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I Wanna Be A Unicorn So I Will Break The Law

by Govindraj Ethiraj, @govindethiraj

I read this somewhat bizarre plea for help by an entrepreneur in The Economic Times in a post titled Unicorns Calling, Is Indian Cloud Telephony Ready?

Bizarre because the writer implicitly presumes (though does not state) that all of us citizens have a duty – moral if not otherwise – in helping his startup and its investors’ (Sequoia & Mayfield) realise their wannabe Unicorn ambitions while breaking the law at the same time.

While the premise of a Unicorn itself must be questioned on multiple counts, that is not the objective of this post.

The company in question offers a cloud telephony service, large parts of it which were apparently shut down by the Department of Telecom.

The Hindu Business Line quoted the company saying, “The telecom operators shut down the service due to pressure from certain telecom regulatory officials on the legality of the company’s features such as Virtual number, Click-to-call and SuperReceptionist kind of solutions that use call-forwarding.”

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When told the current licences available from the Department of Telecommunications do not cover such a service, the company’s response was: “These licences which were made almost two decades ago were archaic.” And added that the Telecom Regulatory Authority of India (TRAI) was already working on this. The company thus admitted it broke the law. Apparently, one more company has been put on the dock too.

Also read: Understanding why Knowlarity’s services were shut down by a telco in Delhi

I found this episode intriguing. Here are the reasons:

  1. Disruption: It is a given that disruption must necessarily test existing laws but where do you draw the line. If I was feeling generous I too would argue that rules regarding telecom networks and applications around it must be tested and challenged constantly. That is how we had no choice but to welcome Voice over Internet Protocol (VoIP).
  2. Law of The Land: But I am equally uncomfortable with the fact that laws must be broken to usher in new laws.  This is a situation that is not tenable in any country or nation which is to have a rule of law above all else. We either respect it or we don’t. Or we are prepared to pay a price for breaking the law and then campaigning for the laws to change.
  3. Cowboy Capital: The desperation to break laws increases when there is money at stake. Yes, it could be passion and determination that drives an entrepreneur to break laws but chances are more likely that its money and impatient investors who have been sold a story that either left out the relevant legal portions or everyone collectively agreed it was a non-issue.
  4. Due Diligence: It is evident that due diligence is a cursory item in the scheme of things. If the proposition looks like it could go from 1 to 1 billion consumers or thereabouts then venture capital must follow. That’s because this world is driven by a winner takes all formula. And when it comes to ‘data stacks’ the bets are big, laws or no laws.
  5. Who Suffers? The company in question complains that some 12,000 customers phone number have been disconnected. Many of them apparently included small businesses, e-commerce firms, cab companies, hospitals and schools. “Even a five-minute outage would lead massive business losses for them,” says the founder. Perhaps the service was restored later, perhaps not.It’s like buying a stolen car. You have zero legal ground in saying that you did not know the car was stolen when you bought it. Similarly, as we have seen in dozens of cases, if you bought a service that was being sold at 1/10th of its market value, then you should have wondered or asked if something was wrong.Intuitively, you should have known that something was like to blow up at some point. Of course, if you were lucky, then the whole proposition would have smoothly transitioned into a legal one. And if you claim that you got duped by the venture capital-backed glitzy advertising, then too bad. You are not the first. There will be many more to come. Make sure you shop carefully.
  6. America Has It: This is the worst and most untenable argument. Obviously, it is also the basis for billions of dollars flowing into find the Amazon of India or the Uber of India. Most of these investments are already going up in smoke. That’s fine. These are investors who knew what they were signing up for.Moreover – and this is critical – consumers are not so badly hit when services like this fail in the US. In India, small businesses or individuals build entire enterprises on a perceived saving in costs. A hit can affect livelihoods much more badly then it would in the U.S.Let me give you a more real example. What happens if one of the cab aggregators shuts down? How many taxi drivers do you think took loans and dreamt up their entire futures on this flight of venture capital fuelled fantasy ? And this is why I would resist cowboy capital or hope it is better directed. This is not the US and there are no safety nets.So maybe the world’s largest cloud telephony company did a $2 billion valuation IPO in the U.S. but the institutions and the regulatory system in the U.S. are more capable of responding to disruptions.

India’s best known businessman, Dhirubhai Ambani was known to test the limits of law, particularly at a time when Government licensing norms for manufacturing capacity were at their peak.

Arun Shourie, then IT & Disinvestment minister with the Vajpayee Government, had said he first learnt about Dhirubhai through the articles of his former colleague S Gurumurthy, Chennai-based chartered accountant and convenor of the Swadeshi Jagran Manch, affiliated to the Rashtriya Swyamsevak Sangh or RSS.

In a speech to mark Dhribubhai’s death anniversary in 2003, Shourie said the point of most of the articles written by Gurmurthy during 1986 and 1987 — many of which he had co-authored — “was that Reliance had done something in excess of what it had been permitted to do: that it had set up capacities in excess of what had been licenced, that it was producing in excess of those capacities.”

He then said (to the shock and horror of most seated there including this writer) that most would say those restrictions and conditions should not have been there in the first place, that they are what held the country back.

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And that the Dhirbubhais are to be thanked for they set up world class companies and facilities.

Shourie then paraphrased what Austrian economist Freidrich von Hayek, the guru of most believers in free enterprise capitalism had said, “By exceeding the limits in which those restrictions sought to impound them, they helped create the case for scrapping the regulations.”

The question is: do you really think we are seeing the birth of new Dhirubhai Ambanis or are these transgressors of the law of the land who should be firmly dealt with as any transgressor would be?


Govindraj Ethiraj is the Founder of IndiaSpend and Ping Network.

Crossposted with permission from here.

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