The Hindu Business Line : Death of distance

THERE ARE THREE distinct and commendable features of the new OneIndia plan announced by the state-owned Bharat Sanchar Nigam Limited and MTNL. The first is the dramatic reduction in the cost of a telephone conversation. The price of a local call on a fixed line is now down to a rupee for three minutes. If that 17 per cent reduction is not significant on its own, the charges for long-distance calls have been cut by almost half to a rupee a minute. Of course, this comes on a plan in which the monthly rental is higher, and no free calls may be offered. But for the many who use the phone intensively or talk to friends in other States, the reduction in the rates is a clear blessing.

The second is the practical play-out of what has so long been a technological possibility: The death of distance. Once telephone rates, especially the cost of leased lines, were set like train fares, by the kilometre, with calls crossing State boundaries automatically inviting higher rates. More dramatically, while mobile calls within Karnataka were at one single rate, calls from Chennai to another part of Tamil Nadu were treated as long distance. That was addressed some months ago. OneIndia now completes the clean break; all long-distance calls regardless of whether they are to the farthest or the closest point in the country will be at the same rate — one rupee a minute. No doubt the higher monthly rental will partly compensate the service provider the lower realisation on each minute used but on balance most customers will realise the burden is lighter.

Yet, the most significant of the three features is that while the first two advancements have been brought about by a constant prodding from the Minister of Communications, Mr Dayanidhi Maran, they do not run counter to business sense. Dropping rates for telecom companies, far from being suicidal, has proved to be a sure way to expand the market, reduce unit costs and make profits. It would not have been unusual for state-run companies to lower prices on political diktat and end up losing money. But the commercials are indeed positive in this case, and one can expect the private service providers to join this gala one-rupee game simply because it will be profitable to do so. With the expected switch in the computation of the access deficit charge — the levy private operators pay mainly to sustain certain rural services of BSNL — from 30 paise a minute to a 4 per cent share of the revenue, they will be enabled to match the new rates of OneIndia. Eventually the burden of the access deficit charge must be phased out for the playing field is to be levelled. If the target of raising the number of telephone users to 250 million is to be met, it is not enough for BSNL to do all the running. Private service providers need to pull in the numbers as well with equally attractive and competitive tariff plans. Any extra levies they are forced to carry will be market-distorting and counter-productive.

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