Telecommunications minister A. Raja has a reputation to uphold. After allegedly handing out favours to private telecom companies for second-generation (2G) spectrum, perhaps he’s now trying to continue his streak by doling out concessions to public telcos too.
Reports earlier this week quoted a letter from Raja, proposing that the government refund the spectrum fee that public telcos paid for 3G (third generation) and broadband wireless. Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) should be exempt because of their “social obligations”.
Let’s get this straight. These two firms already command taxpayer funds to fulfil their social purpose of bringing telecom to rural India. And they already had 3G spectrum 21 months before anyone else (first-mover advantage in such a competitive sector is significant). After all this, instead of regulating these incumbents more heavily, the government is—essentially—considering giving them a bailout.
Raja will note that public telcos didn’t have to pay 2G fees a decade ago. Today, though, we think the rural obligation point is moot. If we take mobile access in rural India—no one today cares for fixed lines—as of December, Airtel cornered 26.28% of the market share, with Vodafone at 18.46%; BSNL came third at 13.62%. Private operators now avail of the Universal Service Obligation Fund subsidy, as BSNL does, to deploy rurally.
Perhaps these statistics don’t reflect the farthest-flung of areas. But if BSNL has had an edge there, it’s probably because it has piggybacked on its existing fixed-line infrastructure. And how much longer before Airtel and Vodafone arrive at even these areas? With urban India saturated, private telcos are obviously turning ruralward: The rural subscriber base at Airtel grew 46% from March to December 2009; BSNL’s grew 17%.
So this is the “social obligation” in whose name public telcos can’t meet their commercial ones. That’s funny. We thought BSNL was corporatized in 2000—spun out of what was before the department for telecom services—to precisely give it the ability to meet commercial obligations, and compete on an even footing with private telcos.
Yet, nothing in the 3G process suggests that Raja has allowed public telcos to operate as any other commercial entity. They were awarded spectrum early. They were given no choice in selecting what 3G circles they wanted to operate in. And they haven’t used a model that can pass on 3G costs to the consumer. So left spending far more money than they would have otherwise wanted to, they’ve come back—cup in hand—to a government they hope will continue to mollycoddle them.
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