Now say hello

Of all the liberalisation that has occurred in the telecom sector so far, the Prime Minister8217;s announcement that long-distance telephony will be privatised within the month should prove to be the most beneficial to the largest number of users in the shortest time. Industry players have already predicted that STD call rates in the country could be cut into half in the next year alone. Even this should only be a beginning, considering that India8217;s absurdly high STD rates are now the highest in the world. This sector has had to carry the burden of being confined to the Department of Telecom8217;s purview even as cellular, paging and basic services were opened up for privatisation first. The normal order of privatisation in the telecom sector in fact starts with long-distance telephony. And while privatisation in all the other areas was necessary as well, the public welfare impact of this privatisation should be the greatest of all, as it will encourage lower end users to use the STD facility much moreintensively.

The Prime Minister has done in one go much of what needed doing to redress matters, both in terms of urgency and procedure. The privatisation is to occur before August 15. What is more, Vajpayee went several steps ahead of the recommendations of the Telecom Regulatory Authority of India itself by announcing that there will be no limit on the number of private players in the long-distance calls sector. In doing this, he went along with the far more radical dissenting proposal of Rakesh Mohan, when the majority report of the TRAI favoured a limited number of private participants. Further, as a result of the experience of the delays and complications experienced in the liberalisation of other parts of the telecom sector these past several years, private players will simply pay an entry fee and then agree on a revenue-sharing formula. Nor are rapidly falling charges expected to make a dent in the companies8217; profitability and lead to an early shakeout because traffic volumes will explode as STD calls become moreand more cheap and pent up demand is released. This is the pattern in developed markets. In the US, where competition is most severe, consumers now pay astoundingly low long distance charges of between 5 and 10 cents a minute.

The pattern should be the same as has already been seen in the Internet 8212; unlimited entry of players leading to ever-lower costs to consumers. This is just as it should be. Indian consumers particularly deserve this after paying outlandish charges for decades, and many having been denied use altogether by prohibitive costs. Costs were kept high first in the name of subsidising local calls, made supposedly by those who are less able to pay. Later, they stayed high by default as long-distance telephony remained out of private hands and closed to competition. The basic framework is now clear. What is crucial is for the government to make sure that other companies8217; traffic is carried by all at reasonable rates. As well as that, the government may consider obliging all participants to have a nationwide network lest they are tempted to confine their operations to the most profitable, heavy-traffic large urban centres.