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Business
Uncertain spell ahead
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Constant tinkering with the policy has meant that the future in the Indian telecom sector is reserved only for companies with unlimited resources at their disposal, says Sandeep Dikshit
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THIS YEAR's Republic Day promises to be memorable for phone users. To add to the bonus of unchanged rentals and local call charges, Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are planning to announce the lowest-ever STD rates so far. By then, the cellular companies would have announced some more concessions they had promised while reducing STD rates about a week ago.
The telecom sector has been in a virtual tailspin ever since the policymakers decided that this sector had to be opened up to competition. Rare was the Government that maintained a consistent policy or ensured that companies adhered to what are boringly termed social commitments. So far the chicken have not come to roost and while the companies race against each other without caring for the consequences, the common subscriber has been enjoying a rare spell of good fortune.
This period of low fixed phone charges, falling cellular rates and the ongoing entry of companies offering `in-between' technology has the middle-class, in particular, in a trance. In a month from now, each city with a population of more than a million should have at least half-a-dozen phone companies.
The introduction of cellular technology in the mid-1990s has no doubt changed how business is conducted, more in urban India and to a lesser extent in some parts of the countryside. The cellular phone has become a necessary accessory for every urban professional, and with good reason.
Entry of more operators per circle
The entry of the third and fourth cellular operators in each circle stirred the market. Things went on a boil with some basic companies deciding to activate their licences for limited mobility. In public, all phone company managers bravely talk of facing competition. But scratch them and they confess that they are grappling with the problem of sustainability. There is enough in most companies' reserves to last out a year or two but the future appears uncertain for at least half of the companies.
Ever since the telecom sector was opened up, analysts had pointed out that the continued existence of more than three companies in one region was doubtful because a small section of phone users provided most of the revenue. Of this, a large proportion of the income to (then monopolistic) BSNL/MTNL came from excessive use of STD and ISD services whose rates were several times the actual cost.
The STD and ISD rates are gradually approaching the cost levels. This development will lead to interesting possibilities such as a much larger proportion of phone users availing of low STD and ISD rates. Because of the country's income distribution pattern, there will be a limit to the spread of phones and therefore the numbers will not be enough for more than a few companies to survive.
Had the Government opted for the ICICI's (consultant) recommendation of liberalising at a micro level, the number of companies could have been larger. But constant tinkering with the policy has meant that the future in the Indian telecom sector is reserved only for companies with unlimited resources at their disposal. The intention behind creating favourable conditions for large corporate houses was honourable.
The policymakers wanted to ensure that with their huge resources the corporates would spread their network to all parts of the country. Thus they would not mind being philanthropic to the "other India'' which is income-constrained but has a homogeneous distribution — it lives in villages, small towns and cities all over the country.
However, corporate-friendly politicians ensured that telecom managers of private companies did not lose sleep over the social obligation factor. It is true that politicians, especially telecom ministers, periodically threatened companies with cancellation of licences, a ban on future licences and other punitive measures. The list that defaulted included the big three which are locked in combat — Reliance, Bharti and the Tatas.
BSNL has raw deal
To be fair, it must be pointed out that the policy makers deliberately overlooked some of the tough conditions. For instance, BSNL had already provided access to villages within the wireline vicinity of big cities or within feasible radio range from rural areas leaving the remote villages for private companies. But the bottomline is that weak-kneed political managers ensured that the responsibility for wiring the `other half' remained with BSNL. BSNL, which has been rather unfairly saddled with this burden, will also have to carry along subscribers in cities who do not contribute significantly to the balance sheet but are substantial in size.
Move to hike call charges
It is to get around this predicament that BSNL has joined forces with private phone companies in a plea to the Telecom Regulatory Authority of India (TRAI). This petition has all the hallmark of spoiling the party for consumers. The companies have pleaded for doubling of local call charges as well as increasing the floor ceiling for rentals. Once call charges are hiked to, say, Re. 1 a minute, cellular companies will also get an excuse to check the free fall in rates.
It could be pointed out that the Government has a universal service obligation (USO) fund to take care of all the deprived phone users. This fund is severely restricted in scope and by its nature cannot subsidise operations in urban areas. The only option for the fixed phone companies, particularly MTNL and BSNL, to survive is higher local call charges.
Though the policies have been designed in a manner to suit companies with pan-Indian ambitions, there has been no attempt to persuade them to set up a demonstrable grievance redressal machinery. Complaints against cellular companies are already rife. Soon fixed and limited mobility companies with more vulnerable networks may give subscribers reasons to complain. The TRAI in the past had dealt with a couple of instances of disaffection against cellular companies. They were, in a manner of speaking, "bulk cases'' arising from policy changes and not individual instances of debits being made from the cash card.
Ask any affected individual, and she will tell you that help lines never give the contact number of a superior officer. The road to grievance redressal begins and ends with the incorporeal voice at the helpline centre. BSNL and MTNL have a grievance cell which is subject to scrutiny by representatives of the people and every complaint will be redressed even if it takes time. These are early days for private companies but their mechanisms do not inspire confidence.
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