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
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 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?