DOT Hatao, Desh Bachao

A Clarion call to get rid of the DOT (Department of Telecommunications, Govt. of India) to save the country, issued in an interview with Economic Times of India on April 25, 2000. It had a major impact and resulted in the policy changes that led to telecom revolution in India. ‘DoT Hatao, Desh Bachao’ (The Economic Times, April 25, 2000) Kanwal Rekhi heads The Indus Entrepreneurs (TiE), a group of Silicon Valley executives and entrepreneurs originating from the Indian subcontinent. The contacts and expertise represented by TiE has become increasingly important as India’s own software industry has grown. Recently TiE has been in the forefront of promoting venture capital in India and has also proposed to the government plans to fund the Indian Institutes of Technology (IIT). Rekhi spoke to Bodhisatva Ganguli of the Economic Times on TiE’s activities in India, the need to deregulate telecom and the role of the IT ministry. Rekhi used to be a senior executive at Novell before heading TiE. There’s been some controversy about your plans to fund the IITs. Mostly it was misreporting in the press. The government has funded IITs and has done a superb job, but it has limited resources. Let me give you a perspective on this. I came back to IIT Kanpur in 1994 after I left in 1967, a gap of 27 years. I saw a campus falling apart, the building not painted in years, I felt very depressed. I went back and then it hit me as to why have the alumni not paid back, ti hit me as to why have the alumni not paid back, it hit me I haven’t paid back. So when I came back the next time I asked the directors how come the building was in such a bad shape ? The directors told me that GOI doesn’t give a budget for the upkeep, So how come you haven’t asked us, I said ? We realized that it was time to change things, and so I made my contribution to the IIT in 1998 and others followed. There is a huge reservoir of good will amongst the ex-IITians. I traveled to the US and spoke to the people and everybody was willing to pay back. So we thought we need to use these resources to build the IITs into intellectual power houses. They are OK but not the best in the world. Why would I like to take over IITs – there is no profit in them. But what exactly had you proposed to the government ? We had proposed to help privatize the funding of IITs. Basically it was just knee-jerk reactions from leftists who are sold out to socialism. They are instinctively anti American, who think there is a ulterior motive behind everything. In any case we plan to raise $1 billion for the IITs, Desh Deshpande has proposed $100 mn already. Raising a billion won’t be a problem at all. Tell us a little bit about TiE ? TiE has emerged as a very innovative idea. It’s a synthesis of Silicon Valley culture and some Indian values. But, simply put, our starting role was to encourage our people to become entrepreneurs. Our role was to provide role models, inspiration, education and mentorship for that. The way to do that is to bring people together, so that a network effect takes place. It’s a process which has been very successful in Silicon Valley where a lot of startup activity has happened because of TiE. TiE ha spread to other cities like Boston, New York, Chicago, Atlanta, Seattle, Vancouver, Eight chapters in US. How many members does TiE have ? Over a thousand members and a couple of hundred charter members. Charter members are the mentors, successful entrepreneurs, who contribute time and energy. How many of them are Indians, and from other parts of the subcontinent ? Ninety percent Indian, but then that’s the ratio of Indians and on Indians such as Pakistanis and Bangladeshis in Silicon Valley. Recently some TiE members such as yourself have been involved in setting up venture capital funds. Yes, TiE is a forum for networking but you need to supply the other structures for entrepreneurial activity to succeed, you need to have angel investors, mentors, VC’s. There wasn’t much of a VC setup and so Infinity (a VC fund in which Rekhi is an investor) was setup. Our role is to provide all the structural pieces you need for the entrepreneur. TiE is like a bazaar where people and set up their stall ~ I’m a VC, I’m a mentor, I’m a lawyer so all of them interact and start businesses. What has been your success in India so far ? We’ve just started out. The Delhi, Hyderabad and Chennai chapters were launched in January, Bombay in December while Bangalore started in August. The Bombay and Bangalore chapters are very active. What are the results on the ground so far in India? I understand a lot of startup activity is happening in Bangalore. In Bombay we’ve put some structures in place. Delhi has quite a few entrepreneurs; several business plans are coming to Infinity and other people. I think the impact is there. The real result will be visible when companies will go public or are acquired. Are you optimistic about the way things are going in India? Absolutely, otherwise I won’t be coming back. It was very easy to ignore India in the past. It’s impossible to