POLICY: Broadband Within Reach

With good fanfare, the Minister for Communications has announced the
broadband policy. The message conveyed was that it was a great progressive step
and that it will bring down the prices of broadband. It was also suggested that
rollout would be faster and that it could be utilised for e-education,
e-governance, e-commerce, e-advocacy, e-medicine and so on.

It is also hoped that increasingly it will be wireless that which will fuel
broadband and, therefore, some radio-frequency spectrum has also been released
for Wi-Fi hot spots. The last kilometre to users would be covered painlessly
because of wireless. All this is good and long overdue but there are glitches.

Unbundling of the local loop was recommended by the Telecom Regulatory
Authority of India (TRAI). The incumbents, BSNL & MTNL argued against it and
the ministry has succumbed to their arguments. In sum, they said that the cable
pairs are their assets and they are subjected to competition in many services
and, therefore, as a business enterprise, they cannot agree for their assets to
be utilised by their rivals. This argument, though sound, is not based on facts.
Of Rs. 100,000 cr. assets that BSNL and MTNL have, about Rs.85, 000 cr. have
been collected from subscribers by pricing the services far above costs. Since
1986, when DoT was allowed to utilise the surpluses, it could have generated
investment. The DoT went on increasing the prices to generate the funds for
investment. Funds are not the exclusive property of BSNL/MTNL but that of over
40 million subscribers. They stand to benefit from revenues they could get by
leasing their cable pairs. Competition will expand the market and promote usage.

Another anti-competitive stand of the DoT is in respect of the provision of
virtual private networks (VPNs) by Internet Service Providers, (ISPs). It may be
recalled that earlier BSNL/MTNL were not offering Internet services. It was the
VSNL, which launched the Internet services. The VSNL monopoly was ended in 1998
through a historic decision of the government to introduce competition in the
provision of Internet service. Internet has since then become the global
information infrastructure (GII) into which national information infrastructures
(NII) are getting interconnected. On this NII/GII, there is nothing that cannot
be electronically delivered-voice, video, text, data, graphics, multimedia,
conferencing etc. The DoT initially opposed VoIP. It has eventually agreed and
now ISPs can provide IP telephony for their customers over the Internet to not
only PC users but ordinary telephones. (But strangely this is not allowed within
India but abroad). It is hoped that ISPs will be allowed to provide IP telephony
to telephone subscribers within India also.

After the corporatisation of the DoT into BSNL, it has now become a
multi-service company providing services like mobile telephony, Internet etc. It
is bidding for VPNs against the ISPs and it has lost many prestigious bids for
banks and other financial institutions. The officers staffing the BSNL and the
DoT and Telecom Commission and to some extent, the TRAI belong to the same
cadre. They change places to avail of promotional prospects and avoid transfer
out of Delhi. Their interest is the preservation and prolongation of the
monopoly.

Finally, we must recognize that competition is improving the BSNL and MTNL.
They are reducing the prices periodically. Earlier, they had pricing their
services far above the costs. Now, they have to learn to raise investment.

BSNL/MTNL are depending on the access deficit charge (ADC) realized from p-telcos
interconnecting with the BSNL/MTNL network. Their argument is that by government
dictation, they are providing below-cost service for a large number of
residential and rural subscribers. Even when they are free to raise rentals and
call charges, they did not do so believing that they can get what they want
through the ADC. They initially estimated the ADC at more than Rs. 10,000 cr.
inviting comments and criticisms from many analysts. TRAI scaled down the
initial approved amount to less than half of what BSNL/MTNL claimed. TRAI is set
to further bring down the ADC. Since the government has constituted the
Universal Fund at 5% of the revenues of all the Telcos, the BSNL/MTNL should not
be allowed to claim any ADC from their rival private telephone companies. They
should be required to identify the subscribers and services for whom the prices
are below costs. This is also the time when the need for the Telecom Commission
should be re-examined.

The author is former CMD, VSNL and Director, CTMS