Long Distance To Go In Telecom

However, the problem is that opening up of long-distance services does not do anything to further the goals of the government as spelled out in the National Telecom Policy (NTP) of 1999. According to NTP 1999, the primary targets of the policy are: make available telephone on demand by the year 2002 and sustain it thereafter so as to achieve a teledensity of 7 per 100 people by the year 2005 and 15 by the year 2010. Currently we have a teledensity of only 2.7 lines per 100 people.

The policy also sought to encourage development of telecom in rural areas, making it more affordable by initiating a suitable tariff structure and making rural communication mandatory for all fixed service providers so that rural teledensity can be increased from the current level of 0.4 to 4 by the year 2010 and provide reliable transmission media in all rural areas by the year 2002.

 

Thus far only 374,000 of the estimated six lakh villages are covered, so there's a lot of work to be done in the next two years. The only problem is that opening long-distance services does nothing to achieve those objectives. Increasing network coverage and tele-density is directly related to the development of basic and cellular services. It is only through basic services that the vision of an affordable basic telephone service in all rural and urban areas can be actualised.

While many aspects of liberalisation of the telecom sector have been a mess from inception, one interesting and important aspect is that the government has tried to make the private telecom firms dance to its tune. In other words, encouraging them to provide services and network in the country, rather than opening up services that the private telecom companies want to enter.

Long-distance services, domestic and international, are two of the most favoured sectors of private firms. It allows them to "cream skim", by connecting into long-distance business traffic rather than get into the tedious process of connecting people's homes or expanding the network. Thus, the private sector has been given a major sop at a time when its commitment to providing basic services is still under question. This is because after the HFCL debacle of 1996, the government has not tried to push the basic services segment. The best route would have been to re-auction all the basic services circles which are still unoccupied using the same parameters that have been used for long-distance services. That is, no bar on the number of operators and a sensible revenue sharing regime that gives incentives to the private operator to build a new bigger network. This would have helped to increase the telecom coverage in the country and later domestic long- distance services could have been opened up.

Firms that enter the provision of basic services and expand the network could have been provided credit later in their long-distance bids, if the government did want to provide a sop. Many of the criticism of the current long-distance policy would also be negated if there were a number of basic service providers who went on to enter long-distance services. For instance, the move to keep intra-circle traffic reserved for basic services providers or to those whom the basic service providers allow their services, has led to comments that not only does this rob long-distance providers of business but also preserves DoT' dominance in intra-circle traffic, since it is still the only national basic services provider. However, if the remaining circles had been re-auctioned or maybe a combinatorial auction of basic services along with long-distance had been held, it would have enabled private firms to complement their services in basic or cellular by adding long-distance to it and allowed them to make a significant network regionally or nationally.

But this is where the policy fails. While on the surface, the new policy seems to have clipped the wings of the DoT, by allowing an unlimited number of operators as opposed to three plus the incumbent, as desired by DoT, the state monopolist has only increased its clout in the absence of competition in its backyard.

Without a simultaneous increase in the network size and subscribers, it is unclear how profitable or lucrative long-distance services will be. Especially, as TRAI has calculated, 45 per cent of long-distance traffic is intra-circle. Moreover, if Internet telephony, where technology is making big leaps every day, is allowed as part of the ICE Bill, then long-distance services will prove even less appealing. Thus, as a result of the opening up of long-distance services, the benefits are only likely to accrue to business customers who the new entrants will target with special rates and value-added services. And you can expect them to join DoT to lobby against allowing Internet telephony in the country now.

What the government should get cracking on is introducing competition in last mile services at the earliest. Only then will the targets in NTP 1999 come close to being met. Till then, the benefits are only likely to accrue to a few people. Big deal.