The Pangs of Protecting Privacy

Is “Privacy” a fundamental right? The Supreme Court is currently seized of the matter with petitioners ranged against the govt. that contents that it is not. The judgement expected end Aug 2017 shall have an epochal impact on posterity.

While the honourable Supreme Court, in Oct 2015, ruled that a citizen cannot be compelled to have Aadhar as a necessary condition to avail centrally sponsored welfare schemes, it has found no fault, in Mar 2017, with the government’s choice – vide Aadhar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, 2016 - to make Aadhar mandatory for “non-welfare” activities like opening a bank account or filing Income Tax returns. The Supreme Court order of August 11, 2015 restricting Aadhar use to only PDS, Kerosene & LPG was later amended to include MNREGS,  National Social Assistance Programme pensions (old age, widow and disability pensions), employee provident fund (EPF) and the Prime Minister Jan Dhan Yojana (PMJDY)

 Advantages of Aadhar Linkage

There is no denying that DBT (Direct Benefit Transfers) has brought in greater efficiency in public spending & reduced corruption by weeding out bogus beneficiaries; the govt. has attributed Rs Rs 49560 crore in savings during the period 2014-16 vide this initiative & to buttress its argument quotes a World Bank 2016 report that claims that Aadhar if extended to all social welfare programs has the potential to create a saving of $11 billion. 

Linking PAN to Aadhar could help identify tax evaders too. In a country where less than 4% of the population pay Income tax – including TDS – a shift to digital transfers vide UPI (Unique Payment Interface) would add a digital footprint to the metadata providing an opportunity to shift to an arguable alternative consumption tax model.

A national criminal database based on Aadhar could help prevent crimes of the Uber kind where an Uber driver - a noted offender in UP - came to Delhi, got a driver’s license & molested a passenger. Going forward there is a case for linking Aadhar to the voter ID cards to eliminate bogus voters to bring about a much needed clean-up of the much maligned electoral process. 

However, other concerns remain.

The Emergence of a “Big Brother” State & “Data Oligarchs”

When Aadhar project was initiated in 2009, under Nandan Nilakeni, as a deliberate policy, to address privacy concerns, only 5 data points were collected from all individuals: Name; Address; Date of birth & Biometrics – iris scan & finger prints. The govt. later extended it to the JAM trilogy – Jan Dhan bank account, Aadhar & Mobile – & now to PAN cards thereby adding financial details to the data master. The National Academic Depository (NAD) containing educational records connected to Aadhar adds another data point.  If credit & medical records too are linked to Aadhar the enormity of information at the govt. hands is staggering, liable to be misused for political purposes in the absence of adequate checks & balances. An Orwellian “Big Brother” surveillance state - hiding under the veneer of security threats - is a distinct possibility.

The creation of “Data oligarchs” is also a cause for concern. Telcos, ordered by GOI to authenticate customers using aadhar can profile their customers based on an individual’s music, movies, videos, news consumption & chat topics of interest; running their own payment gateways or by using the UPI (Unique Payment Interface) they would track digital payments too.  Telcos thus do not run a dumb pipe any longer. Likewise, Google collects metadata based on an individual’s search interests & mail contents while Facebook collects demographics, geographics & psychographics of its users; GPS activation makes physical tracking easy. Since citizens are not aware of the nitty gritties & sign off privacy in their dealing with social networks, Telcos et al, due to ignorance, it is the government’s bounden duty to legislate norms for the same.

Breaches Galore

Such a rich database if it falls into wrong hands could lead to extortion calls leading to a security nightmare. 

Recent events do not inspire confidence on data security. A probe by NPCI (national Payments corporation of India) found a malware-induced security breach in the systems of Hitachi Payment Services -  which provides ATMs, point of sale and other services in India.- during the period May-Aug 2016,  effecting 3.2 million debit cards that forced banks to either issue new cards or request customers to change their PINs. Jio customer database of 10 crore customers along with Aadhar nos. was posted on the website magicapk.com, As per a Mint report, on 25 April, many government departments, including the ministry of drinking water and sanitation, the Jharkhand Directorate of Social Security, and the Kerala government’s pension department, had published Aadhar numbers of beneficiaries of the schemes. On 1 May, Bengaluru-based think tank Centre for Internet and Society (CIS) reported that 135 million Aadhar nos were made public by a Central government ministry and a state government. This calls for stronger measures on data security & penalty on violators.

