The Hindu : Ringing changes

Online edition of India's National Newspaper
Monday, Jan 06, 2003

Opinion

Opinion - Editorials

Ringing changes

THE INTENSE COMPETITION now unleashed in telecommunications has several implications that go well beyond the immediate sectoral interests. Such competition has been price-driven; with the existing service providers hoping to retain their market share through tariff cuts in the wake of strong emerging challenge. The immediate gainers are the consumers, especially users of cellular services, for whom last Thursday's announcement of massive cuts in the tariff ought to be welcome news. No one, however, expects the price wars to end or the tariff structure to stabilise anytime soon. Nor will the price-induced competition be restricted to specific segments such as cellular telephone services. The ways in which the structure of the industry is changing at a phenomenal speed seem unfathomable at the moment. The Reliance launch has been a catalyst not just in the ensuing price wars but even more significantly in attempting to alter the mindset of all the stake holders of the telecom business. One early casualty is going to be the most conventional way of looking at the business: henceforth the services and the tariff on offer cannot be fitted so easily into neat compartments such as basic telephone services, mobile services or local calls, STD calls and so on. The consumer, the regulator and the service providers will have to look afresh at the complex issues on hand.

That will be the most enduring consequence of the ongoing competition in the telecom sector. The difficulty in understanding the likely impact of the WLL services being offered by Reliance and others says it all. Cellular service providers could not prevent the launch of these services with the Supreme Court only mandating a relook at some of its features by the regulator. Limited mobility, offered through a CDMA platform, has been particularly threatening to the cellular operators who have all preferred the rival GSM technology. Specifically, WLL services have been threatening to both basic operators as well as cellular providers. While being tagged on to a basic telephone licence, they do provide, within a stipulated regulatory zone, mobile telephony services. Cellular operators fear that the competition provided by WLL is unfair and not backed by regulatory sanction. Without having had to pay the stiff licence and other charges applicable to a cellular licence, the limited mobility service can be priced as low as 40 paise a minute in certain cases thereby threatening the other basic operators. In short, the opponents of WLL services have been arguing within neat regulator-defined compartments. In the aftermath of the Reliance launch there is no comfort in those arguments if only because the regulatory barriers are crumbling under the onslaught of technology and savvy marketing skills. Another example: Reliance, in its offer, is bundling long-distance STD calls into its limited mobility services using its own newly laid fibre optics network. That is well within the existing regulation and is an indicator of consumer-friendly strategies that will become commonplace. It is certain that both price wars and non-price competition will intensify as the public sector companies MTNL and BSNL join in. At some point, however, one has to ask as to whether unfettered competition is good even from a consumer standpoint.

The answers will have to be qualified. There is a lack of verifiable data on the costing of the cell phone business. Most of them say that they are in the red already in which case some of them may be driven to extinction or forced to merge. On the other side, those who are currently leading the charge will have to show that they can deliver on the quality as well. Another crucial factor for reckoning is the role of the investors. When the industry is in a flux, investment, especially foreign direct investment, may not come in easily. Most of the financial assumptions have already gone haywire. The regulators who are either unwilling or unable to be proactive will have their work cut out. Many lessons from the telecom experience will be highly relevant for other sectors that are being opened up.

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