ignore now. You’ll be a fool to undersell India now that India is finally on the move. Successes like mine, or Narayana Murthy’s are proving to be role models. These are ordinary Indians, if they can do it so can I. And this is raising the aspirations of people. Indian democracy is now responding to the aspirations of the people. No politician can now badmouth IT. This is because IT has become a great hope of the people of India. So what is happening in India is that the Indian spirit is beginning to reawaken. We’re getting our confidence back that we can compete on the world stage. What do you think of the new IT ministry? They are trying to solve a problem that doesn’t exist. The IT industry is very profitables they haven’t needed much financial support from the government, I have a worry that these bureaucrats will find things to do that don’t need to be done. What can the government do for the IT industry? I’ve spoken to the Prime Minister also and I have also spoken publicly, that we need to focus on telecom. Telecom is a shame, the ministry is acting like a monopoly that is focusing on it’s own revenue and profits rather than the national interest. I say “DoT hatao Desh bachao”. One thing that the IT ministry could do is to act as a countervailing force to the ministry of telecom? Like two evils fighting each other? No, no. In that case everybody will lose. We need both to be abolished. What needs to be done in telecom right now? The environment needs to be absolutely opened up for from competition, Put capacity in place so that prices plummet, bring the bandwidth to villages so the village economy can be enhanced very quickly using IT. Make it happen and you will have 100 per cent phone penetration, within the next 10 years. We have only 2 percent penetration, which will become 15% by 2010. Does that basically imply total deregulation of the telecom market? That is the only thing that will work. See what happened in Singapore, Hong Kong and the US. The US revolution that you see in IT is because the AT&T monopoly was abolished. There was a monopoly in US till 83-84. We saw this boom taking place within a few years of its being abolished. DoT is acting like any monopoly trying to protect its own profits and revenues, damn the rest of the country! In the US even before the break up they had the best phone network in the world. But afterwards the US telecom industry became even more advanced, technology was introduced at a much faster pace, and a lot more players emerged offering different services. Phone raises in the US have dropped 99% since AT&T has been broken up. Long distance rates have dropped 99% and bandwidth has grown 1,000 fold. This is a real life example. Look at what happened in Hong Kong or what is happening in Singapore now. The rest of the world is not limited by the Indian bureaucrat’s imaginational. Would you like to comment on the Issue of tax Incentives for expert and software units? I am not a believer in tax incentives. Only 2% of the people pay taxes in India. I believe in a level playing field with low taxes for everybody. If a tax incentive is given it should be given as tax holiday for startup activity for three to four years. The government need money for infrastructure, welfare etc. If everybody is exempted from tax how do you run the government? I am not a believer in tax holidays. Taxation is required for society to function and invent in common goods – primary health, welfare and, national defence. I am not a great believer in tax incentives except in ‘national interest-economic activity’ or startup ventures for a temporary period. What are the drawbacks in the economic liberalization process in India? Let me give you a more conceptual answer rather than a specific one. I haven’t found a liberalizer in the government yet. They seem to be doing a favour to people. They haven’t understood that infrastructure is like circulation in your body. The better it is, the better the whole health of the body. High transaction costs are at the heart of inefficiency, when they set up all these processes and paper work. These process are slowing economic activity down. There is nobody out there to question why we need these processes. At the end of the day there is no great believer in the liberalized free market economy in the government either in politics or bureaucracy. There is a fundamental difference between American and Indian democracy. This is at the heart of the whole problem. American democracy starts by saying we the people give voluntarily some of our powers to the government so we can have some order. But Indian democracy is a successor to the British, where the king was forced to code some of his powers. All the remaining powers stayed with the king. So all the new powers, as yet undiscovered, are with the king – the state. So that is why when internet comes no one has the right to start internet services until the government has formed its policy. In the USA, the internet came and everybody started running internet. So the basic difference is in the philosophical concept.