The Telecom Tariffs and Policies: Surrender to Private Operators

The New Telecom Policy, 1999 (NTP99) show the abject surrender of BJP before the private operators and foreign interests. The National Telecom Policy, which more aptly should be termed as an Anti-national Telecom Policy has now virtually accepted that the basic services operators will not have to pay license fees and will be allowed into inter circle and even ISD areas, thus further reducing “cross-subsidies” for rural and economically backward areas.

 Why is there such a concerted move to increase rentals and lower STD/ISD rates? To understand this, we will have to look at who benefits out of this exercise. It is clear that whether it is TRAI or the Government, the thrusts of telecom policies now is to increase the cost to the lower-end subscriber and provide “concession” to the high-end users. The other is to allow increasing private participation in telecom services, easing out the state from providing infrastructure services and finally privatise DoT. The packaging – as in the National Telecom Policy of 1994 – is sought to be made attractive to the people by talking about rural telephones and increased competition providing better and cheaper services.

 Once, the basic services were thrown open to private operators, all talk of rural telephones, better and cheaper services were then given up. Now the exercise is that having allowed private operators in the telecom sector, how to make them profitable. And of course, the other business friendly goal of lowering the telecom costs for the rich. The TRAI, as we have already noted, has held extensive discussions with private operators on how to make their services profitable and therefore the need to increase tariffs for the majority of the users.

 The Basic Services Tender had laid down obligations that the private operators had to fulfil: license fees, roll out of the network and provide rural coverage, etc. Six licenses were given for basic services and a larger number for cellular operators. None of them have given their committed yearly license fees. DoT asked them to give only 20% of the license fees committed, which a few have coughed up under the threat of encashing their bank guarantees. While the cellular operators have rolled out their network partially, the basic services operators have provided less than 100 thousand telephones and none in rural areas. In the same period, the much reviled DoT has provided 3.6 million telephones last year alone – a growth of 20% bringing its current installed base to 20 million telephones.

 Instead of accepting that the basic promise of NTP94 was faulty, the current Draft NTP99 proposes more concessions to private operators: no license fees, opening long distance and international calls also to private operators and so on. Why is the Government pursuing such policies if these have not led to any increase in teledensity, which, ostensibly, was the basic objective of NTP94? Will not taking away DoT’s long distance revenue lead to slowing down of its expansion and thereby hobbling the only agency which is increasing teledensity in the country and providing rural telephony?

 The crux of the issue is that neither the government nor TRAI is interested in increasing teledensity. The talk of increasing teledensity and therefore inviting private participation in NTP94 and now NTP99 is just hogwash . DoT has an annual surplus of Rs. 8,000 crore which it ploughs back into telecom expansion. Out of this about Rs. 5,000 crore is from STD/ISD traffic. Thus, a major share of the cost of expansion of the network is underwritten by STD/ISD revenues. Attacking this – through TRAI’s reduction of charges to virtually 50% — and allowing private operators to enter this area will whittle down this surplus, slowing DoT’s expansion. The current expansion of 20% or more that DoT is now doing will reduce drastically. This means that rural coverage and coverage for states such as north-east will have to come down as DoT will have to conserve its reduced resources for expanding in commercially attractive areas — read the metros.

 The basic service operators have been worried that DoT – branded as inefficient and costly – is providing cheaper and a faster roll out of its network. This cuts into their future market and therefore the need to hobble DoT . The other is that they require larger immediate revenue as they have no long term interests: they want their cash and they want it now. Therefore the need to raise rentals so that their capital costs are recovered immediately. This is the TRAI–NTP 99 pincer: realise immediate recovery of capital costs through increased rentals and local call charges and enlarge private operators share of revenue by allowing them entry into inter circle STD and ISD segments.

 It is clear from the above that the changes in telecom tariff and the new policy in telecom is nothing but surrender to private operators. The media has gone to bat for TRAI and have supported the tariff increases for the lower-end consumers. Charitably, this is a case of self interest: they want to reduce their operating telecom costs through reduced ISD/STD charges, never mind the impact it has on teledensity and rural telephony. If cross subsidies are to be removed and the low-end user burdened, this obviously must give way to media’s self interest.

 A more uncharitable view of the media is that they have become unabashed supporters of integrating with the global elite. If this excludes the overwhelming majority of the Indian people, that is not the concern of the media. While such a position is not difficult to understand, what is dishonest in this exercise is to represent the criticism of the savage increase in tariffs for the lower-end user as a turf war between DoT and TRAI. The issues raised by the Standing Committee of Parliament and other consumer groups regarding the need for lower access charges for increased telecom penetration have been passed over in conspiratorial  silence.

 The introduction of a regulatory framework in the country, be it for electricity, telecom or insurance, is a change in the form of governance. It is an attempt to de-legitimise political intervention on economic matters by creating institutions that are not accountable to the people. The economic powers of a three member TRAI or Electric Regulator (State or Central) are enormous. TRAI deals with revenues of more than Rs. 15,000 crore, equal to the budget of the richest state government in the country. While these state budgets are made by governments that can be dismissed by the legislature and passed by legislators who can be thrown out by the people, the regulators are immune to any such larger accountability. Thus, regulators such as TRAI, are protected from all rules or regulations and any need to listen to the people.

 The whole regulatory framework that is being pursued by the World Bank and IMF is thus designed to achieve the removal of economic decision making from public domain. The so-called public hearings in which the public could express its view became a farce as the public were crowded out by private operators. TRAI also compounded this by hearing private operators in private and public interest groups in public. Thus, regulation is proving another instruments in eroding peoples’ role in economic decision making.

 The New Telecom Policy1999 is nothing but a rehash of the old NTP94 with even more concessions to private operators.