The Hindu Business Line : Death of distance?

THE PROVERBIAL "death of distance" implicit in the Communications Minister, Mr Dayanidhi Maran's "One India rate" proposal is truly welcome from a consumer perspective as tariffs will drop for long-distance calls. The prospects for further deepening and widening the telecom market, especially in mobile telephony, appear good as fully integrated telecom operators can be expected to bundle local and national long distance minutes in aggressive tariff plans that are tailored to their customers' requirements.

For the government too, these proposals can provide the right stimulus to its efforts to quadruple the existing mobile subscriber base from about 50 million to 200 million by 2007. This will entail replicating the feat that the mobile industry has achieved in the past two years through attractive pricing when the mobile base quadrupled from 13 million in April 2003 to just over 55 million in May. Finally, a unified telecom licence will set the stage for treating the entire country as a single market, instead of the artificial circle-wise divisions prevalent so far. In effect, this proposal will put the final seal of approval on the process of consolidation within the telecom sector that has shrunk the number of service providers to five major groups operating across the basic, mobile and long-distance segments.

Translating the Communications Minister's intent into reality will involve removing the constraints posed by the current policy, and dealing with the implications for the state-owned Bharat Sanchar Nigam. Any reduction in charges will need to take into account the fact that private operators are now required to pay as Access Deficit Charge to BSNL 30 paise a minute on all long-distance calls. BSNL gets Rs 5,300 crore a year on this count, and the question is whether this levy will continue.

A second obstacle to equalising the rate for local and national calls would be the national long-distance operators. Any call from one State to another must necessarily pass through these licencees at a fee that is about Rs 1.20 a minute. The telecom regulator's contention has been that if telecom operators are permitted to carry inter-State long-distance traffic without going through the long-distance operator, it will affect the latter's business operations. How the Government will reconcile the need to lower the rates and keep long-distance operations viable remains to be seen. To drive downs costs for telecom operators, the Government may have to allow them the freedom to bypass the long-distance operator, and push them to share their infrastructure. Without such an arrangement, the operators may not have the economies to keep the fixed tariff elements (such as rentals) at a low level when they heed the Ministerial advice to lower call charges, and the overall monthly bill for consumers may remain at the same level as in the past. The key to accomplishing a One India rate lies in getting BSNL, which has thus far been opposed to sharing infrastructure (such as allowing subscribers of other operators to roam in its network), to open the gates.

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