Telecom in a flux

A SPATE OF policy decisions foretell an upheaval in the telecom sector, especially among the cellular mobile service operators (CMSOs). The ultimate beneficiary will be a certain category of consumers who can expect expanded services at lower prices. But there is also a risk that business decisions made on some highly optimistic and unreal predictions could be the undoing of some telecom operators. Since at least one of the recent decisions is being contested at the Telecom Disputes Appellate Tribunal, a certain degree of uncertainty will also continue for a while.

Well before the Telecom Regulatory Authority of India (TRAI) decided that basic service operators (BSOs) could offer ``limited mobility'' phone services, the cellular phone market was witness to a price war in certain markets. After the Mahanagar Telephone Nigam Ltd., decided to introduce mobile services at dramatically lower rates in Mumbai and New Delhi the existing CMSOs, who have managed a comfortable duopoly for more than five years, have had to respond with equally large tariff cuts. This lowering of tariffs has not yet taken place in circles where the duopoly continues, which only goes to show how the absence of competition contributes to high tariffs. Two recent decisions of the TRAI have also unnerved the CMSOs. The bigger one is the recommendation, since confirmed by the Telecom Commission, to allow the BSOs to offer limited mobility using the wireless in local loop technology. The 1999 Telecom Policy permitted the BSOs to use WLL, as the technology is more commonly known, to offer basic services. Now the TRAI has gone a step further and let the BSOs use the innate ability of WLL to provide limited mobility. The complaint of the CMSOs is that since the BSOs are licensed to provide fixed services it is wrong to permit them to offer mobile services of even limited mobility. Although the quality of mobile phone services offered by WLL is not very good, it is a fact that the CMSOs will face a major threat from this new and inexpensive service. This is shown by the rush of entrants for new basic service licences in a market where the ambitions of the 1994 deregulation have so far largely been belied. The CMSOs have been compensated by a lowering of the proportion of the revenue that they have to pay to the Government in lieu of their licence fees, but for them this is clearly not enough. Another blow that the existing cellular service providers have received is the direction from the TRAI to refund a certain proportion of fixed and call charges collected since late 1999 to the subscribers. This follows a judgment by the Delhi High Court that the benefits of the migration from a fixed licence fee to a revenue-sharing regime should be passed on to the consumers.

Subscribers of MTNL and Bharat Sanchar Nigam Ltd.'s fixed services too are to gain from yet another order from the TRAI. The Department of Telecom had tried to contain the costs of its recent steep cuts in call rates over distances of up to 200 km by decreeing that this would apply only to intra-circle calls. It was clearly illogical to force users in Agra, for example, to pay the old and higher rates for calls made to Delhi just because the two cities did not fall in the same telecom circle. This ad- hocism has now been ended. Much as all these policy changes and market developments will benefit those who have land or cell phones, the larger task of expanding the abysmally low telecom density remains unaddressed. In this respect the delay in finalising the shape and implementation of the universal service obligation, which in theory should boost expansion of the network, is inexcusable.

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