Conclusion

Since India is a signatory to the Universal Declaration of Human Rights in 1948 and the International Covenant on Civil and Political Rights in 1979, a “privacy law” is in order. The UN General Assembly has appointed a Special Rapporteur for privacy since they recognised privacy as a global concern, especially in the digital age. The EU had gone far by allowing freedom to an individual to decide on deleting their digital footprint; it allows the freedom to be " left alone" - to remain anonymous.

A distinction though has to be made between “Privacy” vis a vis “Data Protection”; while data protection has to be absolute, privacy can be subjected to reasonable restrictions the contours of which should be strictly defined by law; going forward surveillance should be allowed subject only to court approved orders & new issues on privacy raised due to the advances of technology or a perverted minds judged on a case to case basis 

Indian Telecom Industry: At the crossroads

The Indian Telecom industry has de-grown by 7.35% in GR (Gross revenue) & 15.6% in AGR (Adjusted Gross Revenue) in the FY 2016-17 over the previous year courtesy the Jio launch that has hastened consolidation & accelerated layoffs. The Voda-Idea merger announcement pushed the consolidated entity into the numero-uno position in RMS (Revenue Market Share) while the Airtel-Tata propinquity is a strategic attempt to narrow the gap by the dethroned leader; Aircel-MTS -Reliance Communications merger completes the picture with BSNL-MTNL being the PSU challenger. It shall henceforth be a 5 player game.

Jio’s launched officially in Sept ’16 & by end May ‘17 had quickly accumulated over 11.72 crore customers of the total mobile broadband usage base of 27.28 crores (43%). India with a total mobile base of 118 crores & wireless tele-density of 91.74% leaves very little space for customers acquisitions, new to the category.  Wireless internet user base, end Mar ‘17, was 40.06 crores – of which 14.5 crore is a narrow-band base, albeit shrinking - indicating that 78 crore users are pure voice customers. The industry’s VLR fig of 86.34% also indicates a steady increase in customer quality & retention although it varies across operators with Idea highest at 101% & MTNL lowest at 47%.

Jio Strategy

Jio’s brand promise of perpetually charging only for data & not for voice is a clever attempt at doing what they know that competition cannot replicate. Their plans: Unlimited voice at Rs 149/- & unlimited voice + data of 1GB per day at 309 for 28 days simplifies tariffs in an over-communicated world; however, their net revenues are likely to be low, perhaps negative, since the IUC(Interconnect charges) at 14 paise per min (PPM) for Mobile calls has to be paid to the recipient operator. Had Jio launched a starter pack at Rs 49/- with all voice calls at 14 PPM, it would have been a better proposition despite denying them the opportunity to showcase “voice free”. Hence their attempts to push the regulator to remove IUC charges would continue despite protestations from the other operators.

Post securing a large 4G base in wave 1, Jio attempted to target the Hi Value 2G/3G customers in wave 2, vide JioFi launch that provided 150Mbps upload & 50Mbps download speeds for upto 32 devices - smartphones, laptops, tablets & smart TVs - with a heavy duty 2300mAh battery that promised a 5-6 hour surf backup – thereby providing mobility while relieving the need for an electrical connection. At a cost of Rs 1999/- - much lower than the cost of a new 4G handset - you could make Video and HD Voice calls, send SMS and set up even (5+1) Audio & (3+1) Video conference calls with the Jio4GVoice app. They now seem poised to target the 78 crores pure voice customers, under wave 3, with the launch of a 4G handset at Rs 499 - 999/- which would involve a heavy subsidy of over Rs 1000/- per handset; since it is likely to be a pure 4G handset – not supporting 2G/3G - a customer is unlikely to "unlock" the device & shift to competition till the time their 4G networks too are not ubiquitous which is at least a year away. Lower the subsidy, higher the chances of targeting the replacement market alone reducing the size of the pie.

