Telecom caught in a loop

This is a market which is still dominated by state-owned monopolies—BSNL and MTNL—have a combined market share of 98 per cent. Therefore, there is a duopoly of the government’s making as the entry of the private players has not made a dent in the market and the private basic service providers cannot be considered as serious challengers when their combined market share is no more than two per cent. In a situation like this the regulator has a difficult role. It cannot wish away the fact that new entrants will invest in the infrastructure only if they are assured of a reasonable opportunity to recover costs.

The network of basic service is to be laid mainly through fixed line infrastructure. In India, the teledensity of basic services is 3.3 per cent—far below the growth obtained in countries like Thailand and China, at 9.3 per cent and 13.81 per cent respectively. To reach the target of 8 per cent in basic teledensity by 2007, 18 million new lines will be needed. It will require an additional 4 million new lines or more every year. This would require a substantial contribution from private players and for this to happen new entrants must have confidence in the regulatory process. Sadly, this fear of regulatory uncertainty has come true, if we look at the TRAI order of January 2003 fixing different rates for the basic service operators by incorporating interconnection and access and carrier charges which have had a cascading effect on the tariffs for fixed line users.

The new IUC regime brings the concept of origination-carriage-termination charges for various legs of a call. The regulator has erred in not conducting a detailed study of the impact of the proposed rates as well as the share of the pie by each operator involved in a call. The regulator admits lack of information on the actual costs incurred by different network elements. This would have serious repercussions for private entrants in basic services in so far as it would make the fixed line operation unviable in the long run. The stand-alone basic operator will virtually go out of business in the new IUC regime, defeating the very objective of creating maximum accessibility at affordable rates. Public access to elementary facility from the PCOs will be denied as existing operators start closing them down because they are no longer profitable.

The regulator seems to have also erred in the new tariff order in treating the WLL as a deregulated service at par with cellular or mobile service. When it was just a new service and the information about the costs was rudimentary, doubts were expressed about the rationale behind it. The WLL service tariffs should have been determined in the initial phase in as much as the cellular tariffs were regulated in the early stages. In fact, there is evidence to suggest that cellular operators were creating every possible barrier for the new entrants. Accessibility to telecom services at affordable prices to the public is a national objective, but the future of the basic service will remain uncertain unless the new regulator irons out the creases caused by the TRAI order of 2003. You cannot conceive of a telephone service that is universally accessible without the basic services. It would be like imagining Hamlet without a Prince of Denmark.

(The writer is former chairman, Electricity Regulatory Commission, Haryana)