© Ravi Visvesvaraya Prasad, Aug 2000. Please read the Copyright Notice. Reproduction strictly prohibited and will be prosecuted without any warning.
Original URL is http://www.timesofindia.com/090800/09edit4.htm
article is in response to the edit page article A Policy Wrong Number -- Cheaper
STD Means Fewer Phones by Prabir Purkayastha in The Times of India
on Saturday, 05 August 2000. Mr Purkayastha's
article raises a number of issues which need to be refuted.
the conference of state information technology ministers on 15 July, the
prime minister announced the opening up of inter-state long distance
telephony by 15 August, with no limit on the number of operators. Mr
Vajpayee appears to have gone by the recommendations of the majority of
the old Telecom Regulatory Authority of India (headed by Justice S. S.
Sodhi and dissolved in January 2000) as well as of Rakesh Mohan, a
part-time member of the reconstituted TRAI. The old TRAI had recommended
no limits on the number of operators, with an entry fee of Rs 500 crores.
Mr Vajpayee appears to have overruled the majority of the new TRAI, who
wanted the number of licensees to be limited to four, to be decided by
competitive bidding on the percentage of revenue sharing.
is uncertain if Mr Vajpayee would be able to meet his announced deadline
due to strong opposition from the department of telecommunications, which
would be playing a key role in formulating the detailed terms. According
to the New Telecom Policy of March 1999, as per India’s commitment to
the World Trade Organization, competition was to have been introduced in
domestic long distance services from 1 January 2000, with the government
to have announced all entry and operating conditions by 15 August 1999.
However, DoT, afraid of losing its lucrative monopoly, sabotaged the
process. Purkayastha’s Delhi Science Forum assisted DoT by filing
numerous cases in the High Court of Delhi.
arguments of universal service obligation and rural telephony are
historical baggage today. Erstwhile monopolies such as AT&T, British
Telecom, France Telecom, Deutsche Telekom, Telecom Italia, Telefonica
Spain, and Nippon Telephone and Telegraph used identical arguments to
prevent competition, but were unsuccessful.
fails to explain why, in spite of DoT having been a monopoly since 1881,
only 2.1 percent of India’s population today has a telephone compared to
the world average of 12.7 percent. In spite of DoT’s professed
commitment to rural telephony, only 0.3 percent of the population outside
the twelve largest cities has a phone, and 292,000 villages still do not
have even a single phone. Since Independence, DoT has installed only
374,600 village public telephones – most of which are perpetually
out-of-order – while it has installed 20 million phones in urban areas.
An expert of International Telecommunications Union estimated that about
half of India’s population had not made or received even one single
phone call in their entire lives. He also estimated that about half of
India’s population had to walk for at least four hours to reach the
nearest working phone.
USO argument used by Purkayastha was formulated by Theodore Vail, then
head of AT&T, in 1914 for the specific purpose of avoiding antitrust
litigation by USA’s Department of Justice. In return for AT&T’s
monopoly being continued, Vail proposed that no person who wanted a
telephone connection would be denied one, no matter how remote the area
she lived in, how much it would cost AT&T to lay a cable to her, or
how few calls she made. Irrespective of the cost, AT&T would provide
her the same range and quality of services at rates identical to those it
charged in metropolises.
to portray themselves as pro-poor, governments worldwide adopted the USO
concept and set up monopoly operators as government departments. They kept
international and long distance tariffs very high to subsidize local and
rural telephony. This was in spite of a typical break-up of
infrastructural costs being about 75 % for the local loop which connects a
subscriber to the exchange, 10 % for national long distance circuits and
15% for international circuits. DoT’s domestic long distance revenues
were approximately Rs 10,320 crores in 1998-99, although the corresponding
costs were only Rs 1,383 crores. Since they generated little traffic, both
fixed and operational costs in rural areas were several times that in
cities, but they were charged the same tariffs. The capital cost to DoT
for providing a new connection is about Rs 20,000 in a metropolis, about
Rs 100,000 in a typical village, and several times that in remote areas.
Nevertheless, the deposits, installation charges, monthly rentals, and
call rates charged by DoT are approximately the same all over India.
technological developments in the seventies refuted the idea that telecom
was a natural monopoly. The prevailing consensus is that telecom is now
characterized by economies of scope rather than economies of scale. In the
early eighties several governments introduced competition in international
and long distance telephony, and compensated their incumbents for the
amounts spent on fulfilling their USOs. In USA, France, Australia, and
Argentina, all basic and long-distance operators contribute 3 to 4 per
cent of their annual revenues to a national USO fund.
India, the 1999 Telecom Policy proposed a Universal Access Levy:
“Resources for meeting USO would be raised through a percentage of the
revenue earned by all operators. This percentage would be decided by the
Government in consultation with TRAI. UAL is required for providing
village public and rural telephones and should cover both capital
expenditure and recurring expenses. USO for rural and remote areas would
be undertaken by all fixed service providers who shall be reimbursed from
the funds raised from the UAL.” Rakesh Mohan has recommended a revenue
share of 5 % for USO.
USO figures presented by Purkayastha conceal more than they reveal.
Although DoT’s fixed and operational costs in the domestic long-distance
sector were only Rs 1,383 crores in 1998-99, the corresponding revenues
were Rs 10,320 crores, due to the artificially high long-distance tariffs.
DoT utilized only about 20 % of this surplus in rural and backward areas.
Of the 4.5 million new connections provided by DoT in 1999-2000, less than
30 percent were outside the twelve largest cities -- and most of these
were in the constituencies of powerful politicians. It would be
instructive if Purkayastha could provide us the number of rural phones
installed by DoT in the last decade which were outside the constituencies
of Ram Vilas Paswan, Beni Prasad Varma, Sukh Ram and Rajesh Pilot.
argument that it would be technically difficult to interconnect a large
number of networks is also false. The International Telecommunications
Union mandates interconnection specifications for transmission and
switching equipment. There are 620 long distance operators in USA, 20 in
Australia, and over a dozen each in Philippines, France and Chile. None of
them are facing any difficulties in interconnecting with each other’s
networks since they all use ITU-specified equipment. In India too it is
mandatory for all equipment to obtain interface approval from the Telecom
Engineering Center whose field trials are stringent.
all, Purkayastha should have realized that it is not possible for India to
renege on its undertaking to WTO. India is already a year behind its
committed schedule and several governments are exerting pressure on us.
long-distance tariffs are currently among the world’s highest. Having an
unlimited number of competitors would cause long-distance tariffs to fall
by at least 50 percent in the first year itself, contrary to
Purkayastha’s contention that they would increase due to duplication of
infrastructure. The national USO fund would adequately take care of
Purkayastha’s concerns about rural telephony.
Published in The Times of India
on Wednesday, 09 August 2000, on the Edit Page
Original URL is http://www.timesofindia.com/090800/09edit4.htm
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Article of Prabir Purkayastha
Published in The Times of India on Saturday, 05 August 2000
Original URL is http://www.timesofindia.com/050800/05edit4.htm
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