Ad-Hocism again

A SLEW OF decisions have been announced in the telecom sector, but, as in the recent past, the manner in which these decisions have been taken draws more attention than their content. It is unfortunate that even after years of controversy over the decision-making process, transparency in the telecom sector remains at a premium.

In the first instance, a decision taken so very clearly to appease the residents of Hajipur, the Parliamentary constituency of the Communications Minister, Mr. Ram Vilas Paswan, has led ultimately to its introduction all over the country. Telephone charges on distances of up to 200 km have been reduced to between one-half to one-eighth their previous levels. A dramatic reduction in call rates would have had to be done sooner or later because of competition from the providers of cellular phone services. It has become increasingly common for cellular service providers to charge their subscribers no more than the local rates for calls made over short to medium distances within a State, a practice now common in the southern States. This has prompted a new but grey area of business - private operators are beginning to offer such cheap rates even to fixed line subscribers by routing calls through the mobile network. Since intra- telecom circles provide the largest single source of revenue to the Bharat Sanchar Nigam Ltd. a response to this competition was necessary. However, what has happened is not the BSNL coming to a carefully thought out decision but Mr. Paswan first providing his constituency with this benefit on the Hajipur-Patna line and then following it up for the Delhi-Meerut route when he launched his new political party, the Lok Janshakti. Since it was inevitable that other parts of the country too would demand a similar lowering of tariffs, the BSNL had no choice but to reduce rates all over the country for the 51 to 100 km and the 101 to 200 km slabs. What we have here then is competition of a certain kind forcing the dominant service provider to slash call charges but the decision itself is taken in an ad-hoc and opaque manner. Since the BSNL forecasts an annual revenue loss of up to Rs. 800 crores from the tariff reduction it has had to somewhat compensate for this by raising phone rentals for low call users in the urban centres. Even after this hike the rentals remain subsidised, but it is forgotten that less than two years ago a huge hue and cry over the rental and tariff revision by the Telecom Regulatory Authority of India forced the Government to intervene and moderate the hike in rentals. That moderation has been largely reversed and at the margin it will dissuade potential low usage subscribers from taking a phone connection.

The third decision announced by Mr. Paswan, about which there is little controversy, is the terms for expansion of competition in the cellular service market. There will now be two more service providers - one from the Mahanagar Telephone Nigam Ltd or the BSNL and the other a private provider - making a total of four. The learning process in the award of licences during the mid- 1990s has persuaded the Government to opt for a graduated bidding process. There will not be a flat licence fee - which caused so many problems in the first round of the award of licences - but instead a one-time entry fee and an annual payment amounting to 17 per cent of the revenue. The graduated bidding process should weed out the financially weak and ``non-serious'' bidders and the revenue share-based fee should make for a more viable business. Now that the licensing process for the cellular service market has been announced the next major decision will be the opening of basic phone services to unlimited competition. This could prove more controversial and so will require the most transparency and careful consideration from the TRAI and the Department of Telecom.

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