• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

TELECOM RATES HAVE dropped; and are set to drop further. Consumers are winning as they finally are getting value for money. But, as in most games, there must be losers, and a potential one has already been spotted: The private basic telephone operators. Theirs is a sorry tale. Just 550,000 subscribers are connected to private basic service providers, in contrast with the 5.5 million cellular subscribers. They have large accumulated losses, and the new low tariffs that have come into play may mean a longer haul to profitability. The state-owned BSNL and MTNL too may have similar concerns, but with a long-established infrastructure and 34 million subscribers, they are in a better position to handle the challenge that is threatening to overwhelm the private operators. Unless, of course, the latter are able to rework their business.

Theproblem was compounded by the dramatic drop earlier this year in the national long-distance rates. Long the most profitable revenue stream for BSNL and MTNL, it was the only hope for the private operators of earning a surplus. Though volumes have grown, post tariff cuts, they have not been adequate yet to restore the revenue. And the private operators cannot seem to make money on local calls nor do they find the monthly rentals adequate. They would like these charges to be raised, but that can happen only at their own peril, for competition from cellular is real. Already it is cheaper to get a cellular phone — a pre-paid card costs as little as Rs 300 — than a fixed line service that can cost up to Rs 450 a month in rentals alone. The cost of talking on the mobile bears no hefty premium anymore. Furthermore, in States such as Kerala, the cost of calling another town on the cellular is often cheaper than with the plain old telephone. That explains why consumers are taking to the cellular phone in droves: their population is growing at 75 per cent a year, while that of basic phone users is at 20 per cent albeit on a higher base of 34 million users.

Ifthey are to survive, the private basic operators have two choices before them: Cut costs and work profitably even at lower tariffs or come up with offerings that provide as much or greater value for consumers than the cellular service can. Costs can be cut if the expensive infrastructure that each and everyone is creating on their own can be optimally shared. At the moment, few are even contemplating this. Servicing the Internet user continues to be an ace up their sleeve; but the Internet usage is growing nowhere near the pace of a couple of years ago. With wireless-in-local-loop capable of allowing limited mobility, they have the technology to match the cellular, but the licensing is still an issue. It would only be fair to the cellular operators that an appropriate licence fee is paid by the basic operators to provide limited mobility. That brings us to the larger question of convergent licence, one that allows any service provider to offer any of the services — cellular, broadband or long-distance — at a fee. That will ensure optimal use of resources and let a provider offer the full bundle of services to a customer at the minimum cost. The sooner the progression is made the better it will be for the industry and its consumers.

Send this article to Friends by E-Mail

Stories in this Section
No collect call for basic operators

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line