The speed with which the government has accepted the telecom regulator's recommendations on opening up the overseas telephone service market is commendable. This would, happily, pave way for dismantling yet another vital telecom services segment monopolized by a government-run behemoth.
This particular report of the Telecom Regulatory Authority of India (TRAI) is a path-breaking one coming from the regulator. TRAI has advocated unlimited competition in the International Long Distance (ILD) telecom services. Currently this is the monopoly of the Videsh Sanchar Nigam Limited(VSNL) which zealously guards its monopoly. The only other telecom segment where unlimited competition was allowed was the Internet access service segment.
TRAI's recommendations were based on a nearly year-long consultation process which included the industry, customers and the public. The regulator and the government has perhaps learnt the lessons from the messy process followed in allowing private cellular services. In cellular services, only limited competition was allowed with just two players in each service area with the option for 2 more to include government companies when the segment became attractive. Also a fixed license fee regime was altered to a revenue sharing arrangement to stabilize the cellular industry.
So in the ILD arena, any number of companies can offer services. Each of these companies will have to pay an entry fee of Rs 25 crore and provide a bank guarantee for an equal amount. The companies will have to share 15 percent of their gross revenue as license fee every year. No mention has been made about the tariff. One presumes that the regulator will work out a tariff regime as in the case of other services and companies would be free to price below this ceiling.
What is commendable is the speed with which the newly converged Ministry of IT and Communications acted on the recommendation. After submission on November 12, the ministry worked through the Deepavali holidays and announced its acceptance of the entire set of recommendations. The usual government practice of referring some of the proposals either back to the Recommending body or to a panel of experts was not done. In normal times, the government bought time through this method and swept inconvenient proposals under the bureaucratic carpet for inaction.
Of course, the bureaucracy being what it is, cannot help holding back some proposals for future action. In this case, the ILD operators would be allowed to use the emerging cost effective technology of Voice over Internet Protocol (VOIP). However, each ILD operator would have to apply for a separate license for VOIP. The government has promised a separate policy framework for the VOIP services.
If more players, other than VSNL, are allowed into the ILD market, the prices of overseas telecom services are bound to fall.
Today, the tariffs for overseas calls are prohibitively high. A call from India to the USA, for instance, costs 8 times as much as a similar call that country to here. VSNL's tariffs are not based on actual costs but aimed to extract monopoly prices. No wonder international calling facility is barred on 98 percent of India's 37 million telephones. A competitive tariff regime for overseas calls should open up new opportunities to Indian business, not just to computer software and hardware companies.
It took long in coming. Anyway, better late than never.