Looking back, the “Monsoon hungama” offer, of 2003 - when Rcom offered handsets at Rs 501/- -  it can logically be presumed that the proposed offer too would attract subscribers at the "bottom of the pyramid"; the corollary to such an induction is that it would put off Hi Value customers. By launching JioFi before the proposed roll out of the low cost handset, Jio appears to have factored this in; however, it would be difficult to make a Hi-Value iPhone customer sustain the Jio connection comfortable in the knowledge that a daily wager too uses the same brand; jio, therefore, could face a brand related challenge.  Likewise, Jio’s Lyf handsets lack robust service centres & that could impede "customer experience" & consequently "word of mouth".

Wave 4, would concentrate on broadband; reliance is already testing its broadband services of 100 Mbps & 100GB in key cities; armed with an MSO (Multiple System Operator) licence it would use the same infrastructure to attack the cable business as well. Expect therefore a consolidation in the cable industry as well.

Jio would be better advised consolidating penetration in "family" as a unit by offering a quad core product – broadband with a cable connection plus 2 mobile connections at Rs 1499/-; their attempts at rate revision by offering unlimited voice with 1GB data per day for 2 months at 399/- would help in ARPU accretion & earn analysts praise in the expectant hope that full charging would commence by Q3 FY 2017-18.

The Strategy of the Incumbents

Airtel-Tata & Voda-Idea could follow a different strategy of segmented offers taking advantage of their entrenched UnR (Usage & retention) machinery. They currently appear to be operating on the following 3 broad customer segments

(a)Customers not showing a dip in usage: Manage customer loyalty through better service with a disproportionate focus to "ring-fence" Hi value prepaid, postpaid mobile & broadband customers. The postpaid product of Jio lacks teeth & that helps the incumbents.

(b)For customers showing a dip in usage:

(1) Offer them full talk time offers & rate cutters to induce higher usage

(2If the above fails & customers show a persistent dip in usage over consecutive months, a Rs 349 plan that serves unlimited voice + 1GB data per day - a marginal premium over the Rs 309 plan of Jio.

(C)Customers who have migrated to Jio: Match Jio on voice & data while protecting the SMS revenue – despite the SMS segment shrinking.

The incumbents also appear to be veering towards the following broad strategies

(a)Retain the advantage of top ups as low as Rs10/- which Jio lacks; students with low pocket money or daily wagers have been traditionally seen to prefer low sachet packs.

(b)Don’t burden their distributors with handset sales in a bid to preserve the channel’s working capital; this is a wise attempt at avoiding the risks of technological obsolescence, non-receipt of price drop differentials to the channel & the consequent channel angst. Instead, allow handset operators to push 4G handset sales vide “bundled offers”. This is inherently a cheaper option as compared to handset subsidy.

(c)Get aggressive in the post-paid & enterprise segment where Jio lacks an effective product & service back up. Airtel – Tata merger would be attractive on this count alone despite Tata Tele being burdened with a Rs 30,000 crore debt; of course bundling Tata Sky & Tata Communications - which are otherwise profitable entities - with Tata Tele in the merger talks makes it a win-win. The combined entity can strengthen their hold on the 2.41 crore customer wire line segment, where Bharti has a 16% share to Tata’s 7.6% against the dominant PSU (BSNL+MTNL) share of 69.6%; other private players have no significant play in this segment yet.

Conclusion

Mergers however induce its challenges of manpower rationalization, channel resizing & reopening of vendor negotiations & that could change the RMS stack rankings. While Airtel- Tata, Idea-Voda & Jio have the financial muscle to sustain a long bloody game, the same cannot be said of BSNL-MTNL or the Reliance – MTN – Aircel combine. A 3 player scenario eventually seems to be a distinct reality; if idea-voda delay investments on fibre it could well be a 2 player game. While players shall regain pricing power, with further consolidation, it is unlikely to happen soon. Therefore, expect the industry to seek & secure concessions from the govt. on reduction of SUC (Spectrum Usage charge) & rationalization of licence fees instalments; a rethink on net neutrality in a bid to gain a revenue share from the OTT (Over the top) players like Facebook could be their other demand.

It would be safe to assume that the next 6 quarters would see a lot of action & bloodshed in this sector eliminating a lot of professional careers & corporate brands in the bargain.

