resources get shifted from one year to the next, I don’t think that the impact of that on the fiscal deficit should be a matter of great concern,” Mr Ahluwalia said.

He also said that in the next three months the government should focus on removing impediments to project implementation.

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