The Hindu Business Line : For a new telecom mantra

The challenge before the new Government will be to sustain and build on the tremendous growth in all areas of the telecom sector since 1999. Special attention must be focussed on the convergence legislation, setting up a super-regulator, improving teledensity as well as broadband connectivity and providing telcos the right incentives for infrastructure development.

THE previous government initiated a number of positive steps that saw tremendous growth in all areas of the telecom sector since 1999. With the introduction of competition in domestic long-distance and international long-distance services, the price of calls dropped as much as 80 per cent in the last couple of years.

The introduction of limited edition Internet telephony service gave a fillip to the languishing ISP industry.

With the introduction of the fourth cellular licence, competition in the industry intensified, with prices dropping, service quality improving and penetration levels deepening.

Post-corporatisation, erstwhile government operator BSNL had to scramble to keep up with the competition, introducing more services at competitive rates and improving customer service considerably.

With the Wireless in Local Loop technology dogged by controversy for over two years, a solution was found in the implementation of the unified access licence, which saw the merger of cellular and basic services.

With enhanced competition in the mobile telephony market, consumers gained from better services and the latest technologies.

The targeted teledensity of 7 per cent by March 2005 was achieved 18 months in advance, due to developments in the mobile telephony market.

The challenge before the new IT and Communications Minister, Mr Dayanidhi Maran, is how to sustain this growth and even improve it in the years to come. Certain key issues need to be focussed on.

The Communications Convergence Bill has been in abeyance for the past four years. Unless it is enacted, the proposed unified licence regime envisioned by TRAI with the objective of merging national long-distance, basic, cellular, international long-distance and Internet services will remain a dream.

The new Information and Broadcasting Minister, Mr S. Jaipal Reddy, has announced the setting up of a separate entity, much like TRAI, for regulating the broadcasting sector. This seems not to gel with the idea of setting up a super-regulator — the Communications Commission of India — as recommended in the Convergence Bill, to oversee the broadcasting, IT, and telecom sectors.

There will, of course, be more pressure on the Government to improve rural teledensity. While the Universal Service Obligation (USO) Fund was created as an outcome of New Telecom Policy 1999, the monitoring and distribution of funds have been mired in mystery.

It is up to the new team in the Ministry to make transparent the collection of USO levy and distribution of the funds to subsidise the rural operations of service providers. The previous government failed repeatedly to enforce the private basic operators to fulfil their rural obligations as per their licence agreements.

Now that most basic operators have acquired unified access licences, their rural obligations are far less. It is mainly up to BSNL to take up the rural obligation. It is in this context that the Government should ensure that the government operator is neither overburdened nor pampered with respect to rural connectivity.

The IT Minister has stressed the need for improving broadband connectivity in the country at reasonable prices. Recent recom- mendations by TRAI on broadband connectivity propose unbundling of the local loop which implies making the government operators lease their fixed lines and collaborate with other service providers, such as ISPs, to promote broadband connectivity.

With disinvestment in BSNL and MTNL ruled out for now, it is imperative that both the regulator and the Government should draw up policies such that the competitive environment is not sullied by erstwhile monopoly market power and the predatory pricing policies of the incumbent government operators.

The shift from fixed licence fees to revenue-sharing in 1999 and subsequent gradual reduction in the licence fees reduced the financial burden of the operators. These steps should continue.

It is quite ironic that while the users of telecom infrastructure, such as BPO companies and off-shore software development centres, continue to get some tax benefit or the other, the telecom companies that provide this infrastructure are burdened with huge licence fees.

It is time the government stopped milking the telcos and provided them adequate incentives for infrastructure development. The licence fees should further be reduced so that they are on a par with world norms of 2-3 per cent, just to cover administrative expenses.

The CAS (conditional access system) imbroglio continues. Will the IT Minister pitch for its implementation in other areas as well? The infrastructure put in by the Multi Service Operators and local cable operators in the metros has been idling.

TRAI has come out with a consultation paper on CAS implementation. The Ministry should expedite the process of solving this issue.

Uncertainties in policy-making during the previous regime led to many foreign companies cutting down on further investments in the Indian market, or leaving.

Though the Ministry may hike the FDI cap in telecom to 74 per cent, administrative ambivalence should be avoided.

Clarity in policy-making, a clear definition of the potential in the telecom sector and the promotion of healthy competition should be the new mantra for the mantri!

(The author is Professor, Information Management Area, Management Development Institute, Gurgaon.)

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