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Today's Hot Stories - January 28, 2013

10 Headlines for Today

(1) Rajnath meets Shettar, says no crisis in Karnataka
(2) India successfully test-fires underwater missile
(3) Brazil nightclub fire kills 245
(4) Hinduja group acquires Belgium media firm
(5) India’s 5-year steel output second highest in the world
(6) Lamborghini unveils Aventador Roadster at Rs.4.77 crore
(7) Messi keeps Barcelona well placed on top
(8) Djokovic retains Australian Open crown
(9) Bell leads England’s charge to victory in final ODI
(10) Ramayana in Arabic unveiled in Jaipur Lit Fest

5 Stories for Today

(1) Telangana decision delayed as Centre seeks more time
(2) Morsy declares emergency in Egypt’s restive cities
(3) Internet tax, a flawed idea
(4) Grundfos to expand
(5) Global economy faced with double-dip recession, warns Anand Sharma

(1) Telangana decision delayed as Centre seeks more time

With the month-long time deadline set by Union Home Minister Sushilkumar Shinde to resolve the vexatious Telangana issue having ended on Sunday, he sought more time stating that the decision might get delayed as consultations with stakeholders were still on and it might take a little time to reach a final decision.

Earlier, echoing the same view, Congress general secretary in-charge of Andhra Pradesh and Union Health Minister Ghulam Nabi Azad said the party wanted to go in for further consultations by interacting with leaders of the Telangana and Seemandhra regions, Andhra Pradesh Chief Minister N. Kiran Kumar Reddy and APCC president Botcha Satyanarayana.

Asked for the deadline within which the decision would be taken, Mr. Azad said: “There is no deadline but the talks will be held as soon as possible.”

The announcement of the Ministers disappointed Telangana protagonists who were hoping that this time the Centre would honour its promise of announcing the decision on the separate State demand . Mr. Shinde, after an all-party meeting on the subject here on December 28 last, said the Centre’s decision would be taken in a month’s time.

As the stir for the separate State restarted in Hyderabad and elsewhere on Sunday by the Telangana Joint Action Committee as well as those who are for continuation of a united Andhra Pradesh, informed sources said the Centre wanted to tread very carefully on the issue as it involved not only of tackling the law and order problem but also the survival of the UPA-II regime at the Centre and the Congress government in Andhra Pradesh.

While MPs from Telangana had threatened to quit the post and the Congress and join the Telangana Rashtra Samiti if Telangana assurance was not honoured, those from the Seemandhra region have threatened to join hands with the YSR Congress if the State was divided.

Considering the catch-22 situation faced by the Centre as well as the Congress, there was no other alternative except to drag the issue further, the sources said.

(2) Morsy declares emergency in Egypt’s restive cities

Egyptian President Mohamed Morsy on Sunday declared a state of emergency and a nightime curfew for one month in three restive cities after days of deadly violence.

Mr. Morsy, facing his worst crisis since taking office in June, said the measures would take effect on Sunday night in the cities of Port Said, Suez and Ismailia.

The three coastal cities have been the scene of clashes for days between police and protesters, leaving dozens dead.

“Let everyone know that the state institutions are capable of protecting the nation, installations and people,” said Mr. Morsy in an address shown on state television.

He added that he had instructed the Interior Ministry, which is in charge of police, to deal “strongly and firmly” with what he called “deviation from law.”

Seven people were killed on Sunday in Port Said, bringing to 38 the number of deaths in the city in two days, according to government figures.

The latest deaths occurred in clashes between police and angry mourners during a mass funeral for dozens of people killed in rioting the day before, reported local media.

Carrying the coffins of people killed in fighting with police on Saturday, the mourners chanted: “The people want to bring down the regime,” said witnesses.

On Saturday, 31 people were killed and hundreds were wounded in Port Said in rioting sparked by the sentencing of 21 local people to death over involvement in deadly football riot.

In Sunday’s address Mr. Morsy offered condolences to families of the dead, but said that respect for court rulings was obligatory.

(3) Internet tax, a flawed idea

A levy will not work as 99.5 % of traffic exchange on the Net happens for free

“We’ve become the bad gatekeepers,” lamented Sunil Mittal, CEO, Bharti Airtel. “When somebody watches YouTube on a mobile and ends up [with a] big bill, he curses under his breath at telecom operators. But YouTube is consuming a massive amount of resources on our network. Somebody’s got to pay for that.”

What Mittal suggested at the Mobile World Congress in Barcelona last year, and is gaining rapid popularity with service providers around the world, was an “inter-connect charge”, an effective Internet tax that would force companies such as Google and Facebook to pay network operators a levy similar to the termination fee that networks pay one another to complete a voice call.

This growing clamour for an Internet tax was obliquely backed by the Government at a U.N conference, held last month.

The advantages for both telecom operators such as Airtel, and the Government (which too might look to levy a similar tax) are immediate and obvious. Telcos, which dole out huge investment for spectrum and network infrastructure, will be able to get a bigger slice of what goes to companies such as Google. This is exactly the new source of revenue that operators, which are suffering from shrinking revenue and rising costs, have been waiting for.

Gated highway

If this is put into practice, service providers would be able to essentially prioritize certain types of traffic, and the “sending party”—Facebook, YouTube— would have to pay Airtel and BSNL for the privilege of reaching consumers.

It’s glaringly obvious to see where this idea, where the “sending party must pay”, originates from however. Data inter-connections in the phone world work this way— where if Rajesh in America, a customer of AT&T, wanted to call Lata in India, a customer of Airtel, Rajesh would first pay AT&T. AT&T would then pay Airtel a little for their efforts in connecting the call. The principle of allowing the ‘sending party’ to pay is a good, and natural fit for the way phone networks work.

This will not work on the Internet though, for the simple reason that 99.5 per cent (OECD statistics) of the exchange of traffic between Internet networks typically happens for free. This method, which is known as the ‘peering system’, has benefited both content providers and telcos.

It is also what has directly led to the rapid growth of the Internet over the past fifteen years — if a telephony inter-connection model would be imposed on the Internet, it would create big problems; for content networks and ISPs would have to use massive resources to bill each other. A customer would also have to think twice before jumping onto Google to make a quick search, lest he rack up his bill too much.

Other disadvantages would surface – unregulated markets for Internet service have proved to work exceedingly well. Even in places with limited broadband competition, for instance, the amount of bandwidth that consumers get for their money has increased at rates far beyond those of any other industry.

Lowest common denominator

Having an inter-connection pricing model for a better quality service would also unwittingly create strong incentives for ISPs to let their current service get worse than what it is today. It is similar to how the less-than-average quality of ‘general-compartments’ on trains has led to the popularity of the more expensive air-conditioned compartments.

This tiered- Internet, where one must pay more and more for better service, will only result in the lowest denominator reaching rock-bottom—a result that will have devastating consequences for a country where its population can hardly afford the basic package.

While most of this talk of an Internet tax was mere wishful thinking on the part of telcos, the recent International Telecommunication Union conference in Dubai has shown that the Indian Government is only too willing to jump on board.

The conference, which sought to bring the Internet under the framework of the U.N agency, saw a proposal from the Indian Government which said: “Member States are free to levy fiscal taxes levied on collection charges for international telecommunication accordance with their national laws.”

Another section of the proposal stated: “Member States should endeavour to take measures to ensure that an adequate return is provided on investments in network infrastructure. If this cannot be achieved through market mechanisms, then other mechanisms may be used.”

These two statements point to the fact that the Government is indeed eager to cash in on a time when public finances have been stretched thin. The funds collected from this tax could, ostensibly, be used for the development and laying of fibre optic throughout the country, something the Government is planning.

Not that easy

However, a recent study shows that the “sending party pays” principle may not result in the growth of Internet-related development infrastructure – as it hasn’t worked for telecommunication networks.

A study from the Mercatus Centre at George Mason University charted international billing rates against four statistics that measure the development of telecommunication networks: fixed telephone lines per 1090 people, mobile subscribers per 100 people, Internet users per 100 people and broadband subscribers per 100 people.

The author, Eli Durado, found little correlation between long distance rates and fixed telephone line construction. For the other three variables – he found a negative correlation.

“My results contradict the hypothesis that the ability to charge more for international Internet traffic is all that is needed to build out telecommunications infrastructure in poor countries," Dourado concludes.

No chest-thumping

“High international telephone collection rates have not led to greater build-out and adoption of telecommunications infrastructure in the past two decades. It seems unlikely, therefore, that adopting a sender-pays model for Internet traffic would increase build-out of Internet infrastructure today."

Therefore, it becomes clear that the development of the telecommunication/fibre optic network depends on the quality of domestic institutions, rather than collection of external funds which are often misused. The curious part, however, is that there are solutions with far less political implications and make more economic sense. Taxing Internet advertising, for instance, is something that can be done easily and legally.

An additional tariff could be placed on the purchasers of ads being shown to Indian residents. This would have nearly the same effect as taxing Internet companies directly, minus the political fuss.

Vint Cerf, Vice-President of Google, Special Services and founder of the TCP/IP protocol, feels that the move to tax Internet firms is strongly anti-competitive, and does not bode well for the spread of Google’s services in India.

“I don’t deny that if Governments and telcos collect the money, they might do something with it. But for that, I might as well go rob a bank and justify myself, saying, I am robbing the bank and getting this money and doing something good with it. I see this proposal as a gun to the head,” he said.

“If you are building a piece of infrastructure, and we are building applications on top of that – there’s nothing wrong with your Government and companies building applications to compete with us. But when you oppose network neutrality and inhibit other people from using that pipe – it is anti-competitive and it is wrong.”

(4) Grundfos to expand

Grundfos Pumps India, a wholly-owned subsidiary of the Denmark-based Grundfos Holding A/s, is planning to expand its operations by setting up an additional unit in its existing complex here.

Addressing presspersons here on Friday, Carsten Bjerg, Group President and CEO, said the investment would be in the order of 30 million euro (Rs. 210 crore) in two phases. “Our investment would be in new products and solutions. We would also add more staff in research and development which would support the India and global operations”, Mr. Carsten Bjerg said.

The plan was to reach a turnover to Rs. 1,000 crore in five years from Rs. 318 crore reported in the year ended December 2012, he said.

According to N. K. Ranganath, Managing Director, Grundfos Pumps India, the parent company, with 20 factories around the world, was considering India as its second home after Denmark.

Apart from meeting the demand from the domestic market, the products turned out from India facility were exported to Bangladesh, Bhutan and Maldives, Mr. Ranganath said.

The expanded facility would help meet the demands in the European and other global markets, he said.

(5) Global economy faced with double-dip recession, warns Anand Sharma

Commerce and Industry Minister Anand Sharma on Sunday warned that global economic growth remained extremely fragile and faced a heightened risk of going into double-dip recession.

Speaking at the CII Global Partnership Summit here, Mr. Sharma said latest projections indicated that this year the global economic growth would be around 3.5 per cent, almost at the same level as last year (3.2 per cent).

“The most worrisome is the slowdown in growth of developing economies, which grew at 5.1 per cent last year, registering perhaps the slowest growth in the last decade. The situation in Eurozone remains grim, even though there have been interventions by the European Central Bank. The U.S. is staring at a ‘fiscal cliff’ and the BRICS economies, which had emerged as pillars of stability and engines of economic growth even at the peak of the crisis, are now experiencing a slowdown. China has slowed down to 7.8 per cent in 2012 while India last year grew by 5.5 per cent. Brazil has dropped from a peak of 5.7 per cent in 2010 to just 1 per cent in 2012.

Mr. Sharma said there was a continued volatility of capital flows, especially to emerging and developing economies. Last year, the net private capital flows to emerging markets were down by 10 per cent at $1 trillion even as the emerging market economies invested over $1.3 trillion abroad.

The Minister said a major area of serious concern had been the rising food prices, which jumped to a record high in July last year though there was a softening towards the latter part of the year. Apart from the deteriorating economic situation, there was a massive social dimension to the problem as the world was faced with an unprecedented crisis of unemployment. Today, out of the global labour force of 3.3 billion, 200 million people were unemployed and over 900 million people were living on below $2 a day. Over the next decade, 400 million new entrants would enter the labour market and we were faced with a challenge of creating 600 million jobs globally.

“Countries like India will see 250 million additional job-seekers in the next 15 years as they shift from the rural economy towards urban industrial activity. There is a serious challenge for policymakers to provide enough jobs in the manufacturing and services industry and to impart adequate skillsets,” he added.

He said the G-20 had emerged as the pre-eminent global body for economic stabilisation in this time of crisis. “It is to the credit of G-20 leaders who demonstrated statesmanship in coordinating their efforts for infusing a $4-trillion stimulus in the global economy. However, we are still not out of the woods,” he said.

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