The Hindu Business Line : Narrow outlook on broadband

THE BROADBAND POLICY, announced on Thursday, is a disappointment, coming as it does after much expectations were raised by the Telecom Regulatory Authority of India recommendations on the subject. Except for the recommendations on granting service providers the freedom to use any access medium and on de-licensing the usage of the frequency spectrum for Wi-Fi, all other suggestions of TRAI have been ignored. These range from unbundling of the last-mile infrastructure for data transfer, open sky policy for V-SAT and DTH, fiscal incentives to encourage broadband penetration and flexibility in pricing to make broadband services affordable.

To a large extent, the Government may be right in allowing incumbents BSNL and MTNL the discretion on how they should exploit the investments they have made over the decades in copper wires that connect individual customers. Those wires obviously provide the one-time monopolies their competitive advantage in the new milieu. Also, the experience of the developed countries in unbundling the last-mile connectivity has been mixed. But given the positive implications on economic growth of accelerating broadband penetration and its manifold spill-over benefits in the form of better education, industrial efficiency, telemedicine and superior governance, public good must override the privilege of exclusive exploitation of the infrastructure by public sector players. Going by the experience in mobile telephony, infusing competition in any form in broadband will be the right strategy to drive down tariffs, increase consumer choice and widen the scope for innovation. Countries that have unbundled, outright or even partially, have attracted more players, bringing better services to the consumer. If, as expected, TRAI rules in favour of lower international bandwidth prices, the case for unbundling gets even stronger. In the absence of competition, there is little incentive for the incumbents to reduce prices and make broadband services affordable to the masses.

Unbundling also makes greater sense as, among the different access media, Digital Subscriber Line, using copper cable, will probably be the preferred route to increasing broadband penetration in the country. Studies by TRAI have shown that nearly 50 per cent of the incumbents' copper lines can be used for DSL services. Thesuccess of South Korea in broadband penetration can be traced to its policy of deregulating SK Telecom's monopoly and infusing competition in broadband. If in 1995, one Korean in 100 Internet users was on broadband, in less than five years, 25 had migrated to that medium. And in economic terms, in 2002, information technology driven primarily by broadband rollout accounted for 50 per cent of Korea's GDP growth rate.

The South Korean experience exemplifies the importance of fiscal incentives in increasing broadband penetration. The Finance Ministry will need to make available quickly the fiscal concessions proposed such as the slashing of import tariffs on inputs for broadband equipment from 33 per cent to 5 per cent, making Web hosting attractive by exempting profits partially from income-tax, and exempting Internet subscribers from paying the service tax. The Government has to pull out all the stops for a robust rollout of broadband access, especially considering the substantial economic impact it can make.