How Can India Contain China

The Chinese ingress into the DoklamPlateau in the Sikkim-Bhutan-Tibet tri-junction seems to be a reaction to the Indo-US joint statement issued after the Modi -Trump meet last month; while China was unmentioned, the call for ensuring "freedom of navigation, overflight & commerce" in the Indo-Pacific, resolution of "territorial & maritime disputes peacefully" & regional connectivity vide "responsible debt financing instruments" while ensuring "respect for sovereignty & territorial integrity" - an endorsement of the Indian Position on CPEC(China Pak Economic Corridor" -  was a severe indictment of China. The eyeball to eyeball confrontation of about 3000 soldiers each supported by the belligerent media of their respective countries was a logical consequence, that has upped the ante forcing the intervention of diplomatic corps to strive for a face saver for both sides. The current confrontation would end – since the Indians enjoy tactical superiority in the current geography – but with the border delineation still unclear & undecided, the possibility of a confrontation in some other sector in due course cannot be discounted.

Brief History of the Indo-China Border dispute

While India reiterates the colonial British stance that the McMahon line is the official Indo-China border, the Chinese have rejected the Shimla agreement of 1914. Post the Indian independence, sovereignty disputes persisted in the eastern sector of Arunachal Pradesh (Tawang) & the western sector of J&K (Aksai Chin). Chinese Premier, Zhou Enlai, in 1959, proposed an Indian concession on Aksai Chin in lieu of a Chinese concession in Tawang to settle the boundary dispute which was rejected by India; the subsequent “forward post” policy implemented without military rigour led to the 1962 war humiliation; the diplomatic blitzkrieg failed since the super powers were involved with the more pressing Cuban Missile crisis then. India lost the entire Aksai Chin to Chinese occupation. Skirmishes recur & in Sept- Oct 1967 at Nathu La & Cho La & in 1987 at Sumdorong Chu, in Arunachal Pradesh, the Indians gave the Chinese a bloody nose buttressing Defence Minister Arun Jaitley’s argument that India of 2017 is not the India of 1962.

Why the Doka La Incursion?

The pronunciations of the Chinese think tanks alludes to 3 strategies: Put India on notice that any hobnob with the US to challenge the Chinese in the Indo-Pacific would be countered; force Bhutan to establish diplomatic relations with China & emerge out of the Indian security cover consequent to the 2007 agreement; & to snub & prevent the rise of a potential challenger – India. The Indian intervention is strategic for allowing the Chinese to own strategic heights overlooking the "Chicken's neck" - the Siliguri corridor - our only gateway to the North East is perilous & pregnant with consequences. While the current standoff would subside, the peaceful rise of China is an oxymoron considering the disputes in the East & South China Sea; therefore, a long term plan to contain China is a dire need.

Long term plan

 (1)Bharat Mala

Strategic expert Ajai Shukla indicated that the Chinese initially send herders into disputed areas, followed by the PLA (People Liberation Army) personnel to build watch towers & bunkers & finally seal the “creeping acquisition” vide building infrastructure.  China, intelligently, thus continues to gain territory without firing a single bullet or a missile.  India should therefore accelerate the construction of the “Bharat Mala”

For details see http://meetrk.blogspot.in/2015/05/geopolitics-of-infrastructure-indias.html

(2)Disproportionate focus on Air Defence

China has a military strength of 2.3 million against India’s 1.3 million; if Pak’s 0.6 million is added India faces foes enjoying a 2:1 advantage in conventional military terms; rational to assume that equipment advantage too shall be proportional although the relative advantages could differ in each category.

China is a $11 trillion economy & India 1/5^th that no; it is reasonable to assume that military budgets are proportional to the size of the economy. Thus while China cannot annihilate us – just as we cannot finish off Pak – since all are nuclear powers, we simply cannot wish away a military superiority in a  2 front war despite the brave averments of our Army Chief, Bipin Rawat, that India is ready for a 21/2 front war – the last half referring to the Maoist insurgency.

A disproportionate focus on the air force, air defence & missile strength should be the medium term plan to protect the land borders; in the absence of good border infra, mobile airlifting of defence forces to forward posts at lightning speeds should be our strategy which demands activation & renovation of border helipads/landing sites. Sea denial in the Indian Ocean is contingent on availability of 3 aircraft carriers & a disproportionate submarine superiority which we lack; India has 13 submarines - all nearing the end of their lifetime of about 25 years - while China has about 50 submarines; they have a higher no of nuclear submarines that can stay undetected under water longer. They have entered into an agreement to sell both Pak & Bangladesh their indigenously built subs encircling us further. 

