Tale of the two ISIs

True, in some instances natural monopolies still exist and choice is not yet possible. Power is an example. Hypothetically, I do have a choice, as I can move to a part of Delhi where a different distribution company is at work. But given the high transaction costs of such switching, that’s really non-choice. However, with the unbundling that is going on, our notion of natural monopolies is changing every day. Perhaps there’ll come a day when I will have two or more power distribution companies to really choose between.

Many reform decisions are taken in the name of consumer choice. But it is doubtful that the consumer is truly offered a choice. Consider the conditional access system (CAS). No one seems to have the foggiest idea about whether the July deadline (for metros) will be adhered to and what it will entail. As one of India’s 44 million cable TV subscribers, I will have a choice between the free-to-air option and various pay bouquets. That’s it. Can I choose which channels will be in the 30 free-to-air lot? Don’t get me wrong. The broadcaster certainly has the right to decide which channel will be free-to-air. But we will probably have about 60 channels that can potentially be free-to-air. Who picks out the 30 for me? My local cable operator does. Do I have a choice in picking channels from a bouquet?

I don’t. The most important choice, at the last mile level, doesn’t exist. Perhaps there will eventually be such a choice. But today, it doesn’t exist. Why shouldn’t there be direct to home (DTH) telecasts, with proper consumer choice? As far as I can make out, other than lobbying by cable operators, the only serious argument seems to be security. Security, of course, needs to be broadly defined, to include FTV, Trendz and their ilk, not to speak of condoms. As everyone knows by now, given our cultural traditions, we need to abstain from these. And since there is no guarantee that we will abstain voluntarily, the government must compel us to.

Exaggerating a bit, I have two propositions. First, monopolies that restrict consumer choice are always the result of government policy. In the absence of restrictive government policy, monopolies will disappear. Second, these monopolies are always justified in the name of security.

If you don’t believe me, consider what is happening to motor vehicle licence plates, subject to the caveat that the issue is now stuck in the court system, proceedings in various high courts having now moved to the Supreme Court. Given our concern with terrorists and security, we must have better licence plates. There will be chromium holograms, permanent ID numbers, embossed registration numbers, snap lock systems and self-destructive stickers. We must have high-security licence plates that prevent vehicle thefts and duplication. Fair enough. So what do you expect the Centre to do? Provide technical specifications, identify agencies that can give approval certificates to manufacturers and notify a date for new number plates. Full stop. What do you expect state governments to do? Introduce a transparent tendering system, have qualification norms for bidders and award contracts.

What you certainly don’t expect a state government to do is to decide that only one manufacturer will cater to an entire state or an entire region within a state. Sometimes for a period of 15 years. Bizarre as it may sound, that’s exactly what was happening, before it got stuck in court. As I said, monopolies are often mandated by the government. You don’t have a single provider even for telecom or airlines. But licence plates, being a high security item, must have a single manufacturer. I wonder whether my power example of non-choice will work. Meaning, can I go to Rajasthan and acquire a licence plate for Delhi to exercise my choice?

Forget the five million new vehicles registered every year. How much will these high-tech licence plates cost? At least Rs 700, if not Rs 1,500. Even 60 million existing vehicles times Rs 700 is a tidy sum. And there will be a replacement market. Enough to lobby about. Having ensured a monopoly through government policy, we must certainly ensure that consumers aren’t exploited. How about setting up a tariff regulatory commission for licence plates?

As I said, this particular issue is sub judice. But there is a more serious mindset problem. I don’t think our planners and policy-makers are really sold on the consumer choice argument. Consumers don’t know what is good for them. It’s far better to decide on their behalf. After all, there is security to consider, even if security is a disguised argument for lobbying. Before BIS (Bureau of Indian Standards), there was the Indian Standards Institute (ISI). It is possible to fix ISI (or BIS) standards and leave things to the market. Unfortunately, the other ISI comes in the way.