Trivial issues have replaced the vital ones and we seem to have lost the
sight of the basic objective of our telecom reforms. The private operators have
been lukewarm to the opportunities in basic services. Fixed services are not
presumed to be a viable option. Where have we faltered?
Telecom for all and telecom within the reach of all" is
how the National Telecom Policy 1994 (NTP ’94), the first ever policy document
on telecommunications of the Indian republic summarized what we set out to
achieve. In these two populist but extremely relevant slogans, we proclaimed to
the world that accessibility to communications was the driving force behind
India’s telecom reforms.
And to achieve that goal, India was ready to dare it all.
Going against the global trends of opening up long distance first, India first
threw up the local services for competition. What followed thereafter is a sad
story, but it is important to emphasize that even in hindsight, no one has
criticized the wisdom of that decision on local services. What has been the
culprit is the way we went about opening up the market. In fact, five years
later, the National Telecom Policy 1999 (NTP ’99) re-emphasized India’s
commitment to the spread of telecom network to most Indian citizens.
"Availability of affordable and effective communications for the citizens
is at the core of the vision and goal of the telecom policy," it outlined.
In other words, unlike the West, the prime, if not the sole,
objective of India’s telecom reform was to make the telecom network reach most
Indians. It was surely not competition for competition’s sake.
Today, unfortunately, we are lost in the comparatively
trivial issues–revenue sharing and licence fee, circuit-switched or
packet-switched, two operators or four–and have forgotten the basic objective
of giving telephone access to as many Indians as possible.
Technology majors, dotcoms, software export houses–the
so-called harbingers of the new economy–dictate our policy directions. There
are politicians who want to project themselves as radicals and others who are
dictated by their vote banks. You have to be "voice of reforms" or
"voice of the people". There is no place for a "voice of
reason".
Short-sighted Vision
The
Prime Minister talks of India becoming an IT superpower. His high- profile
minister for IT talks of taking IT to the masses. The communications minister
(see interview) never misses an opportunity to mention of his
commitment to rural telephony.
But do we really think that way?
Consider this. NTP ’99, which created a renewed hope in the
telecom sector, targets for a 15 percent tele-density by 2010. This target has
been held as sacrosanct by everyone–the DTS, the TRAI, and the private sector
players. Does that mean that ten years from now, even if 15 percent of our
people–that is less than 40 percent households–have a telephone, it is
enough for our country?
It is fine to have 15 percent as the minimum target. Maybe
the policy makers actually meant that. But today, all calculations are based
around this target, as if this is the figure that we should ideally achieve.
When technology is changing so fast and prices dropping every quarter, if not
every month, is it realistic to assume such a target?
Let us see why is it so unambitious? According to Census
projections, India would have 1,162 million people by 2010. 15 percent tele-density
by that time means that we will have 174.3 million telephone connections. TRAI
itself, in its consultation paper on fixed service licensing, estimates that
going by the present growth rate, DTS itself could have a subscriber base of
166.6 million. That leaves the target of 7.7 million for the private sector. In
other words, 4.4 percent of the total connections will be with private
operators. It is safe to assume that 10 to 15 percent of the total lines will go
to business organizations that give
major revenues. Even if one-third of them go to private basic services
providers, what is the need for these operators to go to residential users?
And we keep on repeating that the objective behind our
telecom reforms is to make telephone accessible to all.
One more clarification could be needed. TRAI assumes that
competition from private basic service providers will lower DTS’ subscriber
base to 122.8 million. But won’t competition also grow the market? Hasn’t
that been the case elsewhere? These figures–166.6 million or 122.8 million–are
determined by DTS capability, that too in a monopoly
market. Competition in an underdeveloped market (which India is) does not snatch
away market shares. It develops the market. In fact, DTS could add even more
than 166.6 million
connections!
A moot question that TRAI has considered in detail is
affordability.
There
are three options–to continue to subsidize local telecom service, to raise the
rental/tariff, or lower the per-line cost. The third option is the best in the
long run. While influencing the per-line cost is certainly beyond the scope of
TRAI, it is certainly not so for the Government.
The present per-line cost is Rs 30,000 on an average.
Ironically, it is more in rural/remote areas. It has to be brought down to about
Rs 10,000-12,000 per line so that the present level of tariff and rental are
maintained. With a combination of Wireless in Local Loop (WILL) and C-DOT
switches, it is certainly possible.
There is another aspect that we often overlook. The DoT
perspective plans, which are the basis of most of these calculations, were done
at a time when the equipment cost was still very high. "We have to
recognize the five years’ gap. The world has gone through a fundamental
change. The advent of IP has not only made it possible to offer much more than
what the operators used to offer, it has also brought down the cost of network
deployment considerably," says Vijay K Gupta, the Indian chief of Lucent
Technologies, arguably the first name in global carrier equipment.
A combination of drop in prices of the backbone equipment and
low-cost indigenously developed access technologies will certainly help in
bringing the cost down, thus making the telephone services more affordable.
While TRAI maintains its "technology neutral"
position, the Government does not seem to be interested in going beyond licence
fee and revenue sharing.
Why Fixed Service Is Unattractive?
Worldwide, telecom operators are making money by
-
carrying the call for more distance or
-
providing more and guaranteed bandwidth to business users
or -
providing the subscriber the choice of services by
offering fixed, mobile, and other value-adds.
Why Fixed Service Is Unattractive?
Worldwide, telecom operators are making money by
-
carrying the call for more distance or
-
providing more and guaranteed bandwidth to business users
or -
providing the subscriber the choice of services by
offering fixed, mobile, and other value-adds.
Unfortunately, carriers in India can tap all these areas with
ease, without going for a fixed service licence.
Allowing
intra-circle traffic to National Long Distance (NLD) carriers will make it
possible for them to tap this opportunity. The entry fee for these NLD operators
is likely to be Rs 500 crore. Even if the entry fee, if it is to be charged for
the local fixed services, is lower than that, the return on investment in NLD
will be better and faster. Many private operators, who are now local service
providers, are just waiting for this opportunity.
All ISPs are allowed to give high-speed connections. There is
hardly any entry barrier for the ISPs and many of them are even laying copper
cables to give DSL connections. These high-speed connections will be required in
heavy demand pockets with heavy business concentration. Business community,
which is the creamy layer of subscribers, will have the choice to go to its
ISPs. Since most of these ISPs will be national, it will make sense for big
multi-location companies to go to them for high-speed data transfer kind of
applications.
Allowing basic service providers to enter the mobile services
is being debated. It is likely that the powerful cellular operators’ lobby
will not allow that to happen. Even if that is allowed, the already existing
cellular operators will have an upper hand.
That leaves us with a fundamental question. How will the
fixed service licensee make money? Answers Arun Seth, chief of British Telecom
(India), "The revenues that may accrue to fixed-line operations in India
cannot favourably compare with the revenue that is expected from value-added
services."
However, there are new local players who are still
optimistic. Take for example, Ortel Communications, an Orissa-based ISP wanting
to enter basic services in Orissa. The company already has a good Optic Fibre
Cable (OFC) backbone in Bhubaneswar and Cuttack and wants to provide broadband
access, right from day one. Says Jagi Mangat Panda, CEO, Ortel, "Just
because NLD carriers are permitted to carry local calls, it does not mean they
can do it cost-effectively. Unless they have a particular competitive edge (such
as having already built a local access network), it will usually make more sense
for them to go through an existing network rather than ‘overbuild’. In any
circle, there will eventually be fewer local networks than NLD providers. Thus,
it is the former who will have a better pick of choices to deliver STD to their
customers."
Sounds convincing? Probably, when one considers a state like
Orissa, not really a hot target for many. That will ensure that the licence will
come cheap. If the company manages to get the licence for it, it will be a good
supplement to offer voice over the impressive network that Ortel already has.
That is not necessarily true for many other states.
Is the so-called telecom revival just big talk then? Not
really.
There are services that will generate revenue. Seth
identifies mobility, Internet, and IP infrastructure as growth areas. (Read that
as cellular services, ISP, and long distance.) Though he talks of BT’s
strategy, his is a common viewpoint that is true for most global operators.
No AT&T, NTT, Deutsche Telekom, or France Telecom is anywhere in the fixed
services’ scene in India. None of the major investors in other services (like
Hutchison) are looking at this either. In fact, the TRAI open house on fixed
services licensing held in Delhi recently had hardly any new face. That gives
enough indication of the interest in fixed services.
Whose Problem Is It?
Certainly not that of the fixed service providers.
The
reason: There is hardly any committed fixed service provider in India. In fact,
they are too new to be committed. Most of the operators–Bharti, HFCL, Tatas,
and Reliance–have big long-distance plans. In fact, all the three, except HFCL,
see long-distance as the end and local service a means to achieve that end.
Bharti has been quite open about this.
"It is expected that operators entering fixed service
will be doing so in conjunction with their business as a NLD operators,"
says Usha Rajeev, executive director, Technology Infocomm Communications and
Entertainment (TICE) Group, PricewaterhouseCoopers India.
The prevailing politically correct opinion is there should be
free competition. There should not be any artificial barriers like fixed/mobile,
long-distance/local distinctions.
Fine. But at the cost of the objective with which we started
telecom reforms? Probably not.
Today, the prospective private operators are not too
interested in fixed services. "We may still go for a couple of circles. But
is mein rakha kya hai? We know we are not going to get money from it," says
a top executive of an Indian telecom company, who does not want to be named. His
plan is to use the network to provide value-added services around some
high-demand business pockets.
It is this strategy that may see some companies grabbing
licences, if the fee is low. "In the emerging scenario, the key lies in
paradigm shift towards e-business and creating synergies with media, content
providers, service providers, ISPs, etc," says Usha Rajeev of PwC.
Essentially, she hints at operators making money from business customers.
And why not? Any operator who is entering the business is not
doing so with a social objective. He is doing so for making money. It is only
natural to expect him to go for services in which he can make money easier and
faster. If tomorrow that is long-distance, he will go for that.
Fixed service, in its present form, will not make money. Even
if an operator takes a fixed service licence, he will concentrate on building
that part of network, where he can get his returns fast.
It will not achieve the national objective of providing
telephones to as many places and as many people. The task of ensuring that it
happens lies with the Government.
Needed: A Total Change in Outlook
Can it happen? Yes, there are ways. But that needs a total
change in approaching the problem, right from day one.
As we have seen, sticks do not work. Carrots have to be more
attractive than the business gains. Not always possible. So what is left?
Building more lines in all parts of India should look
attractive to the licensees. The solution: If you cannot change their business
plans, change the licensees.
License those operators for whom building telephone network
in Varanasi will look attractive. To whom giving more connections to residents
of Ranchi will look more attractive. To whom giving telephone connections in
Rourkela will be a viable business. Who are these operators? Of course, they
have to be from Varanasi, Ranchi, or Rourkela.
In simple words, we can follow the ISP model that has worked
well. Okay, there will be chaos. There will
be shakeouts. There will be quality of service issues. There will be
interconnection issues. But the consolidation process will take care of those.
What we need now is rapid spread of telecom networks in
India. We can dare all the issues for the sake of achieving that objective. We
have done that once before, and we can do it again.
Otherwise, the circle-wise licensing may have a few takers.
Moreover, it will not achieve our basic objective–telephone for all and
telephone within the reach of all.