However, there is one saving grace; the Chinese Armed forces are notorious for huge corruption in arms acquisitions, running private enterprises & nepotism in promotions affecting the capability matrix. While President Xi has been trying to mend the same, it is a long torturous process which can be exploited by India & its allies.

(3)Trade

China exports & imports to India are worth about $60 billion & $10 billion respectively; indian exports have been dipping & imports galloping increasing the trade deficit. Squeezing China on trade is difficult despite the deficit since exports to India account for only about 2.5% of Chinese overall exports. Trade sanctions even if implemented will ensure that the goods find their way into India vide a third country courtesy their pricing superiority. China supplies cheap telecom & power equipment & barring their imports shall lead to increased consumer expenses in those sectors. Furthermore, sanctions would be an anachronism in a scenario where India is a supporter of “free trade” under the WTO (World Trade organization) aegis. Efforts should, therefore, be more concentrated on reducing trade deficit & gaining greater market access in China.

(4)Challenge the “One- China” Policy

As per strategic expert Brahma Chellaney, India should use the 3T’s – Trade, Taiwan & Tibet – to tame the Chinese. Trade sanctions are suicidal but imposing non-tariff barriers to force China to the negotiating table would be wiser counsel.

China can’t be overtly prickly about its sovereignty while being insensitive to Indian concerns on CPEC (China Pak Economic Corridor) passing through POK (Pak Occupied Kashmir). China should be gently reminded about the same & other fault lines.

Hong Kong was ceded to China in 1997 by the British & this region has been governed under the “One Country, Two Systems” principle bequeathing its citizens greater democracy. However China has been slowly wresting greater control & President Xi was welcomed by demonstrators when he visited it as part of the 20 year celebrations recently.

Fault lines, in China, that can be exploited include Tibet, Taiwan, Manchuria, Inner Mongolia & Xinjiang - which account for about 58% of the total area - post factoring in a Chinese response: support for Maoists & North eastern rebels; & supporting the  independence of Sikkim. Support for the Muslim Uighur rebels of Xinjiang would be a wrong strategy since it would willy- nilly mean supporting Muslim fundamentalism pushing the Chinese to support insurgency in J&K. When the Dalai Lama was allowed to Arunachal Pradesh this year, China reacted by renaming 6 areas of Arunachal; expect, therefore, an Indian action to be responded by a severe reaction from China. China persists with issuing staple visas to the inhabitants of Arunachal & J&K which they deem as "disputed areas"; an Indian retaliation on similar lines is in order.

(5)Military co-operation US-India-South Korea-Japan-Vietnam-Australia

India gained greatly during the Bangladesh war of Independence in Dec 1971 courtesy the treaty of Peace, Friendship & Co-operation signed in Aug, with the Soviet Union the same year; else President Nixon was keen on the US intervention in the war on Pak’s behalf & only the fear of a Soviet support for India held him back; the USS Enterprise - of the 7th fleet - however did sail towards Indian waters.

To take on the Chinese behemoth a US-India-South Korea-Japan-Vietnam-Australia “string of pearls strategy” is in order; these countries would come together courtesy their common grouse against an aggressive China in the East & South China Sea.

For Details see http://meetrk.blogspot.in/2015/07/disputes-over-islands-in-east-south.html

While being part of Obama’s “Pivot to Asia” made eminent sense, prudence now demands that we should be wary of Trump’s eccentricities & “deal” prone nature.

(6)Bide for time

China’s “One Child Policy” has 16 retirees per 100 today which is projected to increase to 64 by 2050; a greying population has its own strategic challenges; social strains in the absence of a good social welfare net are inevitable.

In the unlikely event of China declaring war, Indian media along with the world media - including those operating from Hong Kong - would start beaming stories that could elicit war protests forcing the intervention of the UN. While Chinese media would only play the official line, news from Hong Kong, Taiwan & the Chinese diaspora would trickle to the mainland leading to a stock market crash killing the prospects of the soft landing of the Chinese economy which has been kept afloat through govt. intervention; flight of capital would accentuate the process.  Indian economy too would suffer collateral damage though. India should therefore bide for her time; strengthening cyber warfare capability to infiltrate Chinese weapon designs & future power projections should therefore be our short term ploy.

Conclusion

China is too large to be taken on alone. Shunning Chinese products as advocated by rabble rousing twitteratti is not a completely thought through solution. Planning to grow the economy at a rate at least 1.5 times our Northern neighbour for the next 2 decades & strengthening our defences simultaneously would be a better strategy. In the intervening period following our “string of pearls strategy” advocated earlier would be a better alternative.  

China still prides itself as the “Middle Kingdom” around which the entire world revolves; perhaps, it believes that it is the only civilization that has forced its way back after an interregnum unlike the Indians, Mongols, Greeks or Romans. The Indian civilization too demands a similar glory & a peaceful rise of the Asian neighbours based on the principles of “Panchsheel” is always a preferred option. India’s ascent is not at the expense of China’s rise; however, if our actions are interpreted as a challenge, so be it.

Modi – Trump Meet: The Takeaways

Prime Minister, Modi’s  5^th sojourn to the US since 2014, was a “getting to know ” President Trump visit; that it passed off without any hiccups is a credit to foreign Secy. Jaishankar who was there much earlier to plan smooth optics. The Indian side was perhaps working on three strategies: entice “Businessman” Trump with defence deals & reaffirm India’s commitment to help him achieve his election pledge of “job creation”- about $6 billion dollars’ worth of arms deals were concluded during the visit; don’t irritate him by raising the H1B visa issue; & get into Trump’s inner circle by inviting a family member to visit India – in this case Trump’s daughter Ivanka for the entrepreneurial summit this fall which was readily accepted. Though achievements were few, that nothing went wrong gave the diplomatic corps some relief who, therefore, touted the visit a success.

The otherwise flamboyant Modi made other concessions in a bid not to irritate the unpredictable Mr Trump: gala rock star concerts of the Madison Square kind were replaced by quieter close door meets with the Indian diaspora & industry; no reiteration of the Paris accord or repudiation of Trump’s castigation of India receiving “billions of dollars” in lieu of being a signatory to the same accord. Modi was advised rightly to steer clear of these otherwise prickly issues & he followed the script. At India’s instance, no questions were invited by both the leaders during the Press meet to avoid controversies.

Trump however was not quite as generous: a committed germophobe he was visibly uncomfortable with Modi’s bear hugs vis a vis his proactive hug to the Japanese PM Abe a few months earlier; he insisted on the trade deficit being brought down & spoke about his efforts to negotiate a higher price for gas supplies to India deviating from the prepared text.  While Shinzo Abe of Japan, Angela Merkel of Germany & Xi Jinping of China were hosted in Trump’s private resort Mar-a Logo, Modi had to be content with a meeting at the White house – a subtle allusion to the priorities accorded. Indian interlocutors were happy at Trump’s pompous concession that “PM Modi & I are world leaders in social media” & fervently hoped that Trump’s pride would not be hurt since he has 32.9 million followers on his personal Twitter account, compared to Modi's 31 million.

Indian gains were few: designation of  Syed Salahuddin of the Hizb-ul-Mujahidin as a “Specially Designated Global terrorist” – negating in the bargain the nuanced difference between home grown liberation fighters & Pak based terrorists;  & a generic support for the Indian stand on CPEC(China Pak Economic Corridor). China’s ingression into the Doka La plateau in the China-Bhutan-India tri-junction & the subsequent sabre rattling is perhaps a consequence to the CPEC allusion in the joint statement.  The rest of the joint declaration covering issues like Afghanistan, terrorism, intelligence sharing and defence co-operation were a reiteration of existing positions.

Trump’s “America First” policy runs counter to Modi’s “Make in India” & perhaps that is the reason the transfer of the F16 assembly line to India was absent from the joint statement. Trump’s “Buy American, Hire American” signed in April overhauled the H1B visa system negatively impacting India which was a large beneficiary of the policy. Trump is a consummate “deal maker” who used the Taiwan issue to seek concessions from China on trade but is now uncomfortable that China has not been able to rein in North Korea; transactional in his vision & bound by his electoral pledges he can never be counted on staunch support. His views on India changed quickly from his campaign promise to give India "a true friend in the White House" to what The Washington Post described as Trump’s way of using “job creation and the Paris climate accords to cast India as an unscrupulous negotiator and a threat to American workers”.  It is, therefore, in India’s interest to be on guard & tread with care.