The Hindu : The other side of telecom

Online edition of India's National Newspaper
Saturday, Feb 01, 2003

Opinion

Opinion - Leader Page Articles

The other side of telecom

By C. Rammanohar Reddy

The rising curve of the teledensity in India hides more than it reveals... The stunning growth of recent years has been concentrated in urban areas.

THE BEST thing to happen in the telecom sector in recent months happened this week. The change of guard in the Ministry of Communications and Information Technology. The regulator is supposed to draw up the rules of the game within the parameters of the National Telecom Policy of 1999, but the situation has been quite the opposite. The previous incumbent in the Ministry was taking decisions on operational matters. The Minister intervened in disputes between service providers. He berated public sector enterprises in the telecom sector. And the rumour mills have worked overtime on the former Minister's links to favoured corporate groups. It does not make for orderly growth if the authority of the regulator is so easily supplanted by a political executive. A good part of the chaos that rules in the telecom sector in India can be attributed to the manner in which the political executive has dabbled in telecom operational matters right through the 1990s. There is a much larger set of issues troubling the telecom sector in India, one few are paying attention to, wrapped up as everyone is in tumbling prices of mobile/wireless in local loop (WLL) tariffs, explosion in mobile usage, proliferation in the number of operators and expansion in the range of services on offer. It is all too easily said that telecom is the one true success story of economic reforms in which the consumer has been the winner. Such an observation reveals a superficial understanding of developments in the telecom sector and a very narrow identification of consumer interests.

Greater private participation, yes; greater competition, yes; and more services, yes. But if we were to look at changes in telecom in the context of the objectives laid down in the 1999 NTP or in terms of any set of goals drawn up for the Indian situation, then we must conclude that for all the apparent hyper-activity the developments in telecom have been disappointing. There was nothing exceptional in the NTP's main objectives of making available affordable and effective communications, striking a balance between expansion of telecom in the rural areas and providing high-value services for a modern economy, covering all villages by 2002, achieving a teledensity (number of phones for every 100 people) of 7 by 2005, 15 by 2010 and a rural teledensity of 4 by 2010. But if we are to evaluate progress since 1999 where are we today?

The indisputable fact is that while in the early 1990s, India figured very poorly in terms of providing access to phones, the position has not changed since then in spite of the apparent explosion in the number of direct exchange lines (the fixed/land phones) and subscribers of mobile services.

At the most fundamental level, progress in the telecom sector must be measured in terms of the spread of the phone network (fixed and mobile services) in the country. Measured by the teledensity, this would indicate on the average the access to telecommunication facilities that large and small businesses have, so too community organisations, Government offices, homes and individuals; and also the size of the network in cities, towns and villages. The spread of the phone network in the 1990s does indeed look impressive. The average teledensity (rural and urban) was less than 1 in the early 1990s, a poor state after decades of state-organised telecom development. By late 2002 there were as many as 50.7 million phone subscribers (land line and mobile), which indicates a teledensity of 5.

Stunning as this growth has been, the change has been of a narrow kind with only limited significance for realising the NTP 1999's objectives of an affordable, accessible and regionally dispersed network. First, there are still more TV sets (80 million) than phone connections (50 million) in India. Besides, it was only last year that the population of phone subscribers surpassed the estimated number of homes with cable TV (45 million). There cannot be a more better indication of just how poorly developed the telecom network still is in spite of all that has happened in the past decade, which was also the decade of the cable TV explosion. Second, the rapid increase in the teledensity hides more than it reveals. Over the past five years, thanks to BSNL's efforts to check private competition, there has been a near three-fold growth in the number of direct exchange lines (DELs) but it is the cellular connections which have exploded, by 30-fold, contributing to the larger increase in the teledensity. Whether, in the Indian situation, a fixed line is preferable to a mobile connection is an open question — there are things that a land line can do which a mobile phone cannot offer and vice versa. But that is not the point. Until now, mobile connectivity has been overwhelmingly concentrated in the metros and other large urban centres. More than 80 per cent of the cellular connections are in the four metros, Maharashtra, Gujarat and the four southern States. Less than a quarter of the one million cellular connections are in the eastern, central and northern States and the rural areas of the entire country. This neglect by the private service providers is beginning to be compensated by BSNL's drive which in just a few months has yielded an estimated one million new subscribers in the small towns and the semi-urban areas. The other aspect of teledensity being driven by mobile phone services is that the subscribers are, by and large, not new entrants to the phone network. Independent observers of the industry suggest that over 75 per cent of subscribers to cellular services already have a landline or are members of a household/organisation that has one. So, if the main challenge is to expand access to telecom and not to expand the variety of access (landline, cellular, limited mobility, etc.) then clearly, the rising curve of the teledensity in India hides more than it reveals. In other words, the telecom network in the country is more inadequately developed than what the average teledensity suggests.

The third and final point to note is one common to developments in so many sectors in India. The stunning growth of recent years has been concentrated in urban areas. Going by the NTP 1999, all of India's 600,000 villages should by 2002 have had at least one village public telephone (VPT). But as of last year more than 100,000 villages were yet to have a single public phone. And this is just for a VPT. The position on access to individual phones on demand must be much worse in the villages. The NTP laid down that the teledensity in the rural areas should increase from 0.4 in 1999 to 4 by 2010. But today there is still only one phone connection for every 100 Indians living in the villages, which makes it highly unlikely that the target of a rural teledensity of 4 will be achieved by 2010.

All of policy, all of entrepreneurship and one can say all of the disputes have been focussed on cellular (in whichever garb they are provided) services in urban India. This lopsided nature of growth in the telecom (specifically voice traffic) sector naturally means that when efforts are made to introduce some rationality into pricing of fixed line services, the issues are immediately converted into neglect of the mythical common man and a favouring of the urban rich. This is what happened in 1999 with the first tariff rebalancing exercise of the Telecom Regulatory Authority of India and threatens to undermine the 2003 exercise as well. The frenetic but narrow pace of growth in telecom (in the market for mobility) in India poses other dangers. Huge investments have been and continue to be made in the area. And service providers are involved in cut-throat competition for market share long before (they claim) they have become profitable. This may lead to a destruction of considerable investment before some kind of consolidation takes place. At least in that respect India would have gone the way of the rest of the world where the telecom companies have seen a bigger reversal of fortune than the dot com firms.

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