Mtnl Cellular Venture Pits Operators Against Consumers

Even as consumer organisations voice their support for Mahanagar Telephone Nigam Ltds (MTNL) cellular venture, experts have warned against such a move being ultimately against the interests of the consumers.

Consumers welcome competition because it brings with it competitive prices. We are totally in support of MTNLs entry into the cellular sector, consumer activist at Voluntary Organisation in Consumer Education, H K Awasthi said.

Questioned about the possibility of reduction in competition resulting from the probable exit of the private operators, he felt they deserved to wind up if they could not provide telecom services at affordable rates.

However, Bharti Enterprises chairman Sunil Bharti Mittal questioned the possibility of MTNL providing an affordable cellular service. There is no way it can provide gsm (global standard for mobile communication) digital mobile service at rates less than ours, when costs of operating and maintaining a network are similar, he said.

 

While conceding that competition benefited the consumer, he felt it was premature to introduce a third operator. He did not, however, perceive a third operator as being a threat to the very existence of private operators itself.

MTNLs cellular plans are currently under a stay order from the Telecom Regulatory Authority of India. The next hearing of the case is scheduled for today.

Consultant R V Prasad said MTNLs affordable cellular service may be good news for the consumer only in the short-term. If such a move threatens the existence of the private operators, the consumer may find himself back at the mercy of a monopolist MTNL.

Another consultant, Mahesh Uppal, said that with duopoly (two operators) not having played itself out, a third operator would hamper the growth of the market. Ultimately, the consumer would be the loser from this tightening of the market, Uppal said, questioning the logic of such competition which takes away choice from the consumer, rather than expanding the available options.

If competition cannot give choice...If competition cannot attract investment, then the consumer has lost, he said.

On the financial front, he cited the status of existing private operators, who were not making a lot of money, and wondered how a government company, with its bureaucratic style of functioning would make its operations viable.

Profitable operations can only be ensured through high degree of cross-subsidy from MTNLs basic telephony operations, he opined, adding that this would go against the rules of competition and fair-play. Uppal made a case for special regulation of a vertically integrated basic and cellular operator to prevent this cross-subsidisation.

He also questioned the logic of investing scarce government funds saying, the last place where we need additional investment today is in the cellular sector.

Cellular Operators Association of India executive vice-chairman T V Ramachandran felt that MTNLs entry would be bad news for existing operators. In a worst-case scenario, if the private operators are forced to pack up, the resultant monopoly would be detrimental to consumer interests and to the financial interests of the government also, he said.

He felt that a third cellular operator was breach of a promise to the operators. Jo wada kiya woh nibhana parega (the promise made by the government must be honoured), he quipped.