A wireless future, mostly mobile

Between them, private and publicly owned companies in the mobile market add an unprecedented two to three million users every month. But India’s success of mobile telephony is relative. It is impressive only when it is seen against the missed targets in other infrastructure services both in the telecom sector (fixed lines, internet, broadband) as well as outside (power). Mobile phone penetration and coverage is higher in many comparable countries in Africa and Asia. Compared to our coverage of a mere 30 per cent population, many countries have close to 80 per cent.

In the last five years, mobile phones have overturned the status of fixed line phones as the common person’s mode of communication. Indeed, fixed line players would explicitly refuse service to many of the new users of mobile phones such as hawkers, wage earners, slum dwellers. In most cases, only mobile phones are the answer, as they are portable and easy to secure. For companies, pre-paid cards ensure defaults are rare.

A fixed phone has an advantage if it is in a shared space like a kiosk. However, as the TRAI has shown in its excellent document on recommendations for growth of rural telecom, mobile phones are a better bet. A shared facility can create only a limited usage. The travel to it and the lack of privacy will ensure that the user will probably make only ‘work’ or functional calls. It is its casual usage which has caused the huge expansion in mobile usage and made the business profitable for investors. Thus mobile phone calls are getting cheaper; fixed calls are not. The expansion in initially expensive mobile services has led to the poor having them too.

If mobile phones are the hope for connecting the unconnected, especially those in rural areas, then policy and regulatory reform must augment the innovation shown by mobile operators in bringing the poor on the networks. For a start, the special treatment to fixed lines must end. There is a huge subsidy and bias towards fixed lines in the current regime for Access Deficit Charges (ADC) as well as the Universal Service Obligation Fund (USF). The first is a subsidy of nearly Rs 5000 crore to BSNL for the losses incurred in its fixed line business and imposes a tax of anything from 30p to about Rs 3.25 on all calls other than between fixed networks. Operators pay five per cent of their revenues into the USF for extending coverage to rural areas. It has a whopping Rs 5000 crore lying unused, but its rules disallow it to fund any phone line other than fixed. Given recent trends in usage, the two mechanisms amount to the poor subsidising the rich.

Fixed lines have in the past connected rural and other budget subscribers. However, not all fixed phones are wireline phones. Fixed wireless phones, only recently emerged on the city scene, were deployed largely in rural areas. These phones can be rolled out quite fast and have an obvious role for rural areas. A subsidy to such phones makes eminent sense. It is ironic that the recent amendment to ADC rules in fact removed subsidy to FWTs arguing that since they were portable, they were akin to mobile phones!

Clearly, future rural networks will be largely wireless and mostly mobile. It makes eminent policy sense to pull all plugs to facilitate wireless technologies. Cheaper spectrum charges in rural areas will go a long way, as will TRAI’s proposal to encourage niche operators who are willing to invest in rural networks neglected by existing players. But additional levies, especially those that don’t apply to fixed line operators, is not only a travesty of commonsense but also a move that hurts the poorest the most. The direction for a new telecom policy could not be clearer.

The writer is a telecom consultant