Some progress

The nation’s telecom liberalization program is being implemented in bits
and pieces. Every other day some key announcements are made. On the face of it,
these indicate efforts to loosen the government’s vice-like grip on this vital
infrastructure sector. But if you delve deep into it, the reform program is not
actually transparent and open-ended.

Take the latest announcement. Just before the Prime Minister AB Vajpayee’s
15-day US visit, the government has announced that the monopoly of the Videsh
Sanchar Nigam Limited (VSNL) over overseas telecom services will end in 2002
instead of 2004. VSNL, which has raised enormous amount from the international
financial markets on the strength of its continued monopoly, will be adequately

It is an indisputable fact that overseas calls from India are very high. VSNL
has fully exploited its monopoly status to fatten its coffers at the cost of
providing a cost-efficient service to customers. All over the world
government-run telecom monopolies are being privatized. Under the World Trade
Organization guidelines, Indian government reluctantly agreed to end VSNL’s
monopoly by 2004. This timetable has now been advanced to provide a talking
point to the Prime Minister when he meets potential American investors. So far
so good. What ever be the government’s compulsion, it offers a ray of hope to
suffering telecom customers.

But the reluctant government announcement comes with many riders, attached in
fine print. What the government has conceded is that private telecom companies
can start to offer overseas services from April 2001. For this to happen, the
detailed guidelines and conditions should be made public right now so that
potential new entrants can make their plans. However, the telecom bureaucracy is
not going to make the passage easy and smooth for the private investor.

The government has made it clear that its domestic telecom operators, MTNL
(covering Mumbai and Delhi) and Department of Telecom Services (DTS) will route
their overseas calls only through VSNL. This is the big hurdle in the path of an
efficient telecom regime. Afterall, the basic telecom sector has yet to become
truly competitive. DTS is the dominant player and bulk of the overseas calls
originate from their network. The private will be left with just the crumbs.
Moreover, this directive forecloses any plans on the part of the country’s two
big telecom providers–MTNL and DTS or its new avatar BSNL–to enter the
lucrative overseas communication services. Straightaway, the government is
putting roadblocks in the path of an efficient telecom system. To demonstrate
its commitment to telecom reforms, the government should immediately withdraw
such foolish directives and give up its back door mechanisms to stymie
competition in the overseas telecom services.

Just before this announcement, the government has tried to give fillip to the
defunct basic telecom service privatization. There are only a handful of private
operators in this segment. The ambitious program did not take off again due to
the dilatory tactics of the telecom technocracy. The government has now removed
the restriction that there will be only one other basic telecom operator in each
state to compete with DTS. Now any number of players can come in. This is a
welcome step. A mere announcement is not enough. The government needs to take
pro-active steps to attract private companies into this vital area. More
important is the need to articulate the commitment to ensure an efficient,
competitive, customer friendly telecom system at the highest levels of the
government. This is really needed to send a strong message to the telecom power
brokers and vested interests that their dilatory tactics will not succeed.

Such a message is all the more important at this juncture when the
400,000-odd telecom employees are on a strike to derail the telecom reform
process. While the genuine apprehensions of the telecom employees should be
removed, they should be made to understand that the interests of the consumers
come before their own needs. Telecom is vital sector for the continued good
performance of the national economy. Every hurdle that comes in the way of an
efficient telecom network should be removed at all costs.

We have seen the benefits of the entry of private players in the Internet
access segment. The same VSNL which, as a monopoly, used to insist of filling up
a large number of forms before providing a connection, is now going door to door
to sell connections. The VSNL’s access charges have more than halved. The
market has exploded with over 1.4 million Internet connections now. In the
heydays of VSNL monopoly, the number of connections remained at an abysmal
40,000 for at least three years, thanks to its inability to service more
customers. This should not be allowed to be repeated at least in the overseas
telecom sector and the best way is to allow unrestricted competition at the

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