BSNL's satphone debut does not make sense

Public sector telecom service provider Bharat Sanchar Nigam Limited (BSNL) wants to offer satellite phone services on a large scale in collaboration with Inmarsat (International Mobile Satellite Organisation), the global satphone service provider. The Inmarsat-BSNL combine has set up a local gateway in Ghaziabad at a cost of $8 million. BSNL is going to roll out satphone services in a phased manner across India over the next two years. This will enable communication during natural disasters and in reaching inaccessible places where cellular coverage is unavailable. However, BSNL offering this service, that too as a monopoly, does not make commercial sense.

To begin with, the market is limited — there are only about 4,500 subscribers in India. Typically, satphone users include disaster management services, security forces, the marine transportation industry, mining prospectors and game wardens in nature reserves. In other words, those who need to subscribe in India are already subscribers. Apart from ships in territorial waters, almost all the users belong to the security forces and other government departments. Moreover, Inmarsat’s network, which has a global grid of 14 satellites, is officially available in India. Handsets that work on other international networks such as Thuraya and Iridium are banned since India’s security forces cannot easily monitor or decrypt the signals. As such, rolling out mass services is hard to envisage. That is because even the biggest players do not have a huge subscriber base. Take Iridium, for instance. In 2016, it had a revenue of $433 million and just 766,000 subscribers worldwide. There are only about two to three million satphone subscribers worldwide — many of them large enterprises, or security forces with specialised needs. Moreover, the handsets are expensive and data transfers are relatively slow. High tariffs make things worse. 

In any case, BSNL has vast accumulated losses and it is second only to Air India in being a drain on the exchequer. It reported a net loss of Rs 7,019 crore in 2013-14, a net loss of Rs 8,234 crore in 2014-15 and Rs 3,880 crore in 2015-16. It lost Rs 4,890 crore in April-December 2016. Given that BSNL finds it impossible to run conventional mobile and fixed line services profitably, it should not be tasked with running a challenging new service. Instead, the public sector undertaking should be earmarked for disinvestment — indeed, the government had indicated such intentions earlier. 

Then there are security concerns. Satphones are also used by terrorists and insurgents. Offering wider coverage may make the security establishment uneasy. Ironically, regions without cellular services where satphones will be most useful are also among the most disturbed places in the country. These include Left-wing extremism-affected areas of the heartland, Jammu and Kashmir, Manipur, and Nagaland. Even cellular services are often switched off in such places at the behest of the administration. Does BSNL have the wherewithal to deal with these concerns?

An additional point pertains to the likely monopoly that BSNL will become in this field. In the past, Videsh Sanchar Nigam Ltd (VSNL), at that time a PSU, held a monopoly for offering satellite phone services. This was later transferred to Tata Communications when it took over VSNL. But that monopoly contract to provide satphone services ends on June 30, 2017, and on the face of it, the monopoly will then be transferred to BSNL. But if, for argument’s sake, there is commercial value in this segment of the market then it would be better to abolish the monopoly and open the satphone services market to competition, possibly by holding a public auction. If the services are not commercially viable, why burden BSNL further?