Even after two months of announcing of the new Telecom Policy, the actual policy contours remain totally unclear. While the basic thrust of the policy has been indicated — henceforth even the basic Telecom services will be open to the private and the foreign investors — the actual mechanism and terms allowing for such investments have yet to be worked out. This gives credence to the belief that the New Telecom Policy was worked out in a hurry before the PM’s US visit, as a concession to US demands in other areas. An NTP instead of the NPT! However, the Telecom sector which is vital to the country’s future, should not be treated in such a cavalier fashion.
Shorn off the verbiage regarding the “intention” to connect all villages and wiping off the entire waiting list by 1997, the operative part of the New Policy is virtually a single line in the NTP document — allowing private sector to operate in the basic Telecom services, an area hitherto the exclusive preserve of the Department of Telecom (DOT). The New Policy has stated that in order to achieve telephone on demand, an additional 2.5 million lines over and above the 7.5 million lines already targeted in the 8th Plan will have to be provided in the remaining 3 years of the Plan. For this, the additional resources required is of the order of Rs.11,750 crore. To connect all villages, the additional resources required are Rs.4,000 crore. The New Policy has argued that the additional resources required to meet the revised 8th Plan targets is of the order of Rs.40,750 crore against Rs.25,000 crore required originally.
In the Policy document, the reason for allowing the private sector to operate in the basic Telecom services is the alleged lack of capability of DOT to raise additional resources of Rs.15,750 crore. The New Policy proceeds also to claim that DOT already faces a resource gap of Rs.6,000 to Rs.7,000 crore in meeting the existing 8th Plan targets itself and is in no position to raise the additional resources required for the revised targets. If the New Policy document is to be believed, the need to allow the private sector does not arise out of any policy consideration regarding the future directions for the Telecom network, but purely due to a lack of adequate capital resources that have therefore to be augmented from private and foreign sources.
In case the Governments figures are correct, then the total investments that DOT can make on its own for the entire 8th Plan is of the order of Rs.18,000-19,000 crore. The original targeted investments were of the order of Rs.25,000 crore, and as per the NTP document, DOT is facing a resource gap already of Rs.6,000 to 7,000 crore. If this is indeed so, how can we then reconcile this claim to the statement made by the Ministry of Communications before the Standing Committee on Communications, (6th Report, Lok Sabha Secretariat, April,1994), “The Department of Telecom has already spent or is committed to spend in the first three years beginning from 1992-93, a sum of approximately Rs.17,320 crore (comprising about Rs.12,280 crores as internal resources and the balance Rs.5040 crore approx. as bonds and “others”). It is anticipated that based on the current trend of internal resource generation and the balance of bond money to be raised, the expenditure will be in the range of Rs.34,000-35,000 crore.” In other words, by the Ministry’s own admission, the total shortfall in terms of resources to meet the revised target of the New Policy was only Rs.5,000 crore — a measly 12% shortfall! Further, the recent DOT tender for leased equipment had drawn an extremely favourable response, making available to DOT another Rs.6,000-7,000 crores. In view of this, the entire premise on which the Government’s policy rests of allowing private capital in basic Telecom services is clearly faulty. There was no resource gap based on which the current policy needed such a drastic change.
The New Policy has stated that basic Telecom services will henceforth be open to the private sector. This means that either the existing network will be handed over to the private companies or parallel networks will be built by the private investors. Either we will see a fragmentation of the existing physical network or its expensive duplication.
It is instructive to examine what is happening globally in the Telecom sector. There are two distinct issues that have come up. One is privatising the existing state monopolies in Telecom services and the other is opening the Telecom services to multiple operators to provide competition. It is important to recognise that they are distinctly different issues even though they are clubbed together loosely as privatisation.
For historical reasons, North America and European Telecom sectors have had different forms of ownership. Recognising the importance of communications to national security, the European countries made telecommunications a wholly owned government monopoly. The US and Canada have the Pacific and Atlantic Ocean for security and allowed private companies to operate in Telecom services. However, the physical network, the laying of cables over vast stretches required “Right of the Way” legislation and therefore state intervention. Ultimately, both Canada and the US had only one telecom operator, Ma Bell (AT &T) in US, and a splinter Bell, Northern Telecom, in Canada. Subsequently, under Anti-Monopoly action, AT&T, who was also a switch manufacturer, had to divest its Telecom operating companies — the baby Bells — or six local operators covering the entire US. However, the worldwide trend was to follow the European pattern and reserve the Telecom services as a government monopoly.
Privatisation in the Telecom sector has meant largely converting the existing government monopoly to private monopoly through sale of shares to the public, much on the patterns of British Telecom. Germany and Italy are in the processing of converting their government monopolies to such private monopolies. UK has gone a step further. It has not only converted British Telecom to a private company by selling shares to the public, it has also allowed competition — Mercury has entered trunk and local operations in competition with British Telecom. However, there are only a few countries in the world, at most half a dozen, who have allowed competition in the basic Telecom services. None of the EEC countries with the sole exception of Britain are even thinking of allowing competition in the basic services in the future. Even where competition has been allowed, two or at best three operators have been allowed into the network. This may be contrasted with the scenario under the New Policy where 30 or more companies are jostling together for entering the basic Telecom services in India.
There are overriding technical reasons why most advanced countries including Germany and US are unwilling to fragment the physical network or duplicate it, as is being proposed under the New Telecom Policy. The future directions for the Telecom sector are clear — we are going to see a unification in the Telecom, entertainment (Cable TV) and data networks. The computer and television are not going to be independent entities but interactive tools providing access to games, movies, educational programs and so forth. The technology is there. All that we require is a 2.4 Million bits/second bandwidth connection to every home as against the 64 Kilobits/second connection we now have over ordinary telephone cables. Nippon Telecom has promised an optical fibre connection to every home in Japan by 2005. The US is actively discussing the Information Super Highway. It is increasingly clear that the future lies in a high bandwidth public information network providing services for various functions, very much like the public transport networks — the roadways. Introducing multiplicity of ownership is a step back from the future.
Even if we accept the Governments arguments regarding lack of resources and the need for introducing competitive networks, we still have to address the question of ownership of the operating telephone companies. In all advanced countries, the telecom sector has a cap on foreign investments. In EEC it is virtually zero. The US allows foreign ownership but restricts it to 20% of the total equity. Further, US also does not allow manufacturing companies to own operating companies anymore. However, the Government seem to be now favourably inclined to foreign control being allowed for Telecom operating companies. Whether it is 40% or 51% equity being owned by foreign companies, it is only a matter of detail. Either way, the multi-national companies will own the private telecom operating companies, subjecting the Indian Telecom network to extra-territorial control. In addition, as the multinational Telecom equipment manufacturing companies are closely involved with the new private ventures, we are likely to see a multiplicity of obsolete equipment being dumped in the Indian network. No restrictions seem to have been proposed for prohibiting manufacturing companies to enter Telecom services and to see that Indian manufacturers will get a fair chance to enter the new switching market that will open up.Sector.
The New Telecom Policy seems to have been a hasty document without any serious thought to the future directions that India must take in the Telecom sector. The overarching consideration seems to be the withdrawal of the state from the basic infrastructure of the country. This may be contrasted with the South Korean example. South Koreans are currently spending 13.45% of their GDP on the Telecom sector, almost all of it through the state. Globally competitive economies can not be built without corresponding Public investments in the country’s basic infrastructure. The Government’s avowed aim is to introduce liberalisation. However, a policy that has no transparency concerning entry criteria for private sector and a “case by case clearance,” is the complete obverse of this alleged aim. We have already seen in the Power Sector that the License-Permit Raj has come back through the backdoor. While the Udyuog Bhavan is relatively empty, the crowds have now moved to the Power Ministry and the Communications Ministry. The actors may have changed, but the act remains the same. Or shall we say that a License Permit Raj by any other name smells the same?