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Bullish on telecom sector

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Our Bureau

New Delhi, Feb. 25

THE Economic Survey has hinted that Indian consumers could be enjoying a tariff structure like that in developed world where there is a single tariff for local and long distance calls.

"In the US, mobile telephony subscription packages bundle airtime with national long distance consumption into a single price per minute where the consumer does not differentiate between local and NLD calls. Given the introduction of competition and consequent drop in prices, tariff package which are competitive by world standards may now appear in India," the survey said.

Commending the growth in the telecom sector, the survey has also suggested policy measures to reduce the extent to which a State-led planning approach is used in the utilisation of spectrum for telecom services. It has also mooted entry of new players and an increased role for the Telecom Regulatory Authority of India, which will enable to drive down prices through vigorous pro-competitive efforts.

While tele-density has risen sharply, India continues to lag behind countries such as Brazil and China where the tele-density is more than 40.

"In order to catch up there is a need to maintain vigorous pro-competitive efforts in terms of public policy, rapidly shift to new technologies, encourage entry of new players and drive down prices through competition," the survey said.

Even as the survey highlighted the performance of the telecom sector as an example to be emulated by other infrastructure sectors, it has sought to draw attention to the declining market share of the public sector giants Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd.

"Over the recent period, PSU operators BSNL and MTNL have lost market share in fixed telephony from 98.65 per cent to 91.39 per cent.

"However, at the same time, the PSUs actually gained market share in mobile telephony from 3.98 per cent to 20.21 per cent. Overall the market share declined from 90 per cent to 55.6 per cent," the survey said.

On the future of telecom sector, the survey has indicated that broadband service may have an even bigger impact upon the economy as compared to growth in voice telephony. "The sharp drop in broadband prices in late 2004 may represent the beginning of a phase of hectic expansion of the sector.

"Going forward, the telecom sector will feature lively competition between multiple private firms," it said. Broadband tariff is set to decrease further as Internet bandwidth will become cheaper.

On postal services, the survey has highlighted the need for clarifying the rationale, the mechanism and the size of the postal subsidy which has been projected to increase to Rs 1,628 crore in 2004-05 compared to Rs 1,354 crore in the previous year.

The increase has been attributed to the merger of 50 per cent of Dearness Allowance with basic pay last year.

At present, user charges in the postal system cover only 78.3 per cent of the costs.

Indicators for telecom

  • Scope for tariffs to come down further
  • Increase competition by encouraging entry of new players
  • Broadband to be the next big thing after cellular boom
  • Single tariff for local calls and STD a possibility
  • Review extent of postal subsidy
  • (This article was published in the Business Line print edition dated February 26, 2005)
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