When Indian prime minister A.B. Vajpayee made the inaugural call on Bharat Sanchar Nigam Ltd's (BSNL's) cellular network from Lucknow to his deputy L.K. Advani in New Delhi, he couldn't have known how dense with controversy those airwaves would become.

Now, BSNL is a government-owned behemoth with 35 million landline subscribers across India. That it would get infected with the cellular bug was a foregone conclusion. That it would get free licences to operate its cell services and special concessions for meeting 'social obligations', was cause for some teeth-gritting, but no cause for much surprise.

But what has shaken the rest of the industry is not so much the scale of its proposed operations-1,000 cities by March 2003-but the way it is conducting itself. The issue is pricing. BSNL stands accused of predatory pricing. In other words, of service charges kept below cost with the intention of hurting others.

Nonsense, respond BSNL officials, arguing that it cannot possibly do anything uneconomic, given the burden of having to cross-subsidise the fixed line network. Why should the government subsidise its cellular operations?

That's a legitimate question, albeit one that leads to interesting answers. Having to 'cross-subsidise' local calls, for instance, did not prevent BSNL from notching up Rs 23,500 crore in revenues and Rs 5,000 crore in net profits last financial year. The company is evidently in no need of life support systems. Other than local calls, BSNL lords over the Rs 8,000 crore domestic long distance market, in which it has a share of over 90 per cent. The company's other lucrative revenue stream is that of interconnection. Other networks pay to gain access to its subscribers, for local as well as long distance calls.

That brings us to the other question: why should BSNL risk getting entangled in a public brouhaha over something that ought to remain just a fringe business for it? The immediate-term target is 2.4 million cellular subscribers-which is modest, given the spread.

The answer could be that the cellular component won't remain all that 'fringe' for very long. By any stretch, distributing SIM cards is easier than installing phone cables. Also, now that BSNL sees itself as a corporate entity, it takes on the right to have its commercial interests met in the manner that suits it best, so long as it does not violate any law of the land. The logic of the business militates against restraints of any sort, pushing instead for an ever-expanding subscriber base.

So, where does that leave private operators?

At risk of injury by the incumbent. Some argue that this is a classic case of setting a former state monopoly on the prowl, without the requisite competition safeguards in place. The MRTPC was to be replaced by the Competition Bill, but it remains just that-a bill on paper. What about the Telecom Regulatory Authority of India (TRAI)? The regulator was veering towards the view that any tariff plan with less than Rs 200 a month in rentals and less than Rs 2 a minute of airtime charges would be 'below cost'. However, that was by the existing players' costing; BSNL's scale will certainly enable lower costing. What could happen is this: TRAI prescribes a cellular tariff floor, the way it has for CDMA-will services-the low-cost format that Reliance Infocomm is going to roll out on December 28 this year.

That's another hot one. At the end, it's funny how telecom businesses would rather depend on centrally-ordained market structures than on the progression of technology. What if radiation-risky cellular systems were to get outmoded by, say, safer chip-enabled telepathy someday?