The Hindu Business Line : Competition, regulation must work for user

The telecom revolution has served up competition and cut prices, but unfortunately in many a case has left the user poorly served too. As much as the telecom companies, the regulator has an important role in ensuring quality service, especially as the state is seeing a receding role for itself in this core sector, says Bhanoji Rao.

COMPETITION has come to stay in the telecommunications sector. It is a vital infrastructure sector and a key driver of economic growth as well as consumer welfare. In such an important infrastructure sector, if it is decided to limit government participation and to allow private actors, then it is important that the state takes on the role of an effective regulator to control possible wasteful competition and to ensure fairness of pricing and efficiency of service. This country has allowed private sector participation in the telecom sector since the 1990s and has put in place a regulatory mechanism since 1997, as described below briefly.

In 1994, when the government announced the National Telecom Policy, the objectives included, quite rightly, the availability of telephone on demand and provision of world-class services at reasonable prices. The policy "recognised that the required resources for achieving these targets would not be available only out of Government sources and concluded that private investment and involvement of the private sector was required to bridge the resource gap."

Private sector participation was allowed in a phased manner from the early 1990s, initially for value added paging and mobile services and thereafter for fixed telephone services. Unlike retail stores or small industries, one must be careful not to allow any fly-by-night operator in the name of encouraging private sector participation. Hence, the government used a competitive bidding process for private sector participation.

To iron out the problems and deficiencies in the sector, which have cropped up since the early 1990s, the New Telecom Policy 1999 was announced. As always, the drafters are never short of language efficiency in describing the objectives: "Access to telecommunications is of utmost importance for achievement of the country's social and economic goals. Availability of affordable and effective communications for the citizens is at the core of the vision and goal of the telecom policy"; and "Create a modern and efficient telecommunications infrastructure taking into account the convergence of IT, media, telecom and consumer electronics and thereby propel India into becoming an IT superpower."

The citizenry should be grateful to the drafters for the inclusion of the following objective as well: "Transform in a time bound manner, the telecommunications sector to a greater competitive environment in both urban and rural areas providing equal opportunities and level playing field for all players". The 1999 policy has clear provisions for interconnectivity among different service providers.

Well ahead of the New Telecom Policy of 1999, the Telecom Regulatory Authority of India (TRAI) was formed in January 1997 to provide an effective regulatory framework and raise safeguards to ensure fair competition and protection of consumer interests. "Section 13 of The TRAI Act gives adequate powers to TRAI to issue directions to service providers," said the Policy statement.

Let us now see a sampling of some ground realities.

A couple of years ago, in Bangalore, one was witness to a German national upbraiding a junior officer of a retail outlet that sells cellular phone connectivity of a well known private operator. The German's problem was simple: His deposit was not refunded more than two months after his post-paid cellular service had been disconnected. He and his family were close to their departure date from India and he had already made several trips to the retail outlet to find out about the fate of his refund. The response he got was the same at every visit: The head or the regional office would directly send a cheque and that the retailer has no more information. The customer could try his luck calling the office concerned. Of what use competition if the customer is not served well?

Recently, a group from Andhra Pradesh went on a tour of the North. Three members of the group had cell phones, each with a pre-paid SIM card of a fairly large value. From the three pilgrim centres the group visited, none could call their home on their cell phones. Every time they tried, they got the message that they do not have the facility for making outside calls and advised them to contact the nearest customer care centre of a company, other than the one that had provided the pre-paid cards.

Upon return from the pilgrimage, one in the group contacted the company that had sold them the connection. They were told that those with a connection taken from the particular company would not be able to make calls if they were physically located in some of the northern States. Is this the service for the consumer, after over a decade of competition into the sector?

A quick survey found that the following were the typical complaints of customers: Bills not received on time; payments made but not taken into account and hence un-updated records; coverage area not fully made known; local calls charged at STD rates; and, ironically, a host of communications problems between parent company and selling agents.

Let us now turn to Internet connectivity. Here too, as in CMTS, there are many actors. A friend was using the Internet connectivity provided by a public sector company. He was happy with the service and the fact that connectivity was assured regardless of whether the dial up was from a metro or a non-metro.

Then it became private and the Internet service was no longer available from some of the non-metros, which were served earlier. My friend had to get a dial up connection from BSNL to ensure Internet access from almost anywhere.

He, of course, laments that BSNL's sancharnet mail site does not allow automatic saving of an address.

Of what use is privatisation and competition if the consumer is not to benefit?

There is nothing inherently right or wrong with private and public enterprises. We have examples of great and shining public enterprises. There are also some poor examples of private enterprise. What we must have — in either case — is an effective regulatory mechanism to ensure consumer welfare.

These are days of relationship marketing (RM). RM is about customer retention and building high level of customer loyalty. RM is vital for success of companies in multi-firm competitive situations, where product differentiation is difficult to practice. Relationships can be built and nurtured only on the basis of trust.

Trust is built on the basis of quality of service and efficiency of after sales service. While telecom companies must remember that they will lose out in the long run if they do not serve the consumer, it is the job also of TRAI to ensure that the long run will come in a relatively short time to inefficient companies.

(The author, formerly with the World Bank and the National University of Singapore, is Professor Emeritus, GITAM Institute of Foreign Trade, Visakhapatnam. He can be contacted at bhanoji@vsnl.net)

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