On Shri Narasimbha Rao’s visit to the United States, he carried a gift – a New Telecom Policy which would allow multi-nationals and private investors in the basic telecom services in India. This  opening of the Indian Telecom market has enormous implications, not only for the Telecom sector but for the sovereignty of the country. After all, the communication network is the lifeblood of a nation. Damage it or sabotage it in a state of hostilities, you can bring a nation to its knees without firing a shot. It is this sector which Shri Rao has decided to hand over to the multi- nationals.

    The New telecom Policy has a number of pious wishes regarding providing telephone on demand, connecting all villages to the telephone network, self reliance, world class service etc. However, the operative part of the policy is one single line which promises that private and foreign investors will be allowed in the basic Teleom services on a Build Transfer Operate (BTO), Build Lease Transfer (BLT), Build Own  Operate (BOO) basis. Further to the policy, the indications are that various parts of the existing network may be handed over to companies like Fujitsu and Reliance. There is now about 30 such proposals with the Government and all of them have major telecom multi-nationals as a part of the proposed set-up. It is clear that the telecom multi-nationals would be the major beneficiaries of the new policy.

    What are the current needs of the Telecom sector? The key tasks are to provide telephone connections to the consumer on demand, extend the rural telephone network to all the villages and provide basic data services to the industry. All this at reasonable and affordable costs. Unfortunately, the current policy does not considers any other option except mobilising additional resources through private sector participation. As we shall see later this is an expensive option and can result in the existing system landing in a crisis without substantial expansion.

    India has seen extremely rapid growth in the last 5-6 years in the telecom field. Though a lot yet remains to be done, the expansion of the network has taken place at a pace which is highest in the world. This must be compared to the rate of growth in the advanced capitalist countries in the telecom sector today which are flattening out due to saturation in demand. With a telephone density of 50 to 70 per 100, the potential for adding switching capacities are quite limited. Against a 16% growth in India, the growth in US is 3.5% and Europe 5.7%. Further, India has been identified as one of the potential future growth areas, as the telephone density is of the order of 0.9 per 100 against a possible 14 to 15 in urban areas. Obviously, given the saturation in demand in the West, the multi-nationals are looking to markets like India to sustain their profits.

    The major problem of the Policy is that it allows the entry of multiple operators in the basic telecom network itself. World over, each local area generally has only one operator. In fact, in most European countries, telecom is still a Government Department and private sector has not been allowed in as yet. Countries which are experimenting with multiple operators have permitted this on the trunk routes, with a few allowing them further in the local loop also. However, this has been done only in a handful of countries like UK, Japan and USA. In USA, though limited competition has been allowed in the trunk routes, the local loop has only one operator in a given geographical area. In all cases, where such competition has been allowed, the basic network has a high density and a large volume of traffic. And in no case does the competition extend beyond two or three such operators.

    The reason why there is a monopoly in telephone services in a given area has to do with the nature of the telecom network. Physical lines had to be laid in each area and right of the way legislation had to be created to permit the same. Multiple network in the same area would mean extremely costly duplication of the physical network with very little added benefit. Further, the co-ordination with road, sewage and other urban agencies in laying a network is sufficiently complex not to warrant a duplication. This is why telecom is regarded as a natural monopoly much like power distribution world over. In US it is termed as a regulated utility as the consumers have to be protected by the state against unfair exploitation by the monoploy companies providing the service.

    The cheapest way therefore to extend telecom services is then through the expansion of the existing network. For reducing the cost of equipment, standardisation and mass production are the cardinal engineering principles involved. Therefore, if the telecom network has to be expanded at the lowest cost to the consumer who ultimately pays the bill, it must be done through an unified network and a few standard switches for which the manufacturing capability already exists in the country. However, the Government has chosen a way to implement the expansion of the teleom network which is diametrically opposite.

    The current Policy will allow multiple operators in one area pushing up costs due to the costly duplication of the physical cable network. Further, there is to be no attempt to standardise the switches with each private operator offering its switches from which ever multi-national they have tied up with. the result will be that even in a small area, there will be multiplicity of equipment and technologies with all the problems of interfacing, increased inventory of spares and expertise required to maintain such disparate systems. The result will be to push up the costs of telephone services to atleast twice their current levels. certainly, if expanding the telephone network at affordable costs is the key objective this is not the way.

    Why should the Government be then embarking on a policy which does have any parallel anywhere in the globe, particularly as it is not even the cheapest option? Why should the telecom network be fragmented which can only degrade the technical efficiencies of the system? The answer perhaps lies not in the stated objectives of the policy but the mechanism which is to be followed to let private sector in. As per the Union Minister Shri Sukh Ram, all such cases will be addressed on a case by case basis. We are quite familiar by now what this means. There will be no procedures, no tenders – followed even for the lowliest of Government purchases, and no transparency in decisons regarding choice of parties. One may be forgiven for being cynical if one suspects that the lack of transparency is precisely the objective of the policy. In the prevailing atmosphere, arbitrary decision making process favours the powers that be even if the cost to the consumer goes up. And multi-nationals with Swiss bank connections obviously are gloating over the current policy which allows them an entry into the heart of the Indian telecom network.

    If competition was to be introduced in the network, then a better option would have been to let competing technologies come in for telephone services. Today, it is possible to provide telephone services either through wireless, cable TV network or through satellite. Though the copper cable is still the cheapest alternative in the urban environment, atleast a degree of competition could have been introduced without sacrificing the integrity of the network Instead, we have a policy which has little understanding of the issues in telecom and is motivated solely with the idea of letting the private sector in basic telecom services.

    The ruling class in this country has clearly lost the ability to plan for the future of the nation. Time and again they are showing their bankruptcy in formulating policies – policies designed to help multi-nationals rather than the nation. The working class will have to take stock of this and take policy initiatives in vital areas. It is fitting that the telecom unions have taken up the challenge of the New Telecom Policy. The success will lie in mobilising the entire Indian people behind an alternate vision of the telecom sector and defeating the  bankrupt path chosen by the Government.