The Hindu Business Line : Long-distance bonanza

A HIGHER DEGREE of competition, lower long-distance tariffs and a wider range of service offerings will be the bonanza that consumers can look forward to from the flurry of recent decisions by the Communications Minister on national and international long distance telephony. The sharp reduction in the long-distance entry fee to Rs 2.50 crore and the slashing of revenue share from 15 per cent to 6 per cent will be a step closer to the proverbial "death of distance" between local and long-distance telephony. With Internet telephony also permitted, competition will drive down tariffs and keep all players on their toes. A boost to these moves will come when the regulator implements the Carrier Access Code. This code, which will allow consumers to pick a long-distance operator to carry their call, and a switch in the Access Deficit Charge to a revenue-sharing formula, which also appears to be in the works, should set the long-distance market humming.

Though some of the long-distance players are seeking a `level playing field' with the new-comers, their demand appears unjustified. Going by their high margins, most of the large players in long-distance telephony should have already recovered a significant proportion of their investments. That apart, their first-mover advantage will offer them a good opportunity to lease out their idle long-distance infrastructure to the new comers. Since direct inter-circle connectivity (between contiguous circles) has not been permitted, non-integrated mobile operators such as Hutch or Idea may take the lease route to build their long-distance footprint, at least in the short run. With a low entry fee, infrastructure providers such as Gail, RailTel and Power Grid Corp, which together have 60,000 km of optical fibre network across the country, will also widen the competition in the long-distance market. The decision of the Government to waive the requirements of roll-out obligations and minimum net worth criteria will allow full play of the market forces in dictating the entry and exit of players. The new policy decision of keeping the competition window open should shut the doors on any cartelisation moves by the existing large players.

However, the latest policy decisions fall short of expectations on two counts. One, the Government continues to remain silent about Bharat Sanchar Nigam sharing its network infrastructure with other players. Subscribers of any private GSM service provider can roam outside the home territory on another private network seamlessly, but not on BSNL's. The reluctance of BSNL to play ball means costly duplication of infrastructure especially in smaller towns. Two, the new policy measures and the competition from large players may prove unduly harsh on the standalone Internet service providers. Quite a few ISPs, already struggling to remain in business, will be rendered unviable very